MJ Hudson Group plc
Annual Report and Accounts 2021
Contents
1. Overview
Financial highlights
4
MJ Hudson at a glance
5
Chairman’s statement
6
2. Operating review
CEO review
10
Business model
19
Strategy
22
CFO review
25
How we manage our risks
34
Principal risks and uncertainties
39
3. People, Communities and
our Environmental responsibilities
People & Wellbeing
44
Communities and society
55
The environment and sustainability
58
4. Governance
Board of Directors and Observers
64
Executive Committee
68
Corporate governance report
69
Audit & Risk Committee report
73
Directors’ report
76
Directors’ remuneration report
81
Directors’ responsibility statement
93
Independent auditor’s report
95
5. Consolidated financial statements
Consolidated statement of comprehensive income
109
Consolidated statement of financial position
110
Consolidated statement of changes in equity
111
Consolidated statement of cash flows
112
Notes to the financial statements
113
6. Additional information
Glossary
160
Financial calendar
163
Shareholder contacts and company advisers
163
Financial highlights
4
MJ Hudson at a glance
5
Chairman’s statement
6
Overview
1 OV E R V I E W
3
Financial highlights
Alternative Performance Measures (APMs).
(‘APMs are identified by ‘*’ in the charts below. Definitions of APMs can be found in the Glossary of Terms section of this report.)
^restated
Statutory revenue
0
10
20
30
40
FY19
FY20
Year
£M
FY21
21.2
22.3
39.8
Underlying continuing EBITDA*
0
1
2
3
4
5
6
FY19
Year
£M
FY21
2.7
3.8
5.6
FY20^
Underlying diluted EPS*
-1.5
-1.0
-0.5
0.0
0.5
1.0
1.5
FY19
FY20
Year
P
FY21
-0.6
0.5
1.2
Net cash position
-15
-5
5
10
-10
15
FY19
FY20
Year
£M
FY21
-12
10
-6.9
Underlying net cash from operating activities
0
2
4
6
8
10
FY19
FY20
Year
£M
FY21
1.1
1.9
6.6
Underlying profit/(loss) before tax*
-2.5
-1.5
-0.5
0.5
1.5
2.5
FY19
FY20^
Year
£M
FY21
-0.2
0.9
2.2
Underlying EBITDA margin*
0
10
20
30
FY19
FY20^
Year
%
FY21
16
19
22
Underlying revenue*
0
10
20
30
FY19
FY20
Year
£M
FY21
16.7
20.3
25.5
1 OV E R VIEW
4
MJ Hudson at a glance
MJ Hudson is a one-stop-shop specialist service provider to the global $100+ tn
asset management industry, concentrating on its fastest growing segment,
alternative investments
1.
We benefit from increasing client demand, as operating in asset management becomes
more complex and more highly regulated as well as the continuing trend to outsource
non-core activities.
1. Private equity, venture capital, hedge funds, and real estate are all examples of alternative investments. The word “alternative” in alternative investments indicates that these investments are often more difficult to access than traditional
ones, such as stocks, bonds, and mutual funds and so are unlikely to find their way into most investor portfolios. However, public and corporate pension funds are significant and longstanding investors into alternative investments, so many
people will already have some indirect exposure to the asset class. Investors in alternative investments often cite enhanced returns and diversification away from stock market returns as key reasons behind their decision.
2. By offices we mean a place from which our services are offered to our clients and where MJ Hudson staff are based, on a day-to-day basis (localised lockdowns notwithstanding).
10
O F F I C E S 2
288
E M P L O Y E E S A N D
C O N S U LTA N T S
1,094
C L I E N T S
1 OV E R V I E W
5
Chairman’s statement
Overview
MJ Hudson is a growth company focussed on a global growth sector –
alternative investments. Undaunted by the combined effects of COVID-19,
supply chain disruption and staggered lock downs, the business has made
real progress in reaching important financial milestones and strategic
objectives over our first full financial year as a quoted company.
Against this challenging backdrop, the key constant theme is management’s belief in the business’s growth opportunity,
emboldened by the resilience of the industry and clients which we serve. Underlying Revenues in the year grew by 14% on
an organic basis with an encouraging first/second half trend. Including the benefit of acquisitions, the group has now grown
by more than 50% in two years on an Underlying Revenue basis. Matthew Hudson and Peter Connell, ably supported by the
other senior management and staff, deserve credit for such an impressive achievement in extraordinary times and they provide
detailed updates on our strategy and financials in their reports that follow.
1 OV E R VIEW
6
Management and staff
The Board would like to congratulate our executive team on navigating our first full financial year as a quoted company.
As I noted last year, these are less than ideal circumstances for such a debut, when first contact with clients, potential
acquisitions and even shareholders is often originated online, as opposed to in person. Many clients froze activities during
the worst of the lockdowns, too.
We would like to thank the staff once again for their hard work and efforts over the year which have generated excellent
financial results. This has been a challenging period for all, and we never take them for granted. As we welcome all our
colleagues back into the traditional office environment, we are very aware that COVID-19 remains a threat. Of course,
as a professional services company our people remain at the heart of the business. Matthew provides an insight in his
section as to how our various teams work together, along with some explanation as to how we approach the human side of
acquisitions. In the People and Wellbeing section, you will find more about the individual perspectives on the business of
some recent joiners.
With the benefit of both organic growth and acquisitions, the group now has 288 staff, an increase of 40% over the prior
year. You can read more about the make-up of our team in the People and Wellbeing section, below, and in our ESG report,
also included in this document. The Group embraces diversity as fundamental to the promotion of the company’s values and
recognises that diversity and inclusion has an invaluable influence on MJ Hudson and all that society aspires to be.
Shareholders
The Group made three further acquisitions during the period and a fourth that completed in recent weeks. That totals
seven transactions since June 2019, which we have financed with both the equity raised at the IPO and the senior debt
facilities provided by Santander which we announced in April of this year. The latter is a significant milestone for us as a
public company and we were delighted to attract the support of such a leading global bank during the lockdown period. The
Santander facility adds judicious leverage to our balance sheet, on attractive terms, with the potential to do more as the
business expands.
We welcome the many new investors who have joined the shareholder register during the period. One of MJ Hudson’s
distinguishing features is the degree of equity ownership within the management team and staff. As detailed in the
Governance section, senior management (including the Board) hold 31% of the company’s shares. We believe management
is best aligned with shareholders when they are fellow owners rather than just ‘renters’ of the corporate assets. The ability
to think and act like business owners as a well as management has undoubtedly informed the Board’s decisions in the year.
The Board is pleased to announce we are proposing to recommend a maiden dividend to shareholders for the six-month
period ended 30 June 2021. We remain a growth company but believe a progressive, albeit modest, dividend policy further
aligns shareholders with management’s goals.
“The key constant theme is management’s
belief in the business’s growth opportunity,
emboldened by the resilience of the industry
and clients which we serve.”
1 OV E R V I E W
7
Board and governance
I would also like to thank each of my board members, and particularly the non-executive directors, for their wisdom, patience, and
flexibility during what was a logistically frustrating year for all public company boards. Each brings varied and complementary skills
sets of which we have made full use and have offered sterling support to our executive team and me over the year.
Given one of our fastest growing business areas is championing ESG in both the alternative investments and public company worlds,
we strive to weave awareness of ESG into everything we do, so I commend our second ESG report to our shareholders and other
valued stakeholders.
Outlook
MJ Hudson is in a strong position, both in terms of the financial milestones it is achieving and the prospects for the industry it
serves. While we cannot ignore the continued risks posed by coronavirus and its impact on business confidence, we have now
witnessed the resilience of the sectors in which we operate. As we build on the early advances that we have made in valuable
secular growth trends, such as ESG and outsourcing in private markets, the Board is optimistic as to growth in the current year,
encouraged by both the trading in the first few months and the potential within our M&A pipeline.
Charles Spicer
Chairman,
24 November 2021
1 OV E R VIEW
8
CEO review
10
Business model
19
Strategy
22
CFO review
25
How we manage our risks
34
Principal risks and uncertainties
39
Operating review
2 O P ERAT IN G R E V I E W
9
CEO review
Introduction
In my statement last year, I said that success would come from: ´listening to our
clients, optimising our services and delivery models and investing in the future´. I am
pleased to report that this is exactly what we have been doing and that it has helped us
emerge quickly and strongly from the pandemic and the economic turbulence that has
impacted so many. Indeed, we remain entirely confident in our immediate and long-
term prospects. For us, this has been a year of real growth, underpinned by investment
activity, and we expect to see both growth and investment accelerate in the coming
year and beyond. So, what is it that gives us this confidence?
‘For us, this has been a year of real growth
underpinned by investment activity and we
expect to see both growth and investment
accelerate in the coming year and beyond.’
2 O P E R ATIN G REVIEW
10
The financial year in review
Firstly, the financial results, themselves: Peter Connell’s CFO review will go through the detail (see page 25), but I wanted to
draw some of the key highlights in our underlying results to your attention:
• Group Underlying Revenue of £ 25.5m, a 26% gain on last year. Within this, approximately half of the growth came as a
result of acquisitions made in the year.
• Organic revenue growth of 14% for the full year with an accelerating trend first half to second half as we saw a rebound
particularly in our Advisory division from a slow first half due to freezing of fund launches at the worst of the economic
turbulence of calendar 2020.
• EBITDA margin pre organic investments maintained at 25% despite the degree of revenue growth achieved
• A maiden final dividend of 0.125p in respect of FY21.
Impact
We have shown that we can scale the business by growing revenues organically at a double-digit rate and by adding
meaningful and client-relevant acquisitions. The result of this is that the balance of the group is changing. In particular, the
EBITDA contributions from the three established divisions are now comparable in scale for the first time. One important
driver of this is the organic growth within ESG. This rebalancing effect has other consequences. The recurring revenue
profile of the Group has increased with 86% of revenues in the year to 30 June 2021 (FY20 – 84%) coming from repeat or
recurring clients.
Our clients and our markets
Early signs of client recovery in the six months to December 2020 were converted into revenue gains in our second half.
Calendar year 2020 was marked by a freezing of fund launches by many of our clients, owing to the lockdowns and also
economic turbulence. I have seen this movie before in our client markets, from the GFC and Dotcom bust; this was not
unexpected. My Chief Operating Officer Odi Lahav and I have both seen and commented on a steady trend of improvement
in each six-month period, since the lockdown, as clients have returned to the business of structuring, launching and
operating funds and analysing and reporting on their performance. This recovery was underpinned by a series of milestone
client wins, listed below. The Advisory division, which had felt the pandemic’s effects most keenly, rebounded, achieving
organic revenue growth in the six months to 30 June 2021. In addition, a number of our businesses distinguished
themselves with transformative growth: ESG & Sustainability (part of the Data & Analytics division) grew revenue by 84%
whilst our Organic Investment portfolio (Luxembourg team, Fund Admin in Guernsey and Regulatory Consulting) more than
doubled revenues in aggregate, compared with last year.
MJ Hudson is well-positioned for growth. By the end of the financial year, we saw a rebound in funds being launched, and
private equity (our largest asset class served), continues its constant march upwards in AUM. Similarly, private debt grows
as more traditional banks withdraw from risk, and as clients seek yield in a super-low-yield market. This thirst for yield has
also led to more investment in real estate and infrastructure, only enhanced by western Governments’ desire to dig their
way out of a crisis. In a similar vein, renewables are also seeing a boost, combined with concerns around climate change and
ESG. ESG reporting is selling like hot cakes, as you can imagine. Investment into alternative assets is increasing, regulation
of the asset class is growing, and clients need expert advice, reliable operational support and the best data and analytics. MJ
Hudson provides all three.
You can find more on this growth and the people behind it, later in this report, in a series of MJ Hudson growth stories.
2 O P ERAT IN G R E V I E W
11
The results suggest our increasing scale and service mix is being actively recognised by clients. I have spent all of my
career in either private equity itself, private equity law or a combination of the two. From these perspectives I have built a
healthy appreciation for the power of a strong brand, and know we have to constantly reinforce our industry knowledge,
connections and increasingly depth of data, to stay relevant and in the industry leadership. Led by our Chief Marketing
Officer, Matt Craig-Greene, and supported by an award-winning marketing team, we will continue to invest in this content,
data and communication. Any of you that have seen our publications or attended our events will already understand our
ability to punch above our weight in the markets we serve.
As our reputation grows, we are increasingly able to attract milestone clients (who, in turn, attract others). A few significant
wins from the financial year are listed, below:
Client type
Client of/Division
Source
Revenue impact
Large UK based asset
manager
Luxembourg ManCo/
Outsourcing
Cross sell from Investment
Advisory following strategic
consulting project
From FY 2022, recurring revenues
Global Bank
ESG & Sustainability /
D&A
Global tender process
Continuing model with revenue
expanding with usage from H2
FY 2021
UK based public sector
Pensions
Investment Advisory/
Advisory
Tender process
Multiyear project, alternatives
focussed from FY 2022
Large UK based global
asset manager
MJ Hudson Bridge*/
Outsourcing
Pitch process
Recurring revenue model, impact
from FY 2022
Large US PE fund
manager
Performance Analytics*/
D&A
Extension of existing client
relationship
From FY 2022, recurring revenues
*Acquisitions made in the year to 30 June 2021
Impact
The client wins are milestones for us because they all have the revenue potential to enter our top ten clients list in the
current year and, by their example, we believe there should be material follow on opportunities. From another perspective,
four of these wins bring a recurring revenue model and two were won on the basis of an international tender process which
enabled the group to showcase its expertise and innovative long-term pricing structure.
Securing the new client mandate in our Investment Advisory business is especially rewarding. As a business, we have a
reputation for investing in technology where this can improve service delivery for our clients and efficiency for our business.
But innovation, for us, doesn’t stop there. As a direct result of rethinking our service and delivery models, as I promised
we would in my letter, last year, we have set this business on an even more exciting trajectory. The credit for this bold and
impactful move goes to the head of Investment Advisory, Joanne Job, and we expect to tell you more about this in the
coming months.
2 O P E R ATIN G REVIEW
12
Operating growth highlights
FY21
FY20
Total offices
10
11
Total staff
288
206
Total clients
1,094
943
Total Multi-Service clients (taking services from > 1 division)
68
91
Multi-Service client revenue as % of Group total
29%
14%
Total Underlying Revenue growth
26%
22%
% Organic growth in Underlying Revenue
14%
4%
% Underlying Revenue from top 10 clients
16%
17%
In terms of operating highlights, we added a new office in Dublin via the Bridge acquisition. Total staff members grew
by 40% (including the effect of acquisitions). The total number of clients taking services from more than one division or
segment 68 Compared with 91 last time. However, the bigger change here is that these Multi-Service clients accounted for
29% of Group revenue compared with 14% in FY20. Within the top 10 clients, a total of 6 came from outside the Advisory
segment compared with 3 in FY 2020.
From another perspective, the growth of our brand can have surprising effects, across the business. Our most downloaded
item is a positioning report on the significance of ESG in private equity. When I tell you that this was published in 2017 and
that it prompted a discussion that led to our first acquisition in ESG, you will understand the impact this can have. This point
takes me on to our next section.
Investment activity
2019
2020
2021
M&A spend*
2.6
8.3
10.7
Incubation **
1.2
1.0
0.3
Investment - capitalised expenditure
1.3
2.1
2.1
Total
5.1
11.3
13.1
*Includes planned expenditure on prior deals
** losses in Organic Investments
Mergers & Acquisitions
We completed 3 acquisitions in the twelve months to 30th June 2021, with a further deal announced after the period
end. That makes eight completed acquisitions since June 2018. Besides Odi, Peter and myself, our M&A team comprises
our head of M&A, Andrew Walsh and General Counsel, Guy Grayson. Total investment activity, including incubation and
planned expenditure on prior acquisitions, totalled £13.1m in the year, an increase of 16%.
“That makes eight completed acquisitions
since June 2018, with on average 31%
revenue growth on consolidation.”
2 O P ERAT IN G R E V I E W
13
I´m often asked, “how do you originate your deals?” Well, we typically go and find them. The founders of the businesses that
we engage with are often known to us and our clients. We tend to work with them already and see them as natural bolt-on
deals or an opportunity to extend or enhance our core services. For example:
• I have known David Dillon a long time; we both started out as fund lawyers. When he told me he was looking for a
partner for his fast-growing governance and ManCo services business, Bridge Consulting, in Dublin, the potential
was obvious. Dublin is a key European fund centre (especially for liquids) and one in which we had previously had no
presence. He, in turn, was attracted by the range of services within our group (ESG, in particular, had been requested by
clients). Although discussions understandably paused in the early weeks of lockdown, we agreed the terms at the end of
2020 and received regulatory approval in early 2021. We have worked together on pitch activity and the revenue run
rate has already exceeded expectations set during deal due diligence.
• A tenured professor, Oliver Gottschalg is one of a small number of recognised international academics in the private
equity space. I have known him for over a decade. Through his business, PERACS, he has perfected a technique to
analyse returns in private equity at a granular level and provide benchmarking and due diligence services. He has an
impressive client base of private equity names with a US bias. Via Teams, rather than in person, Oliver came to see Odi,
Andrew and me in the second half of last year. We told him about our plans to build recurring revenue streams around
proprietary private market data. Oliver told us he wanted to find a partner that believed in his analytics business as
much as he did and could help him scale it to the next level. It sounded like a natural partnership. We completed the deal
at the end of last year and, by Easter, Oliver had secured his biggest ever client contract.
• We had been speaking to Max Hilton for a while and were already working with him in our ManCo business but the
logic for a combination with his risk analytics platform business, Clarus Risk, started to make real sense as our network
in ManCo services grew with the addition of Bridge Consulting in Ireland. A fintech by any other name, we completed
the acquisition at the end of the June. MJ Hudson is both a client and distributor of Max´s services and he and his team
are set to play an important role as our Data & Analytics division develops further. I am pleased to add that Max and his
team have already landed new clients on a cross sell basis from within the MJ Hudson group despite being consolidated
for only a few months.
• MJ Hudson board member and Managing Director of International Administration, Mark Pattimore, was in discussions
with the vendor of Guernsey-based, Saffery Champness Funds Limited (SCFL), for many years. Founded in 2007, SCFL´s
core services include fund administration and fund accounting as well as valuation and corporate secretarial work.
Terms were agreed in late July, subject to regulatory approval which arrived as we were finalising these preliminary
results. This acquisition is now complete. It adds strength in depth to the Group´s Guernsey operations as well as timely
expertise in fund systems.
You can read more about the financial impact of these acquisition in Peter´s section, below.
We knew David, Oliver and Max and the owners of SCFL prior to the lockdown, last year, but the PERACS deal was one
instigated and largely completed without physical meetings.
Generally, acquisition ideas originated internally have had a higher conversion rate into actual deals.
You can read more about our acquisition strategy in the Strategy section, below.
2 O P E R ATIN G REVIEW
14
Impact
When we came to the AIM market, at the end of 2019, the MJ Hudson group had historic EBITDA of £2.7m and one
dominant division (Advisory). Through a number of judicious acquisitions and organic growth, both the Outsourcing
and Data & Analytics divisions are expected to exceed this figure, on a proforma basis, in our current financial year. That
transformation has been made possible by the funds raised at our IPO and the industry of our staff in the UK, continental
Europe and North America.
Of course, acquiring businesses only makes sense if doing so adds value to the Group and helps us to better serve our
clients’ needs. An important question we ask ourselves to determine this is are we able to add value to the acquisition?
Simply put: can we make it grow faster? We are now in our second year as a quoted company and the acquisitions we have
made since June 2018 contributed in aggregate £10.4m to group revenues in the full year to June 2021. Most of our M&A in
the year to June 2021 was completed in the final six months. Looking at this same group in the periods immediately prior to
their acquisition, we have increased revenues on consolidation by a healthy 31% on average. A key contributor to that is our
ESG business in Data & Analytics which has grown revenues by over 130% since being consolidation from July 2019 with
staff numbers up from 12 to more than 40, in Amsterdam and London combined.
Organic investments
Sometimes, the market price of potential acquisitions does not make economic sense to us, and we don’t limit ourselves to
M&A as a growth strategy. Indeed, we are mostly an organic, industry-focussed, growth team. The build over buy question
is something we often think about, and we have good experience in this area. The law firm, which is instrumental to the
group in many ways, was a business I founded as recently as 2010. We have grown the group with this and other business
incubations, as well as acquisitions.
Our incubated businesses form our Organic Investments business segment. We have incubated three businesses: our
Luxembourg services, our regulatory solutions team in London and fund administration. Collectively, these businesses had
Underlying EBITDA of £0.4m in the year to June 2021 following £0.9m loss in the prior year. I am pleased to report that a
series of new client wins, and organic growth, have combined to push them further along the path to profitability. Going
forward, these incubated businesses will be reported in our Outsourcing division, which is their natural home.
Over 4 years, we have therefore invested a total of £3.5m, in organic investments, to get to a position of profitability. This
is a fraction of what we believe it would cost to acquire them now; on a combined basis, this group generated over £2.3m
of revenues in the year to June 2021 with growth of more than 100%, over the prior year. This serves as evidence, I believe,
that investing to create goodwill can be cheaper in the long run than the cost of acquiring it.
You can read more about the financials of our Organic Investments and their consolidation going forward in Peter Connell’s
CFO report.
2 O P ERAT IN G R E V I E W
15
Investment in technology
Since listing the group in December 2019, we have been investing in technology, this includes investment in the IT
infrastructure used by the group; our application development capabilities (including machine learning); and acquisitions of
businesses that centre on technology. We expect to continue this investment strategy
In IT infrastructure, we have been embedding Salesforce into our operational and sales processes and upgrading our
Finance and HR systems to Workday. I consider both systems to be Tier 1 enterprise-grade systems, that will enable us
collectively to scale quickly and to manage our continued global growth more efficiently. We look forward to these systems
being rolled out in FY22.
Our investment in our application development capabilities has also been substantial over the year. Much of the
resource has been dedicated to our proprietary platform, AdvantageIQ, and our award-winning private markets ESG and
sustainability app, ESG Advantage (part of AdvantageIQ). Lastly, two of our recent acquisitions (Clarus Risk and PERACS)
had technology and systems at their core. These systems now form part of our asset management technology suite of
products, bringing more data and tools to our clients, as well as to ourselves. Several business units across the group
are already using these in their day-to-day business. Our plan is to continue to invest in R&D to support and grow these
businesses and launch new products, and to enhance and integrate the technology into our eco-system.
It’s not all about the systems nor indeed the value of the same on our balance sheet but also the people that make it happen.
Over the year, we expanded our team in the UK as well as built out a software development team in Sri Lanka. Today we
have 23 staff in our Technology Group (and many more around the group involved in technology and R&D). As part of this
expansion, we have invested in bringing in new skills to the team, focusing on application development, data acquisition and
machine learning, to build the next generation of services in Data & Analytics. I expect that this team will expand further,
and we will continue the strategy of recruiting talent globally to support our ambitious plans.
Our investment in our application development capabilities has also been substantial over the year. Much of the
resource has been dedicated to our proprietary platform, AdvantageIQ, and our award-winning private markets ESG and
sustainability app, ESG Advantage (part of AdvantageIQ). Lastly, two of our recent acquisitions (Clarus Risk and PERACS)
had technology and systems at their core. These systems now form part of our asset management technology suite of
products, bringing more data and tools to our clients, as well as to ourselves. Several business units across the group
are already using these in their day-to-day business. Our plan is to continue to invest in R&D to support and grow these
businesses and launch new products, and to enhance and integrate the technology into our eco-system.
It’s not all about the systems nor indeed the value of the same on our balance sheet but also the people that make it happen.
Over the year, we expanded our team in the UK as well as built out a software development team in Sri Lanka. Today we
have 23 staff in our Technology Group (and many more around the group involved in technology and R&D). As part of this
expansion, we have invested in bringing in new skills to the team, focusing on application development, data acquisition and
machine learning, to build the next generation of services in Data & Analytics. I expect that this team will expand further,
and we will continue the strategy of recruiting talent globally to support our ambitious plans.
2 O P E R ATIN G REVIEW
16
Investment in people & culture
As well as in technology, we have been investing in people since our IPO. With the benefit of hiring activity and M&A, we
now have 288 staff members in the UK, Europe and North America. This includes some consultants and those on part-time
working arrangements in various forms. Full time equivalent headcount has increased from 158 in FY20 to 233 in FY21.
That is an increase of 47% on the same period last year.
You can read more about the make-up of our team in the People and Wellbeing section and in our ESG report, below.
The first person I hired when setting up MJ Hudson was our head of People & Wellbeing, Charlene Cowen. She has made
an enormous contribution in a difficult year and once again I want to thank her and the team. Growth notwithstanding,
what with Covid and the London office move, never have the skills of the People & Wellbeing team been more needed and
appreciated. Charlene and her team have helped staff through the early Covid months, the challenge of home working and
the start of the office return. It sounds like a straightforward progression as I put it down on the page. As we all know, that
was not the case at the time. With Charlene’s good advice we were able to navigate our way through with a solution that
made sense for us, consulting with staff along the way. One product of that discussion is that we decided we are an office-
based company. We understand the value of being flexible in terms of home working and will continue to support staff
members in that regard, but as in most professional services and knowledge-based businesses, the office is where we all get
to learn, both young and old.
Our culture is vital. It is a culture of intellect, growth and ambition. It incorporates a deep analysis of our clients and sector,
and the confidence and encouragement to advance one´s career and capabilities. At the same time – as we showed during
the worst of the pandemic – it offers care and support. Our business is not just about numbers and the last percentage of
margin. We listen to our clients, and we listen to our people.
2 O P ERAT IN G R E V I E W
17
Current trading
2021 has seen a broad recovery in our markets. Like history repeating, private equity, one of our key client groups, tends
to emerge stronger and perhaps more mainstream with each passing crisis. On the stock market, service providers to the
alternative investments sector have attracted acquisitive interest. At the same time, there has been investor demand for
a number of high-profile new issues in the alternatives fund manager area. Ours is a more diversified business model than
a fund management group, but we share the same alternative investments focus. Our strong results, particularly in the
second half of the year to June 2021, speak to that.
Trading has been strong in the current financial year, continuing the momentum established in the last six months of FY21
and with good contributions from recent acquisitions in Outsourcing and Data & Analytics.
Future prospects
With the benefit of the acquisitions made, to date, and the growth we have already seen, this past financial year, I look
forward to the coming twelve months with real confidence. For example, we anticipate further, secular growth for our Data
& Analytics services (including ESG). Unlike law and regulation, mathematics and data move easily across international
boundaries and our brand opens doors on both sides of the Atlantic. We welcome the many new investors to the register,
many of whom are private clients and small family offices, who have come to this same conclusion.
Looking forward, we can understand why the growth of the sector is attracting outside interest and our own prospects are linked
to that. Growth remains our focus, both in an organic sense and as a filter for acquisitions. If anything, our conviction in that regard
has only increased, through the year. Our plans involve further investment and acquisition activity in the current year, as we think
about adding enhanced technology services and extending our reach internationally in alternative markets. As I write, we have a
qualified list of M&A opportunities in Europe, North America and Asia which we plan to finance through an intelligent mix of debt
and equity over time. I look forward very much to commenting on that in these same pages, in twelve months´ time.
Matthew Hudson
CEO,
24 November 2021
‘Growth remains our focus... if anything, our conviction
in that regard has only increased through the year.’
2 O P E R ATIN G REVIEW
18
Business model
Our business model is designed to support our clients throughout the life cycle of their businesses and of the investments
they make. Whether our client is a boutique fund manager raising its first fund, or a wealth manager in the FTSE 100,
we have developed products and services to help them operate more efficiently and make better-informed decisions.
Depending on their needs, we can help our clients grow, consolidate their position or transform. We can help them exit
individual investments, divest whole portfolios, and manage spin outs of teams and business units.
How are we able to do this, and why do large firms and new enterprises, alike, trust MJ Hudson with such important work?
The answer to both these questions lies in our history and in the special relationship we hold with our clients:
MJ Hudson was founded in 2010, as a private funds law firm. Through the reputation of our senior team, clients came to us
to help them solve complex challenges around spinning out from institutions in the aftermath of the global financial crisis
and launching new investment vehicles. They liked our work, and they came back for more. As we became their trusted
advisers, they shared their longer-term ambitions with us. We began to see opportunities to provide additional services to
these clients (still in law, at first, but then in other areas) and we built out and acquired offshore legal capabilities, as well
as a transactions team. At the same time, they were sharing their plans—and needs—with us, they were talking to their
peers about their experiences of working with us, building our reputation, for us. As more clients, consequently, came to us,
we began to scale more deliberately and, in 2015, we added our first non-law service line (Investor Relations & Marketing
Solutions), through a small acquisition. Suddenly, we were not limited to providing legal advice: we could help our clients
position themselves, as they went out to raise capital, too.
The more work we do for our clients—and their peers—the better we understand their needs. The better we understand
their needs, the more tailored our services become, leading to enhanced outcomes for our clients, greater status for us with
those clients, and greater reputation for us, in the market.
We have consistently added products, services and scale to our offering, always led by client needs, which they share with
us, their trusted advisers.
2 O P ERAT IN G R E V I E W
19
ADVISORY
OUTS O UR C I N G
D A TA & A N A L Y TI C S
Client knowledge and cross referrals
During our work, we often uncover hidden client needs. Our structure makes it easy to introduce additional
MJ Hudson services to satisfy these needs and help our clients become more successful.
Vital, intergrated services
Our integrated services are built around the advice, expertise and technologies that
clients cannot live without. Where it makes sense (often for larger firms), we market
the combined group as a single solution, right from the outset.
Multiple client touchpoints
The depth and breadth of our market contact allows us to understand our clients’
needs from multiple perspectives and engage in ways our competitors cannot.
Long-term relationships
Once a client is onboarded, we leverage the quality of our work, our client knowledge
and our broad range of services to secure continuing, multi-year engagements.
2 O P E R ATIN G REVIEW
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The competitive advantages of our structure
From a commercial perspective, our privileged client relationship gives us a competitive advantage over other would-be
service providers; in return, of course, our clients benefit from being able to access all the services they require, from a
single firm that understands their needs, perfectly.
As a result of this client-led investment and growth, MJ Hudson can now provide its clients with a unique end-to-end
platform of products and services. Although our products and services are delivered in a tightly integrated way, in order to
understand the detail of our business model, it may help to think of them grouped into three established divisions and one
start-up division:
• Our Advisory division (which includes our law firm and our investment consulting team) is where our business started,
and it is often where our client relationships start, too. For example, an established private equity fund manager might
be looking to understand the options for a new fund. We would advise on the structure, the jurisdiction and, potentially,
a number of related factors, including how to position it to investors.
• Our Outsourcing division (which includes fund and company administration) provides outsourced resources and
operating and governance structures. These types of contracts will typically last for many years and may continue
across successor funds. Once we had advised our example fund manager on its proposed new fund, we would set up
the required infrastructure and could administrate the vehicles, taking on governance, risk management and reporting
functions, too. Doing this would help our client focus on its core activities and growing the firm.
• Our Data & Analytics division (which includes our ESG and sustainability practice and our fund performance analytics
team) monitors client activity and provides tools and services to analyse and draw insights from it. It can then package
this up in reports for investors, regulators and other stakeholders. For our example client, we might put in place an
integrated ESG monitoring system, analyse investment activity to identify and prove outperformance, and even track
investor engagement with communications.
Together, the above divisions comprise the Established Business Segments
• Our Organic Investments division (which includes our Luxembourg AIFM regulatory platform, fund administration and
regulatory consulting) provides additional product or jurisdictional services to clients in markets where the Group has
been unable to source an attractive acquisition. Our strategy in this regard is entirely led by client need and we see our
incubation capability is a competitive strength. The entities currently within this division will transfer to Outsourcing in
FY22 as they have now reached a sufficient level of maturity
Naturally, the data we collect and analyse isn’t just interesting to external stakeholders: our clients, themselves (and we,
as their advisers), can use this continuous feedback to optimise a variety of different operational aspects of their business.
Combined with our aggregated market insights, we believe this gives our clients a tangible competitive advantage over
rival firms. For our example client, we might identify new ways to demonstrate the superiority of its investment strategy or
find additional opportunities to create value in its portfolio through ESG-related initiatives. We might also find that market
trends suggest the client’s next fund should consider an alternative fee structure for investors.
2 O P ERAT IN G R E V I E W
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Strategy
Our strategy is to continue our growth, led by the needs of our clients, by scaling
existing areas of strength, adding new, relevant products and services and extending
our presence in attractive markets. In so doing, we hope to become an even better
service provider to our industry, an even more efficient and profitable business, and
an even better place to work. We believe that successfully executing this strategy will
bring significant returns to our stakeholders. To this end we have established three
clear growth objectives, supported by specific tactics (see below).
Objectives
To deliver growth
• Build a group of integrated, complementary services,
in one industry vertical, unique in their combination
under one brand, to serve clients in the evolving asset
management sector, with a particular emphasis on
alternative investments
• Offer services at each point in the life cycle of our
clients and increasingly add value using proprietary
data and analytics
• Provide an environment for individuals to learn,
collaborate and thrive and to encourage team
members to feel like owners of the business
Tactics
To achieve our objectives
• Focus on UK, Europe and North America, (i.e., those
markets with disproportionate exposure to alternative
investments), as well as territories with rising potential
• Use the capital markets to create bespoke financing
solutions for investment in services, companies and people
• Innovate, invest in, or acquire businesses and services
where we see a measurable synergy with our existing
activities and client relationships, where there is a
cultural fit in terms of our approach to our people and
otherwise on terms that are financially attractive and
consistently applied
• Attract, train and retain the highest quality expertise
in our industry and provide career opportunities that
benefit from our breadth of services, continuous training,
international reach and multi-divisional approach
• Provide simple and affordable routes to share
ownership for team members
2 O P E R ATIN G REVIEW
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Guiding principles
MJ Hudson is a business with longstanding principles, and these inform all of our activity. These guiding principles are set
out below. At all times, in all that we do:
We keep clients at the centre
Our business stands or falls on our ability to understand client needs and provide high quality solutions. Our key executives
have personal experience of the markets our clients operate in, and the depth of our client relationships affords us
privileged insight into client requirements. Client priorities drive all of our investment activity and help us to prioritise our
activity. We do not compete with our clients, and we have procedures to manage conflicts.
We believe in the value of people
We consider our staff to be our most valuable asset. We encourage our staff to take care of their own physical and mental
wellbeing and support them in this, fully, including ensuring a proper work-life balance for all staff. We are committed to providing
a safe and healthy work environment. From a personal development perspective, the Group encourages staff to keep their skills
up-to-date and offers its staff the means to develop additional skills through training and development programmes.
We care about the environment
We are a trusted adviser to our clients and are aware that this brings both influence and responsibility. We intend to use
that to promote positive change on sustainability and environmental impact in three areas: our own business; helping
clients make sustainable choices where we can; and creating new products and services to address the challenges ahead.
We employ long-term thinking
We manage our business for the long term, which means, for example, placing an emphasis on continuous staff training and opting
to incubate new businesses as opposed to acquisitions, where investment returns over the longer term make more sense. This
long-term thinking extends beyond commercial aspects of our work into the relationship we have with the planet and our society.
We believe that investment in technology is key to success in today’s financial markets
We believe that technology, combined with data, human experience and insight, can improve the value of our services and
help clients to grow. We believe technology can create and sustain competitive advantage. We aim to build a digital end-to-
end platform of services and infrastructure support for our clients.
We exercise financial prudence
We strive for a high level of financial prudence in all our activities including communication with new and existing investors
and lenders, liaison with our advisers and agents and reporting to our auditors and external stakeholders.
We believe in a strong, internal community and we support and cherish diversity
We recognise that we are building a community of staff members and we recognise that diversity makes our business stronger.
We are committed to the maintenance of a professional, inclusive environment that recruits, retains, develops, remunerates,
and promotes all of our people regardless of gender, race, nationality, marital status, sexual orientation, age, religion or beliefs or
disability. We strive to provide the same terms, benefits and opportunities to all, including routes to becoming shareholders, be
they existing or new members of staff; be they senior executives or those just starting out in their career.
We believe in taking responsibility for our actions
We are committed to being a responsible company in every social aspect. The Group supports applicable national and
international labour laws and complies with internationally recognised human rights principles (UN Declaration of
Universal Human Rights & the European Convention on Human Rights). These principles also guide the Group’s relationship
with internal and external stakeholders. Therefore, the Group may refuse to do business with parties that disregard or
violate these principles.
2 O P ERAT IN G R E V I E W
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Our clients
2 O P E R ATIN G REVIEW
24
CFO review
Introduction
This has been another significant year in the development of the MJ Hudson Group.
During the year, three acquisitions were completed and, after the balance sheet date, a
fourth was finalised. The Group also secured a new borrowing facility with Santander
to complement the funds raised at IPO in December 2019. The Group remains focussed
on growth. Despite the challenges presented by COVID-19 lockdowns, the Underlying
EBITDA performance of the Group has continued to improve.
“In FY21 underlying revenue was £25.5m
(FY20- £20.3m), an increase of 26%.”
2 O P ERAT IN G R E V I E W
25
Statutory results
2021
£m
2020
£m
Change
Revenue
39.8
22.3
78.5%
Operating loss
(5.1)
(5.1)
0%
Loss before taxation
(5.3)
(7.3)
27.4%
Loss for the year
(5.4)
(7.5)
28.0%
In order to assist shareholders’ understanding of the underlying performance of the Group, our comments focus on the
underlying performance of the business for the 12 months to 30 June 2021 and comparative period to 30 June 2020. The
Group includes non-GAAP measures as we consider these to be useful and necessary. They are used by the Group for internal
performance analysis and facilitates comparison with industry peers. A reconciliation from underlying to statutory results is
presented to assist the users of the financial statements to understand the underlying performance of the Group.
Underlying results
KPI
2021
£m
2020**
£m
Change
Underlying Revenue
25.5
20.3
25.6%
Underlying EBITDA
5.6
3.8
47.3%
Underlying Operating profit
3.4
1.9
78.9%
Underlying Profit before taxation
2.4
0.9
166.7%
Underlying Profit for the year
2.3
0.7
228.6%
Underlying EBITDA margin
22%
19%
Underlying basic earnings per share
1.3p
0.5p
Net (debt) / cash excluding IFRS16 leases
£(6.9)m
£10.0m
Proposed dividend per share
0.125p
n/a
Notes
1. Underlying Revenue is segment revenue less direct cost of sales.
2. Underlying EBITDA is segment profit/(loss) before: share based payments expense (including LTIP), fundraising and acquisition costs, non-recurring costs, and discontinued businesses losses. This also included unallocated
group expenses in 2020.
** Certain items have been restated in the results for the financial year to June 2020 as part of the audit for FY21. These restatements
have had, in aggregate, a £0.3m impact on statutory profits in FY20 and relate to changes in the reporting of deferred consideration
and a credit loss calculation within administrative and other expenses. A more detailed explanation can be found in note 1 to the
financial statements.
A reconciliation between the statutory operating loss and the Underlying Operating Profit is included below.
Revenue
In FY21 revenue was £39.8m (FY20 - £22.3m), an increase of 78.5%. Revenue has recovered after being suppressed in FY20 due
to the covid lockdowns. As highlighted in previous reporting, the fund management solutions business unit revenue contains
significant passthrough revenue of £2.2m in FY21 (FY20 - £2.1m) reflected in direct cost of sales. The remainder of the increase
in direct cost of sales of £12.0m relates to one significant new client onboarded by the Luxembourg office. Revenue of £2.2m was
contributed by the three new acquisitions in FY21 i.e., PERACS GmbH, Bridge Consulting Limited and Clarus Risk Limited.
Underlying Revenue represents gross revenue less direct cost of sales and is analysed below.
The Group considers that Underlying Revenue is a better guide to the development of the business. In FY21 Underlying
Revenue was £25.5m (FY20 - £20.3m), an increase of 26%. Organic growth for continuing operations was 14% (FY20 – 4%)
for the full year (up from 3.6% in first half). Organic growth relates to businesses that have been fully owned by the Group
for the whole of FY20 and FY21.
2 O P E R ATIN G REVIEW
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Segmental review
The following table analyses the segmental results for continuing businesses.
£ millions
Advisory
Business
Outsourcing
Data &
Analytics
Established
segments
Total
Organic
Investments
1
Consolidated
F Y 2 1
Underlying revenue
9.5
7.1
6.6
23.2
2.3
25.5
Growth
(5%)
54%
43%
20%
130%
26%
Underlying continuing EBITDA
2
1.8
2.1
2.0
5.9
(0.3)
5.6
Margin
19%
30%
30%
25%
(13)%
22%
F Y 2 0 ( R E S TAT E D )
Underlying revenues
10.0
4.7
4.6
19.3
1.0
20.3
Underlying continuing EBITDA
1.4
2.0
1.4
4.8
(1.0)
3.8
Margin
14%
43%
30%
25%
(100)%
19%
1. Organic investments represent investment into start-up AIFM operations in Luxembourg, fund administration and regulatory consulting (see glossary for more detail).
2. Underlying EBITDA is segment profit/(loss) before: share based payments expense (including LTIP), unallocated group expenses and discontinued business losses.
At the Group level, Underlying EBITDA grew to £5.6m as in FY21compared with £3.8m last year, with associated margins
for the period increasing from 19% in FY20 to 22%. Excluding the impact of Organic Investments, the EBITDA margin
remained at 25%.
Performance by individual segments was as follows:
Advisory
This segment comprises the Group’s Law and Investment Advisory business units. Underlying Revenue was £9.5m (FY20 -
£10.0m). Advisory revenue saw a 5% contraction in the year (FY20 – 7% reduction) which was due to reduced law revenues.
Part of this reduction was due to delays in fund launches and closings in the year but also from internal reorganisations
including the cessation of a small loss-making hedge fund practice and also the closure of the Switzerland branch office.
Investment Advisory revenue continued its recovery from FY20 and saw revenue growth of 31% in second half of the
financial year. The Underlying EBITDA margin increased to 19% from 14% in FY20 due to a focus on margin improvement in
the Law business.
Advisory accounted for 37% of Group Underlying Revenue in FY21 (FY20: 49%)
Outsourcing
Through this segment the Group provides ongoing operational and regulatory support for fund managers and funds. This
segment achieved 54% (FY20 :49%) Underlying Revenue growth in the year. This was largely due to Bridge Consulting
Limited (Ireland) which was acquired on 12 February 2021. 2021 organic growth reduced slightly for the year, albeit with an
improving second half trend, due to reduced revenues in the UK AIFM business. Total Underlying Revenue for this segment
was £7.1m (FY20:£4.7m) and Underlying EBITDA margin reduced from 43% to 30%. FY20 margins were inflated due to the
Covid salary deductions applied across the Group from April to June 2020. We also saw a margin squeeze due to delays in
integrating the Jersey administration business, acquired in FY20, with our established Guernsey administration business.
This is improving now, and the Jersey administration business is currently rebuilding its new business pipeline as revised
travel arrangements make it easier to visit prospective clients based in the UK.
Outsourcing accounted for 28% of Group Underlying Revenue (FY20: 23%)
2 O P ERAT IN G R E V I E W
27
Data & Analytics
This segment comprises the Group’s analytical platform, with a suite of services and products such as ESG, benchmarking,
IR & Marketing, Performance Analytics (acquired December 2020) and Quantitative Solutions (acquired June 2021).
Organic revenue growth in the segment of 30% (FY20 – all acquisition led) was driven by the growth of the ESG business
which grew by 84% in the year. Including acquisitions, Underlying Revenue in the segment grew to £6.6m in FY21 from
£4.6m in FY20. Underlying EBITDA increased to £2.0m in FY21 from £1.4m in FY20 and relevant margin was 30% (FY20: 30%) –
FY20 margins were inflated by Covid groupwide salary deductions.
Data & Analytics accounted for 26% of the Group’s Underlying Revenue (FY20: 23%).
Together the Advisory, Outsourcing and Data & Analytics segments comprise our Established Business Segments.
Organic investments
The Group´s three organic investments are to be moved to the Outsourcing segment in FY22, which is their natural
home. Their collective underlying revenue improved in the year to £2.3m from £1.0m, driven primarily through
expanded offerings within the Luxembourg AIFM business, was offset by a strengthening of teams in each of the three
businesses i.e. Luxembourg AIFM, fund administration and regulatory solutions. Losses at the Underlying EBITDA level fell
from £1.0m to £0.3m in the period.
Organic investments accounted for 9% of the Group’s Underlying revenue (FY20: 5%)
Mergers and acquisitions
During the year we announced three acquisitions – PERACS (now known as Performance Analytics), Bridge Consulting
(MJ Hudson Bridge) and Clarus Risk (Quantitative Solutions) - with a further deal completed after the period end (Saffery
Champness Fund Services). MJ Hudson Bridge forms part of the results of the Outsourcing division and Performance
Analytics and Quantitative Solutions are additions to our Data & Analytics division. Revenue of £2.1m was contributed
by the acquisitions completed in FY 2021, most of which was achieved in the second half. We have invested in our internal
infrastructure to consolidate acquisitions and the integrations of these deals are performing in line with expectations with
MJ Hudson Bridge in particular making good progress. Client reactions have been both positive and supportive.
Each of the businesses acquired, especially Bridge Consulting in Ireland, bring levels of recurring revenue ahead of the
group average. Together with the benefit of a full year´s contribution, this will impact the balance of recurring revenue in the
group in earnest in the current year.
From a cashflow perspective, we invested a total of £10.7m in acquisitions in FY 2021, this figure includes stage and performance
payments for acquisitions announced in prior periods. This compares with £8.3m in FY 2020. With the benefit of businesses
acquired since our admission to the AIM market and the transfer of organic investments planned for the current year, our
Outsourcing segment will be the biggest part of the group by Underlying Revenue, Underlying EBITDA and headcount.
“Revenue of £2.1m contributed by
three new acquisitions in the year.”
2 O P E R ATIN G REVIEW
28
Underlying Operating Profit
Reconciliation of statutory operating loss to Underlying Operating Profit (FY20 – restated):
£ millions
FY21
FY20
Statutory operating loss (restated)
(5.1)
(5.1)
Underlying adjustments
Share based payments and LTIP expense
1.8
0.6
Fundraising and acquisition costs
3.2
4.0
Non-recurring costs
1.8
0.9
Discontinued business losses
0.9
0.5
Group expenses
0.0
0.6
Amortisation of acquired intangible assets
0.8
0.4
Underlying Operating Profit
3.4
1.9
Significant drivers of the operating loss of £5.1m (FY20 - £5.1m) were:
• Adjustment to administration expenses is the addback of share-based payments (in FY20 excluding accelerated
costs of the scheme incurred at IPO which are within non-recurring costs) and LTIP expense in the Statement of
Comprehensive Income
• Fundraising / acquisition costs of £3.2m (FY20 - £4.0m). Fundraising and acquisition costs include £0.7m in respect
of payments to former shareholders of Tower Gate Capital relating to the investment gain described in note 17,
£0.3m in respect of the historic ESG acquisition, 0.1m relating to debt fundraising and £2.1m in respect of the M&A
deals closed in the year, including the transaction which has completed in October 2021 after receipt of regulatory
approval, described in note 27. (FY20 - direct IPO costs of £2.3m, accelerated share option costs that crystallised at
IPO of £0.3m and acquisition costs of £1.3m).
• Non-recurring costs £1.8m (FY20 - £0.9m) The non-recurring costs are one-off in nature and include consultancy
costs in respect of the UK regulated entities totalling £0.3m; reorganisation costs in UK law, investment advisory and
fund management solutions business units which saw 5 people leave the Group as part of a cost-cutting review – total
£0.5m, new product development costs £0.2m, prior accruals adjustments £0.2m and balance being items less than
£0.1m.(FY20 - London office move costs £0.3m, IT infrastructure costs (move from Jersey to London) £0.2m, US launch
costs (suspended due to COVID-19) £0.2m);
• Discontinued business losses represent the loss from individual entities that have either been wound up in the year
or management has concluded will be discontinued in the near future due to lack of profitability. This is a non-IFRS
alternative financial measure.
• Group expenses - Integration infrastructure project FY21 - £0.0m (FY20 - £0.6m) includes central costs not passed
on to segments in respect of improving business integration processes and dedicated IT infrastructure. These costs
related to FY20.
• Included within depreciation and amortisation is £0.8m in respect of amortisation of acquired intangibles.
FY20 included £0.3m in respect of doubled rent depreciation for the period from December 2019 to April 2020
where the new and former London office leases overlapped.
2 O P ERAT IN G R E V I E W
29
Finance expenses and fair value movements
£ millions
FY21
FY20
Bank interest loan
0.6
0.7
Interest on lease liabilities
0.3
0.2
Unwinding of discount on liabilities
-
0.2
Total finance costs
0.9
1.1
Within loan interest in FY20 is £0.3m relating to convertible loan notes which converted into equity at the time of the IPO
and are therefore non-recurring. The financing and debt arrangements section below gives details of the debt fundraising
round that was concluded during FY21.
Finance costs were previously adjusted for deemed interest on deferred consideration charged in the year to the Statement
of Comprehensive Income in arriving at Underlying Profit Before Taxation. As the deferred consideration is contingent upon
meeting performance measures this should have been included in Fair Value movements and that has been corrected in
these financial statements
Fair value movements are summarised below:
£ millions
FY21
FY20
Investments fair value (gain)/loss (note 17)
1.6
0.1
Deferred consideration fair value gain/(loss) (note 21) restated
(0.8)
(0.6)
Convertible bonds fair value loss
-
(0.5)
Total fair value movements
0.8
(1.0)
The fair value investment gain relates to a former Tower Gate Capital investment which came into the Group as part of the
acquisition of that business in 2016 less write downs on the valuation of unlisted investments. This has been added back in
the underlying figures as it is not considered to be representative of the underlying business performance.
2 O P E R ATIN G REVIEW
30
Financing, debt arrangements and regulatory capital
As at 30 June 2021 the Group had cash and cash equivalent balances of £9.8 million and net debt (excluding lease liabilities)
of £6.9 million (2020 – £10.0 million net cash).
During FY21 the Group refinanced its debt facilities and entered into a five-year financing agreement with Santander
UK PLC. The financing comprised a facility of up to £17.5m with repayment due in 2026. There is an option to extend this
amount over time, on an uncommitted basis. The facility is to be used to finance the Group´s M&A pipeline, regulatory
capital requirements and general corporate needs. Existing loans totalling approximately £4 million were repaid in May and
June 2021. The terms of the facility are set out in more detail in note 21 to the financial statements.
The regulated Irish acquisition, Bridge Fund Management Limited (BFML), has won a significant number of new clients
on the back of regulatory changes in Ireland and has seen significant growth. With that growth, has come an accelerated
regulatory capital need. €5.5 million was placed in the BFML regulatory capital deposit account in June and a further €2.8
million has been paid in September which will take this entity’s regulatory capital up to the cap of €10 million. As reported
previously, we have also seen an increase in trade debtors and contract assets due to remote working and lockdown impacts
in extending the timing required for clients to complete transactions. This has begun to ease in June with record law firm
billing in the month and cashflow patterns are expected to return to previous levels over the next few months.
In order to compensate for this accelerated regulatory capital need and also the increased lockup of working capital the
Group entered into discussions with Santander about a further drawdown of £7 million. This drawdown was finalised in
August 2021. This facilitated the expansion of the regulated Irish business and restored the working capital buffer.
Borrowings and other liabilities are set out in the table below:
£ millions
FY21
FY20
Current borrowings
0.0
2.5
Non-current borrowings
16.7
0.9
Total borrowings
16.7
3.4
The increase in borrowings relates to the five year loan facility with Santander – see note 21.
Further details in relation to going concern reviews and covid impact are set out in note 2 of the financial statements
Earnings per share (EPS)
The Group’s Underlying Basic Earnings Per Share has increased to 1.5p (FY20 restated– 0.5p). This is calculated by dividing
the Underlying Profit for the year by the weighted average number of shares in issue in FY21 170.281m (FY20 – 134.308m).
Statutory basic and diluted earnings per share per the financial statements was (3.2)p (FY20 - (5.6)p).
Intangible, tangible and right-of use assets
Included within intangible assets is £15.5m (FY20 – 7.5m) of customer relationships (identified on current and prior years
acquisitions) and software development. Additions in the year totalled £9.7m of which £7.2m related to the valuation of the useful
economic life of customer relationships of acquired companies. Note 27 contains a breakdown of these additions by acquisition.
The balance of intangible assets relates to goodwill of £31.5m (FY20 - £25.2m) arising on acquisitions. This is analysed in
note 14 in the financial statements. The Board carries out an impairment review of goodwill each year to ensure that the
carrying value is supportable. As at 30 June 2021, the Board concluded there was no impairment of goodwill and intangible
assets. £6.3m (FY20 - £6.6m) of goodwill was added in the year from new acquisitions, a breakdown is contained in note 27.
Tangible fixed assets have reduced from £2.2m to £2.1m in FY21. Leasehold improvements in FY20 in respect of the fitout
of the new London office totalled £1.7m of the total additions of £2.1m. FY21 additions totalled £0.2m.
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Right-of-use assets have reduced from £7.6m to £7.1m in FY21. Additions in FY21 totalled £0.6m and £0.1m related to
the acquisition of Bridge Consulting Limited. Additions in FY20 totalled £7.9m of which £7.7m related to property leases
- £7.4m related to the London lease, £0.2m related to property leases acquired with Saris B.V. and £0.1m related to the
acquisition of Anglo Saxon Trust Limited.
Working capital
Management of lockup days remained a key focus of the Group over the period. Lockup days is a measure of the time it
takes to convert work into cash. It is calculated as the combined debtor and WIP days for the Group. This is a key indicator
for management and the Board as it drives the cash generation required to support the Group strategy.
The UK legal advisory business unit lockup at June 2021 was 180 days (FY20 - 145 days). This comprises debtor days
of 74 days (FY20 – 45 days) plus WIP days of 107 days (FY20 - 100 days). This uplift relates to the increased working capital
cycle referred to previously whereby there has been a trend for projects to take longer to complete and get to billing stage.
June 2021 month saw record billing level in the UK law operation, which has distorted the debtor days total. This uplift
in lockup is expected to be temporary. This trend has extended to other segments where contract assets are recognised.
Debtor days for the Group at June 2021 were 67.9 days (FY20 - 63.9 days).
Deferred consideration
Deferred consideration balances have increased in FY21 due to the three recent acquisitions. Liabilities in respect of
deferred consideration have increased from £10.5m in FY20 to £13.6m. The increase is analysed further in note 21 to the
financial statements.
Net debt
The Group calculated net debt as total of cash and short-term deposits and credit facilities. The Group uses this measure to
improve comparability with previous financial years.
£ millions
FY21
FY20
Cash and cash equivalents
9.8
13.4
Borrowing – financial institutions and other borrowings
(16.7)
(3.4)
Convertible Loan Notes
-
-
Net cash/(debt) excluding IFRS16
(6.9)
10.0
Cash flow
Statutory net cash generated from operating activities for FY21 was an outflow of £3.0m before tax (FY20 - £4.8m).
After adjusting for the cash impact of the factors described in Underlying operating profit above, the Underlying Operating
Cashflow of the Group is a positive inflow of £5.2m (FY20 - £1.9m).
Cash balances at the end of FY21 were £9.8m (FY20 - £13.4m).
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32
Net cash used in investing activities
Net cash used in investing activities in FY21 totalled £12.5m (FY20 - £10.6m). This comprised:
Cash flows from investing activities (£’million)
2021
2020
Purchases of tangible assets
0.2
2.1
Purchase of intangible assets
1.9
0.1
Purchase of subsidiary undertaking
1.5
5.0
Purchase of financial instruments
0.3
-
Sale of financial instruments
(0.6)
-
Payment of deferred consideration related to acquisitions
9.2
3.4
Net cash used in investing activities
12.5
10.6
Dividend
The Board has recommended a maiden dividend of 0.125p per share in respect of the period to 30 June 2021, payable
in January 2022 and a resolution to approve the dividend will be put to shareholders at the AGM. For the purposes of
comparison with any future dividends, investors should consider this a payment in respect of the six month period to the
end of June 2021. The Group’s intention in the short to medium term is to introduce a progressive dividend policy. The
Group’s primary focus being on delivery of capital growth for shareholders.
Peter Connell
CFO,
24 November 2021
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Trevor Goodman
Managing Director, Operations
How we manage our risks
Compliance & risk report
Overview
I am pleased to present my first compliance and risk management report. I joined MJ
Hudson in March 2021 and chaired my first Legal, Risk and Compliance Committee in
June 2021. I am therefore grateful to Guy Grayson for all of the work he had done in
the position up to those points during 2021. Guy has now returned to focus full time on
the role of Group General Counsel whilst we continue to work together on legal and
compliance matters.
Overview of risk management at MJ Hudson
The Group offers a range of services within the asset management sector and a number of its divisions are subject to
regulatory oversight in different jurisdictions (notably the UK, the Channel Islands, Luxembourg and Ireland). The sector is
experiencing increasing regulatory scrutiny. This evolution both provides business opportunities to the Group as well as a
heavier regulatory overhead. Over the period, we have seen a growing inclination for regulatory review and intervention.
Risk management and compliance is at the core of the Group’s activities. It is considered at all levels, from group planning
to divisional and jurisdictional levels, to ensure group businesses are managed with appropriate systems and controls,
governance and a culture to organise and control their affairs responsibly and effectively with adequate risk management
systems in place.
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Developments since last year
Since the Company’s IPO in December 2019, we have been working to develop the effectiveness, maturity, coverage and
governance applied within our businesses. Key developments are these:
• Refinement of our “traffic light” risk categorisation system
• Clearer tracking metrics to ensure issues of concern are owned and followed to conclusion
• More investment in systems, controls and people to permit them to execute their roles
• Advances in data and client information security
• Focus on a litigation and regulatory tracker system to improve management of potential claims and regulatory concerns
• Appointment of a senior independent director in Andreas Tautscher to regulated subsidiary board
• My own appointment as chair of the Legal, Risk and Compliance Committee
• Build out of the Group’s compliance function
• Increased regular communications between Group and divisional compliance officers
• Improved linking of Group and divisional policies
• Systematic review of documented Group policies as and when required and on a yearly basis
• Refinement of reporting lines
Consolidated risks matrix
The Group’s risk appetite and risk tolerances are determined and monitored by the Board on review of our Consolidated
Risks Register which is designed to summarise the material risk landscape while reflecting the nature and scale of our
business. The register is designed to map risk trends and seeks to introduce standard risk language and methodology
to ensure a consistency of approach. Details of those principal risks and uncertainties that we envisage could affect our
business operations can be found on page 39.
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Board responsibility
The Board has overall responsibility for the establishment, oversight and effective implementation of the Group’s
compliance and risk management framework. Our risk management process can be summarised as risk alert, risk
assessment, development of mitigation plans and policies, Board reporting, implementation and re-assessment.
Our risk management framework ensures the following:
• “Dashboard” reporting by each divisional / jurisdictional compliance officer
• Legal & compliance risk aggregation by the Legal, Risk & Compliance Committee
• Quarterly meetings of the Operations Committee to address operational risks
• Escalation and reporting to the Executive Committee and to the Audit & Risk Committee
• Board quarterly assessment of effectiveness of Group’s risk management and internal controls
• Staff compliance training and updates
• Overall culture of accountability
• Transparency
An overview diagram of our tiered risk framework is below:
Business heads
Business unit boards
and committees
Compliance officers
Executive
committee
MJ Hudson
Group PLC Board
Operations committee
Legal, Risk and Compliance committee
Divisonal / Jurisdictional
Audit and Risk
committee
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Internal risk review
The results of internal review activities are reported to the Audit & Risk Committee and the risk-based review plan is
updated as required to respond to the risks faced by the Group and to consider forward-looking financial projections and
strategic plans, under both business-as-usual and adverse circumstances. This process provides a forward-looking approach
to risk assessment and a consideration of how risks may evolve through the economic cycle. This helps us to understand the
viability risks to our business model and the sustainability of our strategy. Further the Group’s independent auditor reports
the results of the annual financial statements audit, including findings related to processes and controls over financial
reporting, directly to the Audit & Risk Committee, the findings of which are considered and feed back into the risk based
internal audit plan.
Group Executive Committee
The Executive Committee meets quarterly and works with the Board to define and develop the Group’s strategy. This involves
advising the Board on strategy, making recommendations and presenting relevant plans to the Board. Once approved by the
Board, the Executive Committee is responsible for implementing and executing strategy. The work of the Executive Committee
involves it considering finance, organisational, resource and risk matters relevant to the Group and its divisions.
Group Operations Committee
The Operations Committee meets quarterly and oversees, provides guidance and makes necessary decisions in relation to the
Group’s operating model. It has responsibility for considering all risk types that may affect the Group including, but not limited to,
strategic, operational, regulatory, legal, human resources, technology (including cyber security), client, fiduciary and performance
risks. The Operations Committee reports to the Executive Committee on its work and the outcome of its decisions.
Legal, Risk & Compliance Committee
The Legal Risk and Compliance Committee assists with the assessment of the effectiveness of the Group’s risk management
and internal controls relevant to the Group’s regulated entities. The Group operates a decentralised compliance model
which places reliance on each divisional compliance officer for ensuring that the division he/she is responsible for meets all
applicable requirements. Each divisional compliance officer is therefore responsible for:
• Escalating and reporting legal, risk and compliance matters to the Legal Risk and Compliance Committee.
• Providing a “dashboard” report containing a divisional report and divisional risk assessment at each Legal Risk and
Compliance Committee meeting.
The Legal Risk and Compliance Committee reviews the matters escalated and reported to it and escalates and reports
relevant matters to the Operations Committee. The chair of the Legal Risk and Compliance Committee also has a separate
communication line into the chair of the Audit and Risk Committee.
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Divisional compliance officers
Each jurisdiction in which the Company operates possesses an individual compliance officer who is responsible for ensuring
that the regulated business conducted in that jurisdiction is in compliance with local rules and regulations and that it
responds appropriately to requests from the applicable local regulator(s). Local compliance officers comprise the core of the
jurisdictional tier of the risk model and have the necessary authority and expertise to perform their role. They may draw on
additional resources and expertise from the Group compliance function.
Technology
The Group continues to further develop its internal Technology development capabilities. It is also undergoing a number
of significant developments in relation to IT infrastructure and strategy, including the incorporation of Salesforce and
Workday. The Group is continuing to work to improve performance of its IT systems while focusing on developing
applications, including in connection with client on-line offerings through partnering arrangements with third parties. The
Group has a full-service, in-house IT team, which includes business analysts, developers, IT architects and tech support.
With significant strategic investment, we are actively strengthening mitigation of potential impacts related to data
management, infrastructure stability and cyber security.
Group General Counsel / Compliance with laws and regulations
The Group has maintained an in-house legal function while a public company and uses external legal counsel to advise on
legal and regulatory requirements. The in-house legal function has been expanded over the period and is intended to expand
further - to service the Group’s growing internal legal requirements, an expanding company secretarial function as well as
assisting on non-regulated external client facing services.
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Principal risks, uncertainties
and mitigation
Risk area
Description
Mitigation
Key Person
A loss of a key person in the executive
management team, particularly the CEO but
also the CFO or COO
Succession planning; LTIP; key person insurance;
retention-based staff remuneration planning
IT infrastructure
breakdown and
IT risks
An infrastructure failure or network service
failure resulting in business disruption,
regulatory breach, reputational damage and/
or financial loss. Cyber breach
We regularly test business continuity planning;
robust institutional a-grade public cloud-based
back-up; audit and monitoring of infrastructure
and hardware. Detailed access controls; specialist
in-house IT division; use of firewalls, Cisco
Stealthwatch monitoring tools, policies and
staff training & penetration testing; suspicious
activity reporting; compulsory online security
and awareness training; commissioning cyber
certification.
Client demand
A dramatic drop in demand for services
may adversely impact revenues and profits.
The COVID-19 pandemic has significantly
impacted the demand for project-related
services as we enter 2021/2022.
Redeployment of staff to cyclical activities to
optimise utilisation; use of variable remuneration
linked to revenue generation; multi-jurisdiction
activities and multiple services lines; annuity like
revenue streams.
Access to capital
Inability to raise equity or debt financing
resulting in inadequate funding to meet
business objectives or to fulfil working
capital requirements.
Annual budgeting process; cash flow management
and credit control process; debt limit controls;
access to Santander debt funding facility.
Systemic financial
control failure
A gross failure to manage competently the
financial performance of the Group leading
to financial losses, fraud or loss of investor
confidence
Quarterly financial planning and budgeting; use of
central integrated finance group; highly qualified
reporting team; detailed bottom-up budgeting
exercise supplemented with quarterly reforecasting
exercises; regular financial reporting; Audit & Risk
Committee oversight and involvement.
2 O P ERAT IN G R E V I E W
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Reporting principal risks
The Group’s Chief Risk Officer is the COO, Odi Lahav. The Chief Risk Officer plots principal risks on the Consolidated Risks
Register and reports quarterly to the Audit & Risk Committee and to the Board.
Current uncertainties
COVID-19
The Group did not furlough any employees. The COVID-19 situation, while disruptive and unpredictable, also presented
opportunities for challenging the way we work and ensuring that we innovate to continue to best serve our customers’
needs in a post-Covid environment. We continue to ensure safe working practices, which has been our top priority, in line
with the guidance from authorities in all relevant jurisdictions. Remote working proved extremely successful, but we are
transitioning back to a primarily office based culture. We will continue to monitor working arrangements.
From a revenue perspective, the Group has been relatively well positioned to withstand the impact of COVID-19 on client
instructions due to the variety of services it offers.
Control attestation
At the time of writing this report, the Directors consider that the business model is appropriately diversified, that there are
sufficient mitigating actions available to the Board and that the Group is suitably resilient to deal with crystallisation of risks
and/or adverse economic conditions.
The Directors believe that there continues to be growing demand for a full-service asset management consultancy, such as
MJ Hudson, to provide a range of integrated services to the asset management and investment industries.
Trevor Goodman
Managing Director, Operations
24 November 2021
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40
Our key stakeholers, their primary interests and how we engage with them:
Our People
Stakeholder key interests
How we engage
As a group that provides
services to senior staff within
clients, having “best in class”
employees who are committed
over the longer term is key to
our expanding business model
• Reward
• Career development
• Fulfilment
• Reputation
• Wellbeing
• See the Remuneration Committee
Report
• Monthly “The Email” communication
to staff
• Soft skills training
Our Clients
Stakeholder key interests
How we engage
Key to our success
• Look for “trusted advisor”
• Need wide range of investment
services
• Look for responsiveness and
commerciality
• Webinars
• Seminars
• Know how communications
• Special events
• Industry forums
• Social media and website
Our Regulators
Stakeholder key interests
How we engage
For our regulated divisions, the
on-going positive approval of
regulators is critical to those
businesses continuing
to function
• Governance
• Ensuring compliance with law & rules
• Protection of investors
• Ensuring appropriate personnel &
resources
• Regular correspondence
• During statutory required applications
• As part of M&A processes
• Obtaining necessary approvals
Our Work Partners
Stakeholder key interests
How we engage
It is important we maintain
trusted relationships with
other professional service
providers who work alongside
us to supply co-ordinated
services to clients
• Faith in our service supervision
• Responsible procurement, trust
and ethics
• Effective charging structures
• Long-term relationships
• Training forums and presentations
• Industry events
• Quality management reviews
Our Shareholders
Stakeholder key interests
How we engage
Trust and support from key
shareholders underpin our
ability to deliver on strategy
and performance
• Sustained capital growth
• Financial performance
• Dividends
• Governance & transparency
• RNS communications
• Investor calls
• Via website
• Annual reports
• AGMs
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41
Key issues considered and key deivisions made by the Board over the period:
Key decision
Considerations
Consequences
Senior debt facility
• Access to capital to support acquisition
and investment activity
• Build stakeholder confidence
• Capital raise on terms that reflect
listed status
• Leverage of balance sheet within
defined parameters
Data & Analytics investments
• Build new digital and cross
border services
• Support new venture with global
bank in ESG
• Expansion of our partnerships
• MJ Hudson IQ
• Development of client portals
• Growth of in-house IT expertise in
AI, machine learning and software
development generally in support of new
products
Acquisitions
• Performance & Analytics
-PERACS (Germany)
• Bridge Consulting (Ireland)
• Quantitative Analytics -
Clarus Risk (Guernsey)
• Saffery Champness * -
SCFL (Guernsey)
• Cross referral potential
• Access to larger, international clients
particularly in US
• Target sustainability
• Regulatory capital requirements
• Unified branding and business
development
• Motivational consideration structure
• Integration planning and benchmarking
against prior deals
• Succession management
• Accretion of growing revenue streams
• Expansion of synergistic business lines
• Greater presence in North America
• Greater economic balance across the
Group´s portfolio
• Enhanced integration infrastructure
COVID-19
• Staff safety
• Compliance with changing guidelines
• Salary reductions reversed as market
volatility improves
• Maintaining Group culture and sense of
belonging outside of office environment
• Continued support for work from
home regime
• Voluntary to office for double vaccinated
IT infra investment
• Reduction of dependency on external
providers
• Digitisation of services
• Resilience of infrastructure
• Expansion of internal software
development division
• Remote working ability
Dividends
• Timing
• Investor expectations
• Investment versus growth
• Maiden six month dividend
announced
* Completed 31 October 2021
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People & Wellbeing
44
Communities and society
55
The environment and sustainability
58
People, Communities and our
Environmental responsibilities
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Charlene Cowen,
Chief People Officer
Charlene heads up the Group’s People & Wellbeing function.
Charlene was the first employee of the Group, joining Matthew
Hudson as an associate (solicitor) to launch the Group, in
2010. Charlene qualified as a solicitor in the corporate and
commercial department of the London office of O’Melveny &
Myers in 2007. Charlene’s focus is ensuring that the People
& Wellbeing function provides the optimal environment for
colleagues to deliver excellent service to clients.
People & Wellbeing report
The People & Wellbeing team
The People & Wellbeing team oversees the Group’s HR and recruitment function. The biggest asset of any organisation is its
people, and our team is dedicated to developing and maintaining employee engagement, health, and wellbeing.
The COVID-19 pandemic has further highlighted the importance of keeping employees safe and healthy. We have
implemented several initiatives throughout the pandemic, as set out in this report, to assist people during this difficult time.
Significantly, we have invested in a new HR system, Workday, to support the Group with its continued growth. The new
system will improve compliance, provide better and more sophisticated data and analytics for decision making, and will
increase efficiencies across the Group. We expect the new system to also improve levels of employee engagement and assist
employees with their career progression, learning and development.
Our people
The Group operates across UK, Europe and North America and adheres to regulatory compliance and employment
practices to meet local jurisdictive requirements.
Number of employees
1
2017
2018
2019
2020
2021-YTD
United Kingdom
85.2
88.2
103.0
111.9
130.0
Ireland
-
-
-
-
37.0
Guernsey
9.4
11.4
9.4
9.4
15.1
Netherlands
-
-
11.0
11.0
21.8
Jersey
1.6
1.0
1.0
10.0
14.9
Luxembourg
3.6
4.6
3.8
6.8
5.8
USA
-
4.0
4.0
5.0
4.0
Canada
-
-
-
3.0
3.0
Switzerland
-
-
1.0
1.0
1.0
Total
99.8
109.2
133.2
158.1
232.6
1 Overview of full-time equivalent staff (FTE).
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MJ Hudson growth stories
Vasco Vicini,
Divisional Director of AR Solutions - Regulatory Solutions
The opportunity to join MJ Hudson came unexpectedly during February 2020 as a
result of a coffee which was meant to be a catch up with an old contact of mine. It
turned out that I could be good fit for the business, so I threw myself at it and pursued
the tempting opportunity.
I joined as the Head of the Appointed Representative team in the autumn of 2020 and my objective was to help implement
new and more efficient ways of working with our clients and to ensure that the team was united behind common goals.
Joining during lockdown presented unique challenges to team building and engaging with clients. For instance, getting to
know everyone in the new team was a challenge, but one that was overcome by running virtual “speed dating” meetings to
connect with as many people as possible. I immediately felt welcomed.
Right at the start, we ran a virtual team strategy day which was both constructive and fun and gave everyone an opportunity
to get to know each other and start to bond. To be honest, it’s hard to believe where we’ve got to as a team in just over a
year at MJ Hudson. We doubled in size, grew business, developed our knowledge and confidence, and improved the quality
of services and processes. I am incredibly proud of our achievements, but the road to success doesn’t stop here. We have
plenty more new goals to achieve.
If I had to describe what makes MJ Hudson a special place to work, I would say it is the ability to be dynamic and innovative.
Since day one, I felt empowered to get going and achieve.
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Kate Vine,
Senior Analyst - Fund Management Solutions
I joined MJ Hudson in September 2019, as part of the 12-month graduate rotation
scheme. This involved rotating through four different departments within MJ Hudson.
I was drawn to this opportunity because it is unique; it equips you with a variety of
skills to help you fulfil the different roles, but also gives you the opportunity to discover
which business area is truly suited to you.
After the scheme I was offered a permanent role in the fund management solutions department, where I help fund
managers manage their funds in accordance with the AIFMD. I particularly enjoy the challenge of reviewing and questioning
due diligence carried out on investment opportunities and feel very fortunate to have a front row seat to thorough
discussions between our clients and my colleagues, where deep knowledge of the industry is shared.
I feel exceptionally lucky to have started my career at MJ Hudson, particularly within the graduate rotation scheme. I have
been able to build a strong foundation and develop a variety of transferable skills; the experience has been fundamental
to my performance in my current role. I have absorbed knowledge from a vast number of unique individuals, with a wide
spanning set of skills and deep expertise. Additionally, I have built special relationships with these individuals, which really
makes my day-to-day gratifying, as there is always a friendly face round the corner.
I would really encourage graduates to embark on the rotation scheme as I truly believe it is an excellent kickstart to your
career, and MJ Hudson is a really enjoyable place to be. I am excited to continue my journey at MJ Hudson and look forward
to what the team can achieve together.
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Sebastiaan Greeven,
Manager – ESG and Sustainability
I joined Spring Associates in 2017, two years before it was acquired by MJ Hudson and
became our ESG & Sustainability team. I am located in the Amsterdam office, but I work
closely with colleagues and teams based across Europe and North America. I feel lucky
to be surrounded, physically and virtually, by incredibly talented and driven people, all
aiming to make the world a better place. We have experienced incredible growth in
the last two years and, while this growth certainly also has its challenges, I feel mostly
extremely lucky to work in a field where the opportunities are endless.
I love the freedom and responsibility you get working at MJ Hudson, marking the true entrepreneurial spirit of the firm.
The past year I have been working on the development of our digital ESG Advantage platform, enabling our clients to
simplify, standardise and streamline ESG assessments of fund managers, portfolios, and underlying assets. I truly believe
that we are working on the best digital ESG solution in the private markets space, allowing us to grow even further and
thereby create even more positive impact.
Although we have already achieved so much the past few years, I am excited to see what is still to come and I feel honoured
to be experiencing that alongside my colleagues. Based on them, I have no doubt we will create even more success, positive
impact and have fun while doing so.
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Daniel Daines,
Senior Analyst – IR and Marketing Solutions
I joined MJ Hudson in February 2015 on an apprentice scheme, spending my first
14 months gaining marketing experience in the office, whilst also attending various
external courses on Digital Marketing. I worked on internal marketing projects for
the firm, and then began working on client-facing projects in the IR & Marketing
Solutions division.
In 2016, I completed my apprenticeship and was also shortlisted for Microsoft’s Apprentice of the Year in the Digital
Marketing category. I then joined MJ Hudson full-time, continuing to work on a range of engaging client projects, primarily
working with fund managers in need of positioning, communications, and investor relations support. In this role, the
projects never fail to provide variety: one week I could be producing fundraising materials for a film fund, and the next I am
researching work-life balance sentiments in the private markets.
Over these past 6+ years, I have seen MJ Hudson in three different offices, and have enjoyed watching the firm on its
journey from a boutique law firm to a one stop shop service provider to the asset management industry, whilst supporting
my own professional growth and development. During my time at the firm, I have had the opportunity to help shape the
processes we have in place and the outputs we deliver, as well as training new starters.
The IR & Marketing Solutions team has significantly grown since I joined, particularly since last year’s acquisition of Meyler
Capital, a US and Canada based marketing agency. Having joined a small marketing team in 2015, it has been great to watch
the progress of our team, acquiring quality people along the way, and becoming a larger force that goes above and beyond
with every project.
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Diversity and inclusion
The Group recognises that diversity makes for good
business as it stimulates more ideas, opinions and
perspectives. The Group maintains a professional, inclusive
environment, that recruits, retains, develops, remunerates,
and promotes all of MJ Hudson’s people, regardless of
gender, race, nationality, marital status, sexual orientation,
age, religion, beliefs or disability. In short, the Group
embraces diversity as fundamental to the promotion of
the company’s values and recognises that diversity and
inclusion has an invaluable influence on MJ Hudson and all
that society aspires to be.
We are committed to recruiting, developing, and promoting
a diverse workforce.
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We have focused our diversity and inclusion resourcing
strategy on 3 key areas:
• Expanding our networks and recruitment channels.
We continue to build partnerships with external networks focused on underrepresented groups historically excluded from
the asset management industry. In 2020, we signed up to the Investment 20/20 scheme, focused on investing in future
talent for the investment management industry. We recently signed up with the 10,000 Black Interns programme in the UK,
which is designed to offer 2,000 internships each year for five years. We continue to work with STEM Women UK.
We also registered with the UK Government’s Kickstart Scheme. The purpose of the scheme is to create six-month work
placements, aimed at 16-24-year-olds who are on Universal Credit and who, due to the current economic circumstances,
are at risk of long term unemployment. COVID-19 has had a significant impact on this age group and the scheme is designed
to address concerns over young people’s employment opportunities.
We are continuing to offer new apprenticeships in the UK to provide more opportunities to underrepresented groups
within the asset management industry.
• Identifying ways in which to reduce unconscious bias within the recruitment process.
We have started using a gender decoder tool for job adverts in the UK and Channel Islands to help increase our female
candidate pool; we are changing the way we consider job requirements; and we are creating structured interviews with a
diverse interview panel where possible, to help avoid hiring based on shared biases.
• Technology investment
Investment in our new HR system, Workday will improve our data and analytics capability and support our diversity
initiatives, enabling us to track and monitor the progress we are making.
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We are strengthening our diversity and inclusion retention strategy.
We recognise that working to keep the best talent, which includes supporting women through the executive pipeline, is
the best way to retain our market competitiveness. We are therefore looking at ways to help retain, coach and mentor
women into senior management positions. In line with this, we seek to support our female employees as much as possible
by encouraging shared parental leave and offering equal company pay for maternity and shared parental leave for up to 26
weeks and full pay for paternity leave for qualifying employees.
We actively encourage and support female employees back into work by offering phased return schemes for new mothers,
as well as mentoring programmes for those who wish to participate. We also offer flexible working practices to staff, such as
working from home, term-time contracts and flexi-hours.
We have a corporate membership with City Parents, an award-winning organisation that offers tailored, expert-led
resources to support all types of professionals in their work and home lives. City Parents offers a variety of both live and on
demand events, as well as a wide range of support, podcasts, articles, and resources on topics such as resilience, work-life
balance, remote working, diversity, and confidence at work.
We recognise that we are living in an ageing population. We are therefore tailoring support for workers of different ages
and creating an age-friendly workplace culture. In line with this, we offer alternative working patterns to an employee
reaching retirement age.
Gender Diversity – Total Employees
2017
2018
2019
2020
2021*
42%
40%
41%
44%
42%
58%
56%
59%
60%
58%
Men
*Two recently acquired businesses both had a male heavy headcount which has reduced our female ratio.
Women
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Gender diversity of board & management
2017
2018
2019
2020
2021-YTD
Board
Men
100%
100%
100%
100%
100%
Women
-
-
-
-
-
Executive committee
Men
-
-
50%
50%
50%
Women
-
-
50%
50%
50%
Senior management
Men
67%
67%
100%
100%
83%
Women
33%
33%
-
-
17%
Management
Men
76%
67%
65%
64%
67%
Women
24%
33%
35%
36%
33%
Team management
Men
-
-
-
-
50%
Women
-
-
-
50%
*Diversity metrics are based on our headcount of 244 employees and excludes external consultants. Observers of the Board includes a male to female ratio of 3:1. We have changed the definition of Senior Management
which now includes Business Unit Heads, Managing Directors and Founders (excluding anyone who has stepped down). We have also included our Team Management numbers to highlight the investment we are making into
our female pipeline.
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Wellbeing
We want to ensure that the wellbeing of our team is not just good, but excellent – both physically and mentally. The
People and Wellbeing department has a strong focus on promoting employee wellbeing, through a number of initiatives
including the Recharge Plan – a wellbeing programme which encourages employees to partake in yoga, mindfulness,
running club, book club and boot-camp sessions. The Group also operates a switch-off policy, enabling staff to switch
off their emails from their devices when on holiday.
In a recent internal wellbeing survey, 83% of participants agreed that the company
culture at MJ Hudson supports good wellbeing. 81% of respondents also felt their line
manager genuinely cares about their wellbeing.
The COVID-19 pandemic has further highlighted the importance of keeping our employees safe and healthy. We have
implemented several initiatives throughout the pandemic to assist people during this difficult time:
• Since working from home, we have adapted our Recharge Plan and moved our yoga, mindfulness and bootcamp
sessions online which has made them more inclusive for our other offices across Europe and North America.
• We have created a Remote Working Guide which provided staff with guidance on homeworking, family resources for
parents juggling schoolwork with their own work and tips on looking after mental health during the pandemic. We have also
provided staff with the right homeworking equipment so they could create an ergonomic workspace that worked for them.
• We have provided immediate support to our colleagues to support them with their wellbeing.
• We understand the importance of social connections. We held a virtual Christmas party which was attended by
staff across Europe, the US and Canada. We hosted ‘Mental Elf’ and ‘New Year Natter’ check-ins throughout the
Christmas period, via Microsoft Teams to gauge how people are. We continued to hold these weekly wellbeing
check-in sessions throughout February and March as it was noted that some team members have indicated that
they would benefit from more regular catch ups.
• The Group places a particular emphasis on mental health. The implementation of the mental health programme ‘’MARBLES’’
assists staff and managers in recognising and coping with mental health issues. The programme is designed to reduce the
stigma and create a greater understanding of how best to look after mental health, complemented by a number of tools
including the Group’s Mental Health First Aid Kit, regular training sessions and workshops and online resources. We have
continued with our regular mental health training sessions throughout the pandemic via Microsoft Teams. The Group also
has a number of Employee Assistance Programmes in place across its offices in Europe.
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Health & safety
The Group is committed to ensuring the health and safety (H&S) of all employees and everyone affected by day-to-
day business activities, therefore providing a safe suitable environment for all those attending MJ Hudson business
premises. The Group’s H&S policy sets out arrangements related to the assessment, control, and prevention of H&S
risks as well as information, training and supervision of safe working methods and emergency procedures. These policies
are regularly reviewed (internally and (in the UK) by our external H&S consultants) and updated to reflect changes
in legislation and best practice. We have taken a cautious approach to returning to the office and continue to follow
government guidance. We have conducted COVID-19 health & safety risk assessments and have drawn up seating plans
to allow for social distancing. We have engaged with our staff throughout the process and listened to their needs. We
have gradually reintroduced employees to the London office on a part-time basis from mid-June and attendance to date
has been optional. As a Group, we have decided that we are an office-based company as we see great value in working
collaboratively in person which adds to the fantastic people focussed culture we strive to retain. We do, however,
understand the importance of offering flexibility to our employees and therefore will continue to offer working from
home on a regular basis for those employees that wish to.
Training & development
The Group is dedicated to the development of its employees and maintains a schedule of training and group seminars for a range
of topics, including risk & compliance, skills & knowledge sharing and personal & professional growth. Employees are encouraged
to seek out tailored and specific training to support their individual development. Mandatory Skillcast online training requires all
employees to complete training modules concerning data privacy, security & GDPR, Bribery Prevention, and Equality & Diversity
in the workplace.
Recruitment
Our recruitment activity is up on
pre-pandemic levels, and we continue to
recruit successfully, despite the current
skills shortage in our industry.
MJ Hudson is an equal opportunity employer, with
motivations to employee the best candidates regardless
of gender, race, nationality, marital status, sexual
orientation, age, religion or beliefs or disability. The Group
has recently expanded its reach to a wider network of
universities for graduate recruitment as a commitment
to being an inclusive employer. The Group has specialist
development schemes for new graduates, including
training contracts, rotational schemes, apprenticeships
and internships.
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Communities and society
Hudson’s Heroes
MJ Hudson is dedicated to making positive changes in society and aims to support local and
national causes by way of the Hudson’s Heroes programme. Every year, the company selects a
charity to volunteer with, so the MJ Hudson team can directly give back to society.
The Group raises funds for the chosen charity in a variety of ways, including quizzes, inhouse competitions and
marathon and sports participant sponsorship. Giving back to the community in this way not only benefits those that
we help but strengthens the Group’s friendly and integrative culture.
This year, Hudson’s Heroes continued to support Headway East London, a local charity supporting people affected by
brain injury, offering specialist services to survivors and their families. Moving forward, we want to gain representatives
and contribution from across the Group rather than just focus on UK charities.
MJ Hudson’s Engine Room
The Engine Room aims to empower its members with the skills they need to grow their professional networks in the
world of private equity and venture capital. Aptly named, The Engine Room represents young people working at the
core of their companies to fuel future business and become tomorrow’s leaders. In 2021 and beyond, we aim to support
our members with networking events, which will feature guest speakers, relevant content and, of course, opportunities
to meet industry peers. Whether it be market trends or mental health issues, we hope our events will provide attendees
with a chance to unwind in an informal setting and discuss what matters to them.
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Harlequins Women
We continue to sponsor Harlequins Women and we are proud to be the team’s first official
corporate partner. This year, the team was crowned Premier 15s champions and a small
contingent from the firm was lucky enough to watch them beat Saracens in the final, at
Gloucester Rugby’s Kingsholm stadium.
Anti-bribery & anti-corruption (ABC)
The Group takes a zero-tolerance approach to bribery and corruption (ABC) and is committed to acting professionally,
fairly and with integrity in all business dealings and relationships in all areas of operation and implementing and enforcing
effective systems to counter bribery and corruption. This must be reflected in every aspect of how the Group operates. The
Group must bring integrity to all dealings. Bribery and Corruption harm the societies in which these acts are committed and
prevent economic growth and development.
The Group’s ABC policy states the requirement to conduct all business honestly and ethically, and without the use of
corrupt practices or acts of bribery to obtain an unfair advantage.
The Group Compliance team has conducted a group-wide risk assessment to identify potential ABC risks, mitigation
strategies, and monitoring and review procedures.
Whistleblowing
The Group is committed to conducting business with honesty and integrity and holds employees to maintain high standards in
accordance with the Group’s Whistleblowing Policy and any other rules, regulations or codes of practice/conduct applicable.
The Group acknowledges the risk of unknowingly harbouring illegal or unethical conduct and promotes a culture of openness
and accountability which is essential to prevent such situations occurring and to address them swiftly and appropriately.
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Group ethics
The Board actively promotes ethical conduct, integrity, and professionalism, throughout the organisation. Culture and
integrity are promoted in the staff handbooks and reinforced through numerous communication channels. The reporting
period has also seen significant enhancements to the risk culture and education across the Company.
Modern Slavery Act statement
This voluntary statement has been made as MJ Hudson is below the turnover threshold required for it to publish a
mandatory statement under the Modern Slavery Act 2015. Nonetheless, the Group continually review and evaluate the
company’s position concerning the Act and will seek to implement a robust policy and Section 54 compliant statement when
this becomes necessary.
MJ Hudson uses the term “modern slavery” to encapsulate slavery, servitude, forced or compulsory labour and human trafficking.
To date, the Group confirms that no occurrence of modern slavery in our organisation or supply chain has been identified.
MJ Hudson operates in the financial services sector and provides advice to asset managers, fund managers and investors to
enable them to operate more efficiently and invest more successfully.
The Group regularly advise clients on their legal and regulatory responsibilities and hold the Group to the same high
professional standards.
The business is office-based and primary supply chain categories support our office operations. Supply categories include
office-space and services, the provision of security and cleaning, IT and technology, professional services and business travel.
As a regulated provider of legal and financial services and employer of predominantly professionally qualified and highly
skilled people, the risk of modern slavery within our business is very low.
The Group ensures a high level of understanding of the risks of modern slavery and human trafficking in supply chains and
primary business. The Group plans to implement mandatory training for all employees before the end of the next financial year.
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Environmental and
sustainability performance
“Sustainability is becoming more and more
integrated with the way we manage our business
and how we think about our long-term strategy,
and the impact that we want to make as an
organisation.”
Climate risk statement
At MJ Hudson, we are committed to minimising the societal and environmental impacts of climate
change and view tackling it as a priority for our stakeholders and our business. We believe our
services can support both our clients and the industry in the transition to a low-carbon economy.
We aim to lead by example and publicly support the TCFD (Task Force on Climate-related Financial Disclosures) and its
disclosure framework, while critically assessing our operations to limit the potential impact.
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Carbon Exposure
1 (tCO2e x tCO2 price / EBITDA)
FY19
FY20
FY21
0.20
0.09
0.05
1. tCO2e x tCO2e price carbon exposure assumes a £53.2 per tonne CO2e.
-50%
% ESG Services Revenue (ESG revenue vs Group Underlying Revenue)
2
FY20
FY21
7%
0.05
2. Values depict ESG revenue as a percentage of the Group’s underlying revenue.
Percentage growth is calculated using absolute revenues from the ESG business unit.
+84%
11%
We are developing a TCFD-aligned reporting approach and have analysed the four TCFD pillars: governance, strategy,
risk management, metrics and targets. We continue to identify climate-related risks and strategies to mitigate them
appropriately, while maximising potential opportunities for positive impact. Our analysis considers a range of climate-
related scenarios over varying time horizons and degrees of severity, which we regularly assess for our business operations
and our clients. The provision of MJ Hudson’s services means that operations have a relatively small impact on the
environment, and we consider both physical and transitional climate-related risks to be low.
The Board and Executive Committee continue their management of climate-related risks and opportunities supported by
our ESG and Sustainability team, strengthening our approach.
We use metrics to track and assess our performance for both climate-related risks and opportunities while assigning targets
to advance our progress. For climate-related risks, we report on metrics that include Carbon Footprint, Carbon Intensity
and Carbon Exposure. For climate-related opportunities, we report on metrics such as % of renewable electricity procured,
and % of ESG services revenue of total revenue.
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Notable developments
PRI – Reporting and signatory
As a service provider in the asset management and alternative investment industry, we believe that incorporating ESG
considerations into the investment decision-making process is key for the protection and growth of long-term value, and
the long-term protection and prosperity of the planet. By working with investors, asset managers and corporate clients to
embed and strengthen their approach to sustainability, we aim to drive positive change across the responsible investment
space: firstly, through a better understanding of the impacts of their investments on climate change, ecosystems, and
society; and, secondly, to challenge their investments to reduce these impacts, while capturing the opportunities that the
transition provides.
We see our membership to the PRI as a natural commitment to support and promote industry best practices, in a world with
ever increasing-sustainability challenges, and rapidly developing regulatory requirements. Through the acquisition of the
ESG business from Spring Associates in 2019, our dedicated ESG services were covered as a PRI signatory and the wider
MJ Hudson group became a signatory in April 2021. Prior to our membership, we have contributed to PRI publications:
Incorporating Responsible Investment Requirements into Private Equity Fund Terms and A GP’s Guide to Integrating ESG Factors
in Private Equity; and going forward, we will seek opportunities to contribute to publications or speaking events related to
leading best-practice guidance and case studies.
The Group submitted its first PRI reporting this year, which articulates how we support clients to establish their ESG
frameworks and integration practices; develop stewardship strategies; and enhance their monitoring and disclosure.
We see this as an important step in progressing practices across the industry and will continue to disclose and align
ourselves with PRI’s reporting framework.
ESG policy
At the start of the financial year, the Board approved the Group’s ESG policy. It sets out the Group’s commitments to
corporate sustainability and the integration environmental stewardship, social responsibility, and sound corporate
governance into our decision-making processes. The Policy will continue to be strengthened on an annual basis.
Carbon neutrality
MJ Hudson is committed to becoming a Carbon Neutral organisation from FY2022. This compounds our desire to remain
environmentally conscious and minimise the impact of our operations. Integral to this strategy is the transition of all our
offices to renewable sources of energy to power daily operations. Residual emissions from operations that are not abated at
source, and those arising from business travel (by air) will be offset through certified high-quality sequestration projects.
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Renewable Electricity Procurement
3 (% of Total)
3. Renewable electricity procured is expressed as a percentage of total electricity procured by the group.
Data exclude offices in Vancouver & Zurich due to non-available energy data from shared office spaces.
FY18
3%
FY19
3%
FY20
20%
FY21
51%
+162%
Total Carbon Footprint
4 (tCO2e)
*
FY18
94
36
*Difference due to rounding.
4. As defined by the internationally accepted corporate accounting and reporting standard: The Greenhouse Gas Protocol; The carbon footprint includes the GHG
emissions CO2, SF6 CH4, N2O, HFCs, PCFs, and is usually expressed in equivalent tons of carbon dioxide (tCO2e); Natural gas used for heating is from the Netherlands
office only, which was acquired in 2019. Direct emissions (Scope I&II) exclude offices in Vancouver & Zurich due to non-available energy data from shared office spaces.
Data Source: Greenhouse Gas Protocol, CO2 Emissiefactoren.nl, Emission factors from the Association of issuing bodies (AIB) 2020.
-18%
Scope I (Natural gas use)
Scope II (Purchased electricity)
Scope III (Business travel by air)
FY19
103
FY20
FY21
40
64
75
10
36
29
51
11
41
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Renewable energy procurement
The Group continues to increase its share of renewable energy to power its operations. As of the start of 2021, MJ Hudson’s
London office now procures 100% renewable electricity, certified by OFGEM. It adds to the portfolio of offices that utilise
renewable sources of electricity including operations in the Netherlands, Luxembourg and MJ Hudson Quantitative
Solutions, based in Guernsey.
Carbon reporting
We hold ourselves accountable for our impact. To ensure transparency, we continue the recording of energy use at MJ Hudson
offices, business flights and their resultant carbon emissions while aiming to minimise its impact over time. In FY 21, due to the
COVID-19 pandemic and subsequent restrictions on air travel, our scope III air travel emissions were reduced to zero.
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Direct Carbon Intensity
5 (tCO2e/FTE)
FY18
0.33
5. Carbon intensity is defined as tCO2 emissions per FTE (tCO2 / FTE). Direct emissions (Scope I&II) exclude energy and FTE data related to offices in Vancouver
& Zurich due to non-available energy data from shared office spaces. Data Source: Greenhouse Gas Protocol, CO2 Emissiefactoren.nl, Emission factors from the
Association of issuing bodies (AIB) 2020.
-12%
FY19
0.30
FY20
FY21
0.30
0.23
Our direct carbon intensity has reduced since we started to measure it in FY 18, largely due to the increasing volume
of renewable energy procured for our office operations. We acknowledge that in response to the COVID-19 pandemic,
governmental remote working orders have also contributed to the reduction in energy use at our locations and will have had
an emission impact as our employees continued their work away from our offices. We will continue to support our employees
in our physical offices and while remote working to operate as sustainably as possible.
Following the transition of the London office to a new state-of-the-art and energy efficient building, both the Amsterdam and
Dublin-based operations will be moving to new offices with improved sustainability credentials in the next year.
The use of public transport, car-pooling and sustainable transport schemes (e.g. cycle to work) are encouraged. The Group’s
offices implement recycling and waste strategies to minimise the environmental impact of day-to-day operations. Such
strategies include the removal of plastic containing beverage supplies, the removal of general waste collection aiming to
encourage greater waste sorting and recycling, and migration to efficient printing processes.
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Board of Directors and Observers
64
Executive Committee
68
Corporate governance report
69
Audit & Risk Committee report
73
Directors’ report
76
Directors’ remuneration report
81
Directors’ responsibility statement
93
Independent auditor’s report
95
Governance
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4 GOV E R N A N C E
Board of Directors and Observers
Directors
Charles Spicer,
Independent Non-Executive Chairman
Provides overall management supervision and direction
to the Group.
Charles is an experienced director of public and private
companies, and currently also serves as non-executive
chairman of Creo Medical Group plc, IXICO plc and Korn Wall
Limited (KwickScreen). He is a chair of the UK Department of
Health’s Invention for Innovation (i4i) Funding Panel, deputy
chair of The Royal Humane Society and a warden of The
Fishmongers’ Company. Previously he was chief executive of
MDY Healthcare plc, an Aim-quoted strategic investor, and
before that, head of healthcare corporate finance at both
Numis Securities and Nomura International.
Matthew Hudson,
CEO
Provides business strategies to deliver growth in line with
objectives approved by the Board.
Matthew founded the Group in 2010. He has over 30 years
of private equity and legal experience. Matthew is a well-
known industry figure, regularly speaks on new developments
concerning the Alternative Assets industries and has authored
the leading text of “Funds: Private Equity, Hedge and All
Core Structures”, as well as a follow up: “Fund Managers: The
Complete Guide”. Prior to MJ Hudson, Matthew co-founded
the private equity team at law firm SJ Berwin, which became a
market leader in Europe. He also established or re- established
the London offices of two major US law firms: Proskauer;
and O’Melveny & Myers. Matthew has previously founded
or worked in a number of private equity and venture capital
houses, including Far Blue Ventures, Tower Gate Capital,
Coller Capital, and Credit Suisse First Boston.
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4 G OV E RN AN CE
Peter Connell,
CFO
Manages and directs financial strategy. His responsibilities
also extend to M&A activities.
Peter previously held numerous directorships including
finance director of Mayo Wynne Baxter LLP; finance director
and CEO at Hastings Insurance Services Limited; founding
chairman of Advantage Insurance Company (Gibraltar); and
non-executive director of Creechurch Managing Agency
at Lloyd’s. Peter is a Fellow of the Institute of Chartered
Accountants in England and Wales (FCA) and qualified while
working for Peat, Marwick, Mitchell (now KPMG).
Jonathan Bale,
Director
Company Secretary.
As well as being the Company Secretary in Jersey, Jonathan
is the principal of the Group’s law practice in Jersey. He joined
the Group following its merger with VerrasLaw, which formed
the Group’s Jersey legal practice in 2014. Jonathan was the
founding partner of VerrasLaw. Prior to this, he worked for the
Jersey law firms Walkers and Ogier.
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4 GOV E R N A N C E
Board of Directors and Observers
Directors
Geoffrey Miller,
Independent Non-Executive Director
Chairman of Remuneration Committee.
Geoff has over 20 years’ experience of working in financial
services, both as a rated equity analyst covering investment
banks, asset managers and investment companies and as a
senior fund manager. Geoff is currently the non-executive
chairman of Globalworth Group, a quoted international
property business with a market capitalisation over €1 billion.
He is a director of several private companies and a principal
in a venture capital business based in Guernsey, focussed on
financial and technology sectors.
Andreas Tautscher,
Independent Non-Executive Director
Chairman of the Audit and Risk Committee.
Andreas has over 30 years’ experience in the financial
services industry, with particular experience in banking,
fiduciary services, investment services and fund
management. For the last ten years of his Deutsche Bank
career, which spanned from 1994 to 2018, he was a C
suite executive with a regional and business responsibility
reporting to group board members. He also sat on the Virgin
Group board as a non-executive director which coordinated
the whole of the Virgin group businesses. Andreas is a
Chartered Accountant and qualified at PWC in 1994.
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4 G OV E RN AN CE
Mark Pattimore,
Executive Director
Managing Director of Fund Administration and Corporate
Services in the Channel Islands.
Mark has over 35 years’ experience in offshore financial
services, the last 25 of which have been as a director. His
experience covers Investment and Insurance with Old Mutual
to Fiduciary with Equity Trust and in the last 15 years in both
fund administration and Fiduciary. He is a former Chairman
of the Guernsey Association of Trustees and is a Fellow of
the Chartered Association of Certified Accountants working
with Peat, Marwick, Mitchell (now KPMG) in Guernsey and in
Grand Cayman.
Observers
Odi Lahav,
COO (Non-Voting Board Member)
COO looking after Technology, Operations, Risk and
executive sponsor for ESG for the Group.
Odi also oversees the Data & Analytics Division and the
Investment Advisory business unit. Odi has over 20 years
of experience in investment management (specialising in
alternative investments), risk and governance. He has worked
primarily in the private sector, but also spent a number of years
in the public sector, in supervision, at the Canadian financial
regulator OSFI. Prior to founding Allenbridge Investment
Solutions (now MJ Hudson Investment Advisory) in 2012, he
was vice president and head of the Alternative Investment
Group at Moody’s in London. Odi is an Actuary and Associate
of the Institute and Faculty of Actuaries.
4 GOV E R N A N C E
67
Executive Committee
MJ Hudson’s group core executive management team is comprised of the
following persons:
Charlene Cowen,
Chief People Officer
Charlene heads up the Group’s People & Wellbeing function.
Charlene was the first employee of the Group, joining Matthew
Hudson as an associate (solicitor) to launch the Group in 2010.
Charlene qualified as a solicitor in the corporate department
of the London office of O’Melveny & Myers in 2007. Charlene’s
focus is ensuring that the People & Wellbeing function
provides the optimal environment for colleagues to deliver
excellent service to clients.
Matthew Hudson,
Group CEO
Matthew is responsible for developing
business strategies to deliver growth.
Biography page 64.
Peter Connell,
Group CFO
Peter is responsible for managing and
directing the financial operations of the
business.
Biography page 65.
Odi Lahav,
Group COO
Odi Lahav is responsible for delivering the groups strategic objectives, driving the
technology strategy and developing and building out the Data & Analytics Division.
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68
Corporate governance report
Mission, culture & ethics
The principles of accountability and responsibility for risk awareness, excellence in corporate governance and risk
management is an important element of MJ Hudson’s culture and its training programme. Separate business lines within
the Group are given a high degree of autonomy in line with the Group’s emphasis on personal responsibility. The Board
actively promotes ethical conduct, integrity, and professionalism throughout the organisation. Culture and integrity are
promoted in staff handbooks and reinforced through numerous communication channels. The reporting period has also
seen enhancements to the risk culture and education across the Company.
Key developments in our approach since last year
Since last year, the Group has made important strides to ensure robust applicable structures. We have hired Trevor
Goodman, as Operations Head and chair of the Legal, Risk and Compliance Committee. We have refined the terms of
reference of our internal committees and as a consequence streamlined our reporting processes to meet fixed quarterly
Board meeting cycles. The Board believes the overall governance framework is strong and suitable for the Group’s size.
Corporate governance code
MJ Hudson Group plc is traded on the AIM market of the London Stock Exchange (LSE: MJH). The Board has applied the
principles set out in the Quoted Companies Alliance’s Corporate Governance Code (“QCA Code”). The QCA Code sets out
a standard of minimum best practice for small and mid-size quoted companies, particularly AIM companies. In accordance
with the AIM Rules, the Company has published, in broad terms, a summary setting out how the Company complies with the
QCA Code. This summary and the extent to which the Company has departed from any of the provisions of the QCA Code it
has provided details on its website as required and these disclosures can be found at: https://investors.mjhudson.com
Reporting Framework
The diagram below describes the Company’s corporate governance framework.
Board
Board
committees
C Suite
Operations
Groups
Audit and Risk
Remuneration
ExCo
Opsco
Finance and
Funding
IT and Cyber
Security
Legal, Risk,
Compliance
Divisional
Compliance Heads
Business
Heads / BD
People &
Wellbeing
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4 GOV E R N A N C E
Board role and experience
The Board has overall responsibility for supervising and approving the implementation of MJ Hudson’s strategy and
business direction and for instituting suitable systems of governance, internal controls and risk management. It holds a
minimum of four scheduled quarterly meetings and in practice also a number of additional ad hoc meetings. All material
management decisions in the context of the Group as a whole are required to be approved by the Board. The Company
believes that among its members it has aggregated the required skill sets that are considered essential to the management
of the Group including financial acumen, experience in listed companies, knowledge of the regulatory environment and in-
depth knowledge of the alternative investments sector.
Board composition
The Board continues to comprise the same seven Directors since IPO, four of whom are Executive Directors and three of
whom are Non-Executive Directors. Under their letters of appointment, the Non-Executive Chairman is expected to spend
four days per month on Company business and each of the other two Non- Executive Directors are expected spend two
days per month on Company business. The Board has re-considered the external time commitments of the Non-Executive
Directors, in light of their other time commitments as noted in their biographies on pages 66 and has concluded that they
each fully satisfy their obligations to the Group.
Board Committees
The Board continues to run two specialist committees, Audit and Risk Committee and Remuneration Committee, each with
formally delegated duties and responsibilities and with written terms of reference that are reviewed annually. These terms
of reference are available on the Group’s website https://investors.mjhudson.com. Each of the permanent members and the
Committee Chairmen are Non-Executive Directors.
A primary focus of the Board committees is accountability. Those Directors who are not members of a particular
Committee, as well as executive managers, may attend by invitation of the relevant Committee Chairman. Matters
addressed by each Committee are reported by its Committee Chairman to each subsequent Board meeting and reviewed
by the full Board so that the Board is made aware of any material issues arising. Given the Group’s current size, the Board
continues to believe that there is no current requirement for a separate nominations committee nor a separate insider
committee. Such matters for the time being fall directly under the scope of the Board.
Independence
The three independent Non-Executive Directors (which includes the Chairman) bring constructive challenge to the Board’s
decision-making processes. Over the period, the Non-executive Directors have liaised with executive management between
Board meetings on many matters including in relation to strategy sessions, compliance, budgets and staff remuneration.
Breakout meetings between the Chairman, the Non-Executive Directors and the Group CEO are scheduled into the
Board’s annual board meeting programme. These meetings were encouraged by the Chairman and provided a forum in
which to share experiences and to discuss wider business topics, fostering debate in Board and committee meetings and
strengthening working relationships.
All Directors have complied with the Companies (Jersey) Law 1991 to disclose to the Company the nature and extent of
any interest of the Director (whether direct or indirect) of which the Director is aware in any transaction which may conflict
with the interests of the Group. The Directors’ Register of Conflicts of Interest is maintained by the Group Company
Secretary.
Any Director may take independent professional advice at MJ Hudson’s expense. The Directors have directed the Company
during the year to take independent advice to assist them in decision making in relation to the performance of their duties.
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Direct reporting
To ensure an independent reporting structure, reports produced by the People & Wellbeing Group are shared directly
with the Chairman of the Remuneration Committee of the Board and reports produced by the Legal, Risk and Compliance
Committee are shared directly with the Chairman of the Audit & Risk Committee.
Re-election of Directors
It has been determined by the Board that at least one third of Directors shall submit themselves for re-election to the Board each
year. Andreas Tautscher, Mark Pattimore and Peter Connell shall retire by rotation and re-submit themselves for re-election at
the 2021 AGM. The Board recommends their re-election based on their skills, experience and contribution to the Board.
Relationship Agreement
The Company, Cenkos and Matthew Hudson (CEO) entered into a relationship agreement at the time of the Company’s IPO
in connection with ensuring the independence of the Board. In that agreement, Mr. Hudson, who is the largest shareholder
in the Company, undertakes to vote as a shareholder to procure: (i) the Group is managed for the benefit of its shareholders
as a whole and independently of the interests of Mr. Hudson and his associates; (ii) all transactions between the Group and
Mr. Hudson and any of his associates shall be on an arm’s length basis, on materially normal commercial terms; and (iii) any
dispute arising between the Group and Mr. Hudson and his associates is finally determined only by the independent Non-
Executive Directors.
Business conflicts
In the event of a business (client) conflict the Board is required to convene a conflicts committee, consisting of divisional
compliance officers and the CEO, which shall act by majority (with the positive approval of the CEO). Such a committee
has authority to resolve any area of dispute regarding a conflict of interest that arises across more than one MJ Hudson
group business.
Board and committee attendance (1 July 2020 to 30 June 2021)
Director
Board*
Audit & Risk
Committee**
Remuneration
Committee
Charles Spicer
8/8
-
-
Andreas Tautscher
8/8
3/3
3/3
Geoff Miller
8/8
3/3
3/3
Matthew Hudson
8/8
-
-
Peter Connell
8/8
-
-
Mark Pattimore
8/8
-
-
Jonathan Bale
8/8
-
-
*Does not include ad hoc sub-committees of the Board
**For Board committees, attendance shown is of relevant members
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Director of Corporate Development
Andrew Walsh previously worked as an equity analyst and corporate broker at Bridgewell Securities, Altium
and Schroders. After this he worked as a senior adviser to a corporate finance boutique and ran a consultancy helping
clients with M&A and IR. Andrew joined the firm in January of 2020 after advising on the IPO. He is Director of Corporate
Development at MJ Hudson where he manages the M&A function and leads on investor relations.
Group General Counsel
Guy Grayson previously worked as a corporate finance lawyer with SJ Berwin, Clifford Chance and Hogan Lovells. He
is responsible for setting MJ Hudson’s legal strategy and for selection of its legal advisors. He is also involved in the
management of regulatory compliance and risk control.
Management alignment
The Directors and certain management hold a material interest in the Group which aligns their interests to shareholders.
The division of shareholdings at the date of this report is approximately as follows:
Type of shareholder
% of total issued share capital
Directors
31
Institutional investors
55
Staff
6
Broker
6
Others
2
Total
100
Investor relations
The Group maintains an active dialogue with its institutional and retail investors to involve them in performance, strategy
and key new developments. The Group CEO and the Group CFO are closely involved in investor relations and Andrew
Walsh has day to day responsibility for such matters. The Board also seeks to establish a mutual understanding of core
objectives between the Group and its investors by providing information on the Group website. Previously published RNS
announcements can be viewed on the Group’s website at: https://investors.mjhudson.com
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Audit & Risk Committee report
The Audit & Risk Committee oversees the Group’s financial reporting
and internal control framework and provides the primary link between
the Board and the external auditor.
Report from Audit & Risk Committee chair
I am pleased to present the report of the Audit and Risk Committee (the ‘Committee’) for the year ended 30 June 2021.
During the year, the Committee met on three occasions. The Committee has monitored and reviewed the financial reporting
process to ensure the integrity of the financial information provided to shareholders. The Committee has also overseen the
development and management of the Group’s risk management and internal control framework. Appropriate impairments
of business units have been considered and no impairment was recorded. During the year the committee initiated and
oversaw the tender process in respect of the external audit contract. This is covered in more detail below.
Assessment of new accounting standards and a review of the potential impact of COVID-19 and Brexit has been
undertaken. The committee has met with the External Auditor and has invited the CFO, COO, Group Counsel and Group
Financial Controller to join the meetings.
Composition of the committee
The Audit & Risk Committee shall have at least two members who shall each be independent Non-Executive Directors. The Audit &
Risk Committee shall be composed of (as a minimum) Andreas Tautscher, as chair, and Geoffrey Miller.
4 GOV E R N A N C E
73
Role of the Committee
The Committee’s primary responsibilities are to review the consolidated financial statements and any changes in accounting
policy, to have assurance that there are suitable internal controls and risk management systems in place; to develop,
implement and monitor the Group’s policy on external audit; and to review audit effectiveness.
The main roles and responsibilities of the Committee include:
• Monitoring the integrity of the consolidated financial statements of the Group, including its annual and half yearly
reports;
• Reviewing and reporting to the Board of Directors on significant financial reporting issues and judgements;
• Reviewing and challenging the consistency of, and any changes to, accounting policies on a year on year basis and across
the Group;
• Assisting the Board of Directors in ensuring the annual report and accounts, taken as a whole, is fair and balanced and
provides the information necessary for shareholders to assess the Group’s performance, business model and strategy;
• Reviewing the Group’s internal financial control systems and other internal control and risk management systems;
• Making recommendations to the Board of Directors in relation to the appointment, reappointment and removal of the
external auditor and to approve the remuneration and terms of engagement of the external auditor;
• Reviewing the independence and objectivity of the external auditor and the effectiveness of the external audit process;
• Reviewing the adequacy of the Group’s arrangements for its employees, contractors and external parties to raise
concerns in confidence about possible wrongdoing in financial reporting and other matters; and
• Reporting to the Board of Directors on how it has discharged its responsibilities.
The membership of the Committee and its terms of reference are set out on the Group’s website.
Operation of the Committee
External audit
The Committee has primary responsibility for the relationship between the Group and its external auditor.
During the year the Committee agreed to undertake a process to tender the external audit contract. This process comprised
initial conversations which were followed by written submissions. Following careful consideration of the submissions the
Committee recommended to the Board that Ernst & Young LLP be appointed as external auditor.
During the year the Committee discussed the following major topics:
• Auditor selection
• Appointment of Ernst & Young as the Group’s statutory auditor and negotiated their remuneration and their terms of
engagement;
• Financial impact of new accounting standards in the year;
• Consideration of significant financial reporting issues, revenue recognition, goodwill impairment, intangible, deferred
consideration earnout liabilities, acquisition accounting and going concern;
• Evaluation of the impact of upcoming accounting standards;
• Review of the 31 December 2020 interim Consolidated Financial Statements; and
• Evaluation of the current internal controls and risk management framework within the Group;
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Risk and internal control
Risk management is the responsibility of the Board of Directors. Further details about the process followed and principal risks
and uncertainties that could affect business operations can be found in the Principal risks and uncertainties section above.
The Committee keeps under review the adequacy and effectiveness of the Group’s internal controls and risk management systems.
During the period the Committee has received and reviewed the Group’s Legal, Risk and Compliance Report, discussed the
most significant risks highlighted in the report and reported to the Board of Directors on risk and internal control matters.
The Committee has also reviewed audit recommendations with regard to internal controls and management responses
following completion of the June 2020 audit.
External auditor independence, effectiveness and fees
Independence
The committee has carried out a structured review of the independence and objectivity of the independent auditor and has in
place procedures to ensure this is not compromised. This review will be carried out on an annual basis and the procedures include:
• Audit partner rotation – the Committee considers this to be a key control in ensuring continued independence and
objectivity by reducing the risk of familiarity. As this is the first year of the appointment of Ernst & Young this has not
been considered in detail this year.
• Restrictions on the nature and amount of non- audit work – the Committee monitors the external auditor’s proposed
scope of work and value of fees paid, to ensure that independence is not compromised. This prevents the auditor being
able to provide certain services to the Group.
• The Committee monitors the engagement of the External Auditor for non-audit services. The objective of the review is
to ensure that the provision of non-audit services by the External Auditor does not impair, or is not perceived to impair,
the External Auditor’s independence or objectivity.
• Relationship of the auditor with senior management – The committee reviews the relationship to ensure it has not
become compromised due to familiarity or other factors.
Audit effectiveness
The Committee reviews the external audit plan proposed by the auditor and participated in the review of the quality of the
service that they provided. The Committee’s consideration includes:
• a review of the external audit plan;
• the auditor’s assessment of Group accounting and business risks;
• the auditor’s own quality control procedure;
• the auditor’s assessment of the key risks of misstatement;
• consideration of the audit strategy and its communication;
• whether the staffing of the external audit has continuity whilst maintaining independence; and
• communication of the findings of the Committee and the quality and key features of its work.
Fees
Note 4.1 to the financial statements includes disclosure of the auditor’s remuneration for the year.
Andreas Tautscher
Chair of the Audit and Risk Committee,
24 November 2021
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Directors’ report
The Directors present, here, their consolidated report for the year
ended 30 June 2021.
Other information
Other information relevant to this Directors’ Report and which is incorporated by reference can be located as follows:
Topic
Page reference
Compliance and Risk Management
34
ESG incl. People and Carbon Reporting
58
Directors’ Responsibility Statement
93
Board composition, roles and biographies
64
Our Executive Committee
68
AGM Notice
On website
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76
Activity
The principal activity of the Group is acting as a specialist provider, primarily in our key markets of North America and
Europe, of advice and outsourcing infrastructure to asset managers, institutional investors and their advisers in the
alternative investments sector, which includes private equity, venture capital, real estate and hedge funds.
Company status
MJ Hudson Group plc is public company incorporated in Jersey. It is listed on the AIM market of the London Stock Exchange.
The principal activity of the Company is that of a headquarters company.
Subsidiary companies
The Company operates through a number of subsidiaries in different countries. The list of subsidiaries is available at note
31 to the Financial Statements.
Group results and dividend
The Group’s loss before taxation for the year ended 30 June 2021 amounted to £5.3m million (2020 - £7.3m). The Group’s
Underlying Profit Before Taxation for the year ended 30 June 2021 amounted to £2.2m (2020 - £0.9m). The Directors
recommend the payment of a maiden dividend of 0.125p per share and a resolution to approve this dividend will be placed
before shareholders for approval at the forthcoming AGM.
Share capital structure
Details of the Company’s share capital are set out in note 22 to the Consolidated Financial Statements. As at the date of
this report, there was a total of 172,627,765 ordinary shares of no par value in issue. The share capital of the Company
comprises one class of ordinary shares of no par value and these are admitted on the AIM market of the London Stock
Exchange. Subject to usual lock in arrangements entered into with certain shareholders in connection with the Company’s
IPO, all shares are freely transferable and rank pari passu for voting and dividend rights.
There are no restrictions on voting rights or restrictions on the transfer of shares in the Company except for usual market
lock-in agreements entered into with certain shareholders at IPO. No persons hold special rights in connection with control
of the Company.
Significant interests
As at 9 November 2021 (the latest practicable date prior to the issue of this report), the following had interests in voting
rights in the Company’s issued share capital, each in excess of a 3% stake.
Shareholder
% of issued share capital as at 9 November 2021
Matthew Hudson
22.5
Canaccord Genuity
10.3
Somers Limited
9.6
Danske Bank
7.2
Katherine Hudson
4.9
Capital Research
4.0
Polygon Group Limited
4.0
Emily Devlin
3.9
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Save as referred to above, the Directors are not aware of any persons as at such date who were interested in 3% or more of
the voting rights of the Company or could directly or indirectly, jointly or severally exercise control over the Company.
Change of control provisions
Neither the Company nor any of its subsidiary undertakings has entered into any significant agreement that takes effect,
alters or terminates on a change of control of the Company following a takeover except in respect of acceleration of staff
share options under the Company’s share option plans. Neither the Company nor its subsidiaries has entered into any
agreement that provides any of their directors or employees compensation for loss of office or employment that occurs
because of a takeover bid.
Relationship agreement
Details of the relationship agreement between Matthew Hudson, the Company and Cenkos Securities plc, the Company’s
Nomad, are set out on page 71. The Company confirms that it and, in so far as it is aware, Mr. Hudson has complied with
his undertakings in the relationship agreement such that the Company has, during the year, been able to operate as an
independent business.
Articles of Association
The rules governing the appointment and replacement of directors, and the powers of the Company’s directors, are set out
in the Company’s Articles of Association which are available on the Company’s website at: https://investors.mjhudson.com.
The Articles of Association may be amended by a special resolution of the Company’s shareholders.
Political donations
The Company has not made any political donations, including to a non-EU political party, and does not incur any
political expenditure.
Financial risk management and financial instruments
The Company’s risk management objectives and policies are shown in note 25 to the Consolidated Financial Statements.
The Company does not make use of any financial instruments, including for hedging purposes.
Directors
Details of the Directors in office at the date of this Report and their respective biographies are listed on pages 64 to 67.
It has been determined by the Board that at least one third of Directors shall submit themselves for re-election to the Board each
year. Andreas Tautscher, Mark Pattimore and Peter Connell shall retire by rotation and re-submit themselves for re-election at
the 2021 AGM. The Board recommends their re-election based on their skills, experience and contribution to the Board.
Directors’ interests
Details of the Directors’ remuneration, share options, service agreements and interests in the Company’s shares are
provided in the Directors’ Remuneration Report on page 81. Except for Directors’ service contracts and Company share
options, no Director has a material interest in any contract to which the Company or any of its subsidiaries is a party.
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Directors’ Indemnity Provisions
During the period, and up to the date of approval by the Board of the Consolidated Financial Statements, the Group
purchased and maintained Directors and Officers Liability Insurance for all of the Directors and Officers to indemnify them
from any losses that may arise in connection with the execution of their duties and responsibilities to the extent permitted
by Companies (Jersey) Law 1991. In addition, directors and officers of the Company and its subsidiaries have been and
continue to be covered by director and officer liability insurance.
Post balance sheet events
Please refer to the Consolidated Financial Statements note 30 regarding post balance sheet events.
Statement of Directors’ responsibilities
Our statement on Director’s Responsibilities has been provided on page 93 of this Report.
Acquisition of shares
Purchase of owned shares by the MJ Hudson Group plc Employee Trust during the period is described in note 22 to the
Financial Statements.
Share dealing code
The Company has adopted a share dealing code which applies to the Company’s Directors, its other PDMRs and all Group
employees. In accordance with the Market Abuse Regulation, the Directors and PDMRs are also responsible for procuring
the compliance of their respective connected persons with the Company share dealing code.
Annual General Meeting
The 2021 Annual General Meeting of the Company (2021 AGM) will be held at the Company’s offices at Forum 4, Grenville
Street, St. Helier, Jersey JE4 8TQ on 20 January 2021. The Notice of the 2021 AGM (2021 AGM Notice) is available on our
website https://investors.mjhudson.com. The Annual Report & Accounts shall be laid before the shareholders at the 2021
Annual General Meeting. An explanation of the resolutions to be put to shareholders at the 2021 AGM and the Directors’
recommendations in relation to them are out in the 2021 AGM Notice. Results of proxy voting for and against each
resolution, as well as abstentions, are published on the Company’s website as soon as practicable after the meeting.
Audit information
Each of the persons who is a director at the date of approval of this annual report confirms that:
1. so far as the director is aware, there is no relevant audit information of which the Company’s auditor is unaware
2. 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 Company’s auditor is aware of that information.
Appointment of auditors
Ernst & Young LLP have expressed their willingness to continue in office as auditor and a resolution to reappoint them will
be proposed at the forthcoming Annual General Meeting.
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Other information
Particulars of significant events which have occurred since the end of the financial year have been included in note 30 of the
Financial Statements
The Directors’ Report was approved by the Board of Directors on 24 November 2021.
By Order of the Board
Charles Spicer
Chairman
24 November 2021
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Directors’ remuneration report
Annual Statement from the Remuneration Committee Chair.
Dear Shareholder,
On behalf of the Board, I am pleased to present the Directors’ remuneration report, covering
MJ Hudson’s Remuneration Policy and practice since becoming a listed company.
This report relates to the period from 1 July 2020 – 30 June 2021. The Remuneration Committee (the
“Committee”) came into existence at the time of the IPO and members were reappointed at the AGM
in December 2020. The Committee met three times within the financial year.
The Group carried out a review of MJ Hudson’s remuneration policy prior to Admission and in doing
so sought independent, specialist advice. The Remuneration Policy set out in this report is designed to
attract, retain and motivate directors to achieve the Group’s strategic goals.
The Group continues to review the potential impact of COVID-19 on the business.
Geoff Miller
Chair of the Remuneration Committee,
24 November 2021
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1. Statement of policy on Directors’ remuneration
The Board has decided, as a matter of good corporate governance, to adhere to the requirements of the UK remuneration
reporting regulations although, as a Jersey registered company, the Group is not technically required to do so.
The Remuneration Committee does not consult with employees on remuneration policy for Directors.
The Group has taken a balanced approach to executive remuneration and the objective of this policy is to attract, retain and
motivate directors without paying more than necessary.
The Group’s remuneration strategy is based on the following six principles:
1. Promote the long-term success of the Group;
2. Attract, retain and motivate high calibre senior managers and directors in order to deliver the Group’s strategic goals
and business objectives;
3. Reward delivery of the Group’s business plan and key strategic goals;
4. Achieve consistency of approach to senior managers and directors to the extent appropriate and informed by relevant
market benchmarks;
5. Encourage widespread equity ownership across the senior executive team and wider Group to ensure a long- term
focus and alignment of interests with Shareholders and other external stakeholders; and
6. Align employees with the interests of shareholders and other external stakeholders and encourage widespread equity
ownership across the Group.
Salary reviews normally take place in December each year, with any increases taking effect from 1 January. With the
Group focused on reducing its costs due to the impact of COVID-19, an inflation linked review was done across the Group
in January 2021 and promotional increases awarded since that time. The wider Group were provided with an increase
just above the UK rate of inflation. It was also determined by the Committee that bonus payments would be cancelled as
another way in which the Group could reduce its costs.
Consideration of employment conditions elsewhere in the group
The Committee takes the remuneration and employment conditions of its broader employee population into account when
setting the remuneration policy for its Executive Directors. This ensures that any increases to the Executive Directors’ basic
salary is in line and relative to the average level of increase awarded to other employees in the Group. The Committee also
considers its responsibilities to its shareholders and the wider economic environment and market developments.
Consideration of shareholders
The Committee recognises the importance of taking its shareholders’ views into account when making decisions regarding
the Remuneration Policy for Executive Directors. The Committee will consider shareholder feedback received at the AGM
each year and at other times, as appropriate.
Considerations of ESG issues
Please refer to the Environmental and Sustainability Performance report on page 58.
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2. The Role of the Remuneration Committee
The Committee’s Terms of Reference can be accessed here https://investors.mjhudson.com/corporate-governance.
The members of the Remuneration Committee have been appointed by the Board and include two independent non-
executive directors – Geoffrey Miller, as chairman and Andreas Tautscher. The Remuneration Committee meets at least
twice a year. The Remuneration Committee shall, among other matters:
• determine and agree with the board the framework or broad policy for the remuneration of the Group’s chairperson
and the executive directors including pension rights and compensation payments. The remuneration of non-executive
directors shall be a matter for the board. No director or senior manager shall be involved in any decisions as to their
own remuneration;
• review the ongoing appropriateness and relevance of the remuneration policy;
• review for approval by the board the design of, and determine targets for, any performance related pay schemes
operated by the Group and approve the total annual payments made under such schemes; and
• review the design of all share Incentive Plans for approval by the board and shareholders.
3. Directors’ remuneration
The remuneration of the Board of Directors for the period from 1 July 2020 to 30 June 2021 and comparative period from
12 December 2019 to 30 June 2020.
Salary
and fees
£’000
Taxable
benefits
£’000
Pension
£’000
COVID-19
reduction
1
£’000
Share based
payments
£’000
Total
£’000
Executive
3
Matthew Hudson
(CEO & Founder)
2021
253
3
-
(12)
788
1,032
2020
91
2
-
(8)
219
304
Peter Connell (CFO)
2021
248
4
6
(11)
123
370
2020
211
1
7
(11)
46
254
Mark Pattimore
2021
204
-
8
(10)
123
325
2020
141
-
-
(11)
41
171
Jonathan Bale
2021
119
-
-
-
1
120
2020
14
-
-
(1)
-
13
Total Executive
2021
824
7
14
(33)
1,035
1,847
2020
457
3
7
(31)
306
742
Non-Executive
Charles Spicer (Chairman)
2021
60
-
-
-
4
64
2020
33
-
-
(3)
2
32
Geoff Miller
(Remuneration Committee Chair)
2021
35
-
-
-
2
37
2020
19
-
-
(2)
1
18
Andreas Tautscher
(Audit & Risk Committee Chair)2
2021
46
-
-
-
2
48
2020
19
-
-
(2)
1
18
Total Non-Executive
2021
141
-
-
-
-
149
2020
71
-
-
(7)
4
68
Total Directors’ remuneration
2021
965
7
14
(33)
1,043
1,996
2020
528
3
7
(38)
310
810
1. In response to the COVID-19 pandemic, all Directors agreed to waive 20% of salary and fees for the three month period from April to June 2020. Three Directors agreed to waive 20% of salary for an additional three
months from July to September 2020.
2. Included in the above table for Andreas Tautscher are additional fees that he received in the year of £11,250 in respect of his role as a director of MJ Hudson Advisers Limited.
3. The total of fees paid to the executive directors in the period was £108,750
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i. Executive Directors Remuneration
The table below provides a summary of the key aspects of the Group’s remuneration policy for executive directors.
Base Salary
Purpose and
Link to Strategy
The aim is to provide competitive basic salary that will attract and retain the executive
directors and reflect their experience and position in the Group.
Operation
Basic salaries are initially set at a level required to recruit suitable executives reflecting their
experience and expertise.
The executive’s current salaries were agreed pre-IPO and the only increases since then have been
contractual.
Annual salary reviews normally take place each December and any increases take effect from
1 January. Any subsequent increases will take the following into account:
• Personal performance
• Performance of the Group
• External economic conditions, such as inflation
• Average change in total workforce salary
• Scope of the role
• Market benchmarking comparisons
Maximum
opportunity
Any increases in basic salary will typically be in line with the average level of increase awarded to
other employees in the Group.
The Committee retains the flexibility to award larger increases than those awarded to the general
workforce where it considers it appropriate and/or necessary (such as
in exceptional circumstances or if an individual assumes a new or expanded role with further
scope and responsibility).
Framework used
to assess performance
The Committee considers the individual salaries of the Executive Directors at a Committee
meeting each year, taking into account the factors listed under ‘Operation’ and ‘Maximum
Opportunity’.
The full annual salary reviews did not take place this year to help further reduce costs in the hope
of carrying the business through these challenging economic times. Salaries were increased for a
limited number of individuals who received a promotion. The wider Group were provided with an
increase just above the UK rate of inflation.
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Pension
Purpose and
Link to Strategy
The aim is to provide a market- competitive benefit for retirement
Operation
Executive Directors may receive an employer’s pension contribution depending on the
jurisdiction and personal circumstances of the individual.
The Group’s pension scheme is reviewed periodically by the Committee to ensure it remains
market competitive.
Maximum
opportunity
Employer pension contributions are fixed as a percentage of base salary up to a maximum of 5%.
Framework used
to assess performance
N/A
Benefits
Purpose and
Link to Strategy
The aim is to provide a competitive benefits package to encourage retention
Operation
The Group’s benefit schemes are reviewed periodically by the Committee to ensure they remain
market competitive.
Benefit values vary year on year depending on premiums.
Maximum
opportunity
A range of contractual benefits are provided that, depending on the jurisdiction and personal
circumstances of the individual, may include health insurance, life assurance, critical illness cover
and income protection.
Framework used
to assess performance
N/A
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Annual Bonus
Purpose and
Link to Strategy
The annual bonus scheme aims to reward the delivery of short-term objectives consistent
with the Group’s business strategy.
Operation
Executive Directors are eligible for a non-pensionable discretionary annual bonus based on
individual and Group performance.
The Committee meets in June and decides upon bonus payments which are paid in two (2)
instalments (in July and December) each year. This is designed to incentivise high performance
and achievement of the Group’s business objectives
In line with best practice, malus and clawback provisions are operated by the Committee in
certain circumstances for the Executive Directors.
Due to the impact of COVID-19, bonus awards in respect of FY21 were cancelled.
Maximum
opportunity
The discretionary annual bonus opportunity for an Executive Director is not capped but is
determined based on individual and Group performance.
Framework used
to assess performance
Performance targets are set by the Committee annually, based on a range of financial and non-
financial measures.
It was determined by the Committee that due to the impact of COVID-19, these bonuses should
be cancelled as another way in which the Group could reduce its costs – there was therefore £nil
bonus payment.
Long Term Incentivisation Plan (the “LTIP”)
Purpose and
Link to Strategy
The LTIP was put in place for the Executive Directors, targeted at the long-term performance
of the Group. It also provides a mechanism to retain key individuals and align their interests
with shareholders.
Operation
The LTIP incentivises the Executive Directors to seek to achieve superior returns for shareholders
over a three-year period.
The LTIP is a “subsidiary growth share plan”. Its rules are contained in the articles of association of
the Subsidiary.
Participants in the LTIP hold B Shares, the rights of which are linked to performance under the
rules of the LTIP.
Maximum
opportunity
The LTIP awards 17.5% of the Aggregate Gain in value of the business over three years from the
date of Admission. The Aggregate Gain is calculated using two independent measures, namely a
TSR gain and an adjusted EBITDA per share gain giving a 50% weighting to each.
Framework used
to assess performance
Pay-out to participants in the LTIP is conditional on the Group achieving certain three year
performance targets, timed to run from the date of Admission.
Where a target is met, the participant has the right to exercise his or her LTIP rights as soon as
possible after the third-year anniversary.
The performance targets will be assessed periodically by the Committee to ensure they remain
appropriate.
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Share Option Plans
Purpose and
Link to Strategy
The Group has the following two all- employee Share Option Plans in place:
1) the Unapproved Plan 2) the CSOP Plan
The Share Plans help support long-term commitment to the Group and foster wider employee
share ownership.
Operation
The Committee is responsible for approving the grant of share options on behalf of the Board.
The Unapproved Plan is used for the grant of options that are unapproved for UK tax purposes.
The UK CSOP Plan is intended to enable options to be granted to UK taxpayers in a tax efficient
manner.
The Share Plans are discretionary and will only operate in those years that the Committee
determines. Currently, it is expected that options under the Share Plans will be granted twice
per year.
Maximum
opportunity
Options granted under the CSOP Plan are subject to a statutory limit such that no employee may
at any one time hold subsisting options over shares worth more than £30,000 granted under the
CSOP Plan.
Subject to the above limit, the aggregate market value of Shares in respect of which options may
be granted to an employee at any time shall be determined by the Committee.
Framework used
to assess performance
The Committee may, in its absolute discretion, make the exercise of an option subject to the
achievement of objective performance conditions.
The Committee has the power to vary the terms of any performance conditions attaching to an
outstanding option in appropriate circumstances, provided that the amended conditions shall be
no more difficult to satisfy than was the original performance condition(s).
Share Incentive Plan
Purpose and
Link to Strategy
The Group launched its first employee share plan, the MJ Hudson Group Plc Share Incentive
Plan (the “SIP Plan”) in April 2021. The SIP Plan is currently available to all employees in the UK.
The Group is also in the process of investigating equivalent SIP Plans for our offices outside of
the UK.
The SIP Plan helps support long-term commitment to the Group and foster wider employee
share ownership.
Operation
By joining the SIP Plan, employees have the opportunity to acquire ordinary shares (“Partnership
Shares”) in the Group by paying for them directly from their gross monthly salary. In return for
every Partnership Share purchased, participants will receive 2 shares at no cost (“Matching
Shares”). To obtain tax advantages, a trust will hold these shares for a minimum period of 3 years.
Maximum
opportunity
Employees can buy Partnership Shares in the Company for up to £1,800 value per annum. While
the shares are in the trust, any capital increase is sheltered from capital gains tax. If a participant
decides to withdraw their shares from the trust between year three and year five: income tax is
payable but typically on the amount of gross money used to acquire only the Partnership Shares.
Framework used
to assess performance
N/A
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4 GOV E R N A N C E
ii. Non-Executive Directors remuneration
The remuneration for the Non-Executive Directors is determined by the Board within the limits set by the Articles and
is based on information on fees paid in similar companies and the skills and expected time commitment of the individual
concerned. The fees are reviewed each year as part of the annual budgeting process. The Non-Executive Directors receive
additional remuneration for chairing Committees.
No finders’ fees were paid in respect of the Non-Executive Directors.
As Non-Executive Directors are not employees, they do not receive benefits or pension contributions and they are not
entitled to participate in any of the Group’s short-term bonus or long-term incentive plans. The Non-Executive Directors
are entitled to participate in the Group’s share option plans and details of the options that have been awarded to them are
included in section 5 of this report.
Non-Executive Directors serve under the terms of a letter of appointment. DAC Beachcroft provided specific advice in
relation to the letters of appointment and the cost of the advice sought was incorporated into the IPO costs. The letters of
appointment may be terminated by either party giving at least 3 months’ written notice.
All directors were reappointed at the AGM in December 2020. Details of each Director set out below:
Non-executive Director
Director fees
£’000
Committee Chair fees
£’000
Expected contribution
per month
Charles Spicer (Chairman)
60
-
4 days
Geoff Miller (Remuneration Committee Chair)
30
5
2 days
Andreas Tautscher (Audit & Risk Committee Chair)
30
5
2 days
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4. Directors’ shareholdings
The business address of all of the Directors is Forum 4, Grenville Street, St. Helier, Jersey JE4 8TQ. Directors’ shareholdings
as at 30 June 2020 and 30 June 2021 are stated below.
30 Jun 20
30 Jun 21
Number of
shares
Issued
capital %
Number of
shares
Issued
capital %
Executive
Matthew Hudson (CEO & Founder)*1
48,248,796
28.2
47,922,046
27.8
Peter Connell (CFO)2
345,870
0.2
378,552
0.2
Mark Pattimore4
2,078,280
1.2
2,101,930
1.2
Jonathan Bale3
2,501,550
1.5
2,996,550
1.7
Total Executive
53,166,496
31.1
53,399,078
30.9
Non-Executive
Charles Spicer (Chairman)4
87,720
0.1
110,793
0.1
Geoff Miller (Remuneration Committee Chair)4
87,720
0.1
117,950
0.1
Andreas Tautscher (Audit & Risk Committee Chair)4
-
-
23,000
0.0
Total Non-Executive
175,440
0.2
251,743
0.2
Total Directors’ shareholdings
53,341.936
31.3
53,650,821
31.1
*Including family holdings
1. On 29 July 2020, the MJ Hudson Group plc Employee Benefit Trust (EBT) acquired 350,000 shares from Katherine Hudson, the spouse of Matthew Hudson (CEO).
2. On 11th May 2021, Peter Connell, acquired 319 partnership shares and 638 matching shares, making in total 957 ordinary shares of nil par value in the Company, also as a part of a regular monthly purchase under the
terms of the SIP. The partnership shares were acquired applying monies obtained via salary deduction at a price of 47p per share and the matching shares were acquired at a price of 50p by the Company and awarded at
nil cost. These shares were acquired in the market and are held, subject to restrictions imposed by the SIP rules, by the SIP trustees. On 8th June 2021, an additional acquisition of 300 partnership shares and 600 matching
shares was purchases at 50p per share under the same terms.
3. On 12 February 2021, Jonathan Bale exercised 495,000 options over ordinary shares of nil par value in the Company. The exercise price was 32p per share. As a result, and in satisfaction of such exercise, the Company has
transferred to Mr. Bale 495,000 existing Ordinary Shares from its Employee Benefit Trust.
4. Refer to PDMR RNS announcements for purchase of ordinary shares.
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4 GOV E R N A N C E
5. Directors’ options
Details of options over shares in the Company held by Directors who served during the period, all of which have been
granted at no cost to the Directors, are set out below:
Number of options
Name
Option plan
As at 30 Jun 20
Granted during
the year
Exercised during
the year
Lapsed during
the year
As at 30 Jun 21
Exercise price
Date of grant
Expiry date
Executive
Matthew
Hudson
Rollover
2,475,000
-
-
-
2,475,000
0.36
12.12.19
11.12.22
CSOP
-
-
-
-
-
-
-
-
USOP
-
-
-
-
-
-
-
-
Peter
Connell
Rollover
821,250
-
-
-
821,250
0.38
12.12.19
11.12.22
CSOP
51,282
-
-
-
51,282
0.585
13.01.20
12.01.23
USOP
22,564
42,767
-
-
65,331
0.585
0.46
13.01.20
05.02.21
12.01.23
04.02.24
Mark
Pattimore
Rollover
821,250
-
-
-
821,250
0.39
12.12.19
11.12.22
CSOP
-
-
-
-
-
-
-
-
USOP
76,923
43,478
-
-
120,401
0.585
0.46
13.01.20
05.02.21
12.01.23
04.02.24
Jonathan
Bale
Rollover
495,000
- (495,000)
1
-
-
0.32
12.12.19
-
CSOP
-
-
-
-
-
-
-
-
USOP
-
21,739
-
-
21,739
0.46
05.02.21
04.02.24
Total Executive
4,763,269
107,984
(495,000)
-
4,376,503
-
-
-
Non-Executive
Charles
Spicer
Rollover
-
-
-
-
-
-
-
-
CSOP
-
-
-
-
-
-
-
-
USOP
85,470
32,609
-
-
118,079
0.585
0.46
13.01.20
05.02.21
12.01.23
04.02.24
Geoff
Miller
Rollover
-
-
-
-
-
-
-
-
CSOP
-
-
-
-
-
-
-
-
USOP
42,735
21,739
-
-
64,474
0.585
0.46
13.01.20
05.02.21
12.01.23
04.02.24
Andreas
Tautscher
Rollover
-
-
-
-
-
-
-
-
CSOP
-
-
-
-
-
-
-
-
USOP
42,735
21,739
-
-
64,474
0.585
0.46
13.01.20
05.02.21
12.01.23
04.02.24
Total Non-Executive
170,940
76,087
-
-
247,027
Total
Rollover
4,612,500
-
(495,000)
-
4,117,500
-
-
-
CSOP
51,282
-
-
-
51,282
-
-
-
USOP
270,427
184,071
-
-
454,498
-
-
-
Total Directors’
Options
4,934,209
184,071
-
-
4,623,280
-
-
-
Options are not linked to any market or other performance conditions.
1. On 12 February 2021, Jonathan Bale exercised 495,000 options over ordinary shares of nil par value in the Company. The exercise price was 32p per share. As a result, and in satisfaction of such exercise, the Company has
transferred to Mr. Bale 495,000 existing Ordinary Shares from its Employee Benefit Trust.
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LTIP
The interests of the Directors and their immediate families (including any interest known to that Director or which could
with reasonable diligence be ascertained by him or any person connected with a Director within the meaning of article
74ZA of the Companies (Jersey) Law 1991 in the LTIP and Share Plans are as follows:
Director
Number of B shares in
subsidiary
Percentage of share
capital in subsidiary (%)
Value included in share
based payments (£’000)
Matthew Hudson
8,600
43.0
787
Peter Connell
1,300
6.5
119
Mark Pattimore
1,300
6.5
119
Performance conditions for LTIP are based on 50% TSR and 50% adjusted EBITDA per share. The pay-out of Adjusted
EBITDA Gain is estimated based on discounted cash flow projections for the Group and resulted in an expected EBITDA
gain payout of £3.6m for the year ended 30 June 2021.
For further information on Directors’ holdings and options, refer to the Admissions doc on our website.
6. Service Contracts
DAC Beachcroft provided specific advice for the Director Service Contracts. The total cost of the advice was incorporated
into the IPO costs. The Contracts aim to protect both the individual and the Group’s interests.
No contractual payments are to be made on termination. Set out below are summary details of the employment contracts of
each of the Executive Directors of the Board:
Matthew Hudson
(Chief Executive Officer), entered into an employment contract with MJ Hudson Holdco Limited on 13 November 2019,
with an effective date of 1 November 2019. Mr Hudson is entitled to receive an annual salary of £203,000 plus an
additional £25,000 per annum for his appointment as a director of the Group. Subsequent to the balance sheet date, after
a benchmarking review, the Board has approved an increase in Mr Hudson’s annual salary to £240,000 effective from 1
September 2021. The employment contract may be terminated by either party giving at least 6 months’ written notice at
any time. The employment contract contains restrictive covenants for a period of 6 months following termination of his
employment. Mr Hudson is entitled to participate in a long term incentive plan. He is also entitled to life assurance at four
times base salary, critical illness cover up to £100,000, family private medical insurance and other de minimis benefits in
kind equal to £3,040 in aggregate in the last financial year. Mr Hudson has opted out of the Group pension plan.
Peter Connell
(Chief Finance Officer), entered into an employment contract with MJ Hudson Holdco Limited on 13 November 2019, with
an effective date of 1 November 2019. Mr Connell is entitled to receive an annual salary of £199,681 plus an additional
£25,000 per annum for his appointment as a director of the Group. The employment contract may be terminated by either
party giving at least 6 months’ written notice at any time. The employment contract contains restrictive covenants for a
period of 6 months following termination of his employment. Mr Connell is entitled to participate in an annual bonus and
long-term incentive plan. He is also entitled to life assurance at four times base salary, family private medical insurance,
pension contributions, critical illness cover up to £100,000 and income protection up to fifty per cent of base salary and
other de minimis benefits in kind equal to £3,667 in aggregate in the last financial year.
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Mark Pattimore
(Director – Guernsey), entered into an employment contract with MJ Hudson Fiduciaries Limited on 13 November 2019,
with an effective date of 1 November 2019. The employment contract may be terminated by either party giving at least
6 months’ written notice at any time. The employment contract contains restrictive covenants for a period of 6 months
following termination of his employment. Mr Pattimore is entitled to an annual salary of £204,000 plus an additional
£25,000 per annum for his appointment as a director of the Group. Mr Pattimore is entitled to participate in an annual
bonus and long-term incentive plan. He is also entitled to life assurance at four times base salary, income protection cover
and pension contributions in the last financial year. Mr Pattimore has opted out of the health insurance scheme.
Jonathan Bale
(Director and Group Secretary – Jersey), entered into an employment contract with MJ Hudson Services Jersey Limited
with an effective date of 1 December 2020. The employment contract may be terminated by either party giving at least
3 months’ written notice at any time. The employment contract contains restrictive covenants for a period of 6 months
following termination of his employment. Mr Bale is entitled to an annual salary of £108,000 plus an additional £40,000 per
annum for his appointment as a Group Secretary and director of the Group. Mr Bale is entitled to participate in an annual
bonus and long-term incentive plan. No further benefits were in force for Mr Bale at the date of this document.
7. Other
Other transactions that occurred with Directors during the year are detailed in note 28 to the financial statements under
Related Party Disclosures.
Save as disclosed above and in note 28 of the financial statements, none of the Directors or Senior Managers nor any
member of their immediate family or any person connected with him holds or is beneficially or non- beneficially interested
directly or indirectly, in any shares or options to subscribe for, or securities convertible into, shares of the Company or in any
Group Company. In respect of the Directors, there are no conflicts of interest between any duties they have to the Company
and their private interests and/or other duties they may have, which have not been disclosed to and approved by the Board.
There are no arrangements or understandings with major Shareholders, customers, suppliers or others, pursuant to which
any Directors were selected as member(s) of the Board. There are no outstanding guarantees provided by any member of
the Group for the benefit of the Directors.
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Directors’ responsibility statement
The Directors are responsible for preparing the annual report and the
consolidated financial statements in accordance with applicable law
and regulations.
The Directors have elected to prepare the consolidated financial statements in accordance with International Financial
Reporting Standards (IFRS) as adopted by the European Union.
Under company law the Directors must not approve the consolidated 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 profit or loss of the Group for that period. The
Directors are also required to prepare consolidated financial statements in accordance with the rules of the London Stock
Exchange for companies trading securities on AIM.
In preparing these financial statements, the Directors are also required to:
• Select suitable accounting policies and then apply them consistently;
• Make judgements and accounting estimates that are reasonable and prudent;
• State whether applicable accounting standards have been followed, subject to any material departures disclosed and
explained in the financial statements; and
• Prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company
will continue in business.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the
Company’s transactions and disclose with reasonable accuracy at any time the financial position of the company and enable
them to ensure that the financial statements comply with the requirements of the Companies (Jersey) Law 1991.
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 and for ensuring that the annual report including consolidated financial
statements, taken as a whole, are fair and balanced and understandable and provide the information necessary for
Shareholders to assess the Company’s position, performance, business model and strategy.
The Directors are also responsible for preparing a Strategic Report (compromised of the overview and operating review
within this annual report), Directors’ report, Directors’ remuneration report and Corporate Governance Report.
The Directors are responsible for the maintenance and integrity of the corporate and financial information included on
the Company’s website. Legislation governing the preparation and dissemination of consolidated financial statements may
differ from legislation in other jurisdictions.
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The Directors confirm to the best of their knowledge:
• They have complied with all the above requirements in preparing the consolidated financial statements;
• The consolidated financial statements, prepared in accordance with the applicable accounting standards, give a true
and fair view of the assets, liabilities, financial position and profit or loss of the Group and the undertakings included in
the consolidation taken as a whole;
• The Strategic Report and the Directors’ Report include a fair view of the development and performance of the business
and the position of the Group and the undertakings included in the consolidation taken as a whole, together with a
description of the principal risks and uncertainties that they face;
• The directors consider the Annual Report, taken as a whole, is fair, balanced and understandable and provides the
information necessary for shareholders to assess the Group’s position, performance, business model and strategy; and
• There is no relevant audit information of which the Company’s auditors are unaware, and each Director has taken all
the steps that he or she ought to have taken as a director in order to make himself or herself aware of any relevant audit
information and to establish that the Company’s auditors are aware of that information.
Reappointment of Auditor
Ernst & Young LLP replaced BDO LLP as auditor of the Group. This followed a formal selection process involving senior
executives and the Board. The formal appointment was confirmed (following the necessary on boarding procedures), to
shareholders in November. A resolution to re-reappoint Ernst & Young as auditor for the ensuing year will be proposed at
the Annual General Meeting in accordance with the Companies (Jersey) Law 1991.
Website publication
The Directors are responsible for ensuring the Annual Report and the Consolidated Financial Statements are made
available on a website. Consolidated Financial Statements are published on the Company’s website in accordance with
legislation in Jersey and the United Kingdom governing the preparation and dissemination of Consolidated Financial
Statements, which may vary from legislation in other jurisdictions. The maintenance and integrity of the Company’s website
is the responsibility of the Directors. The Directors’ responsibility also extends to the ongoing integrity of the Consolidated
Financial Statements contained therein.
This Directors Responsibility Statement has been approved by the Board of Directors of MJ Hudson Group plc on 24th
November 2021 and is signed on its behalf by:
Matthew Hudson
CEO,
24 November 2021
Peter Connell
CFO,
24 November 2021
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Independent auditor’s report
Independent auditor’s report to the members of MJ Hudson Group Plc
Opinion
We have audited the Consolidated Financial Statements of MJ Hudson Group Plc (the “Company”) and its subsidiaries (the “Group”)
for the year ended 30 June 2021 which comprise the Consolidated Statement of Comprehensive Income, the Consolidated
Statement of Financial Position, the Consolidated Statement of Changes in Equity, the Consolidated Statement of Cash Flows and
the related notes 1 to 31, including a summary of significant accounting policies. The financial reporting framework that has been
applied in their preparation is applicable law and International Financial Reporting Standards as adopted by the European Union.
In our opinion, the Consolidated Financial Statements:
• give a true and fair view of the state of the Group’s affairs as at 30 June 2021 and of its loss for the year then ended;
• have been properly prepared in accordance with International Financial Reporting Standards as adopted by the
European Union (‘IFRS’); and
• have been properly prepared in accordance with the requirements of the Companies (Jersey) Law 1991.
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, including the UK 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 Consolidated Financial Statements, we have concluded that the directors’ use of the going concern basis
of accounting in the preparation of the Consolidated 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:
• obtaining an understanding of the process followed by management to make its going concern assessment;
• obtaining management’s latest forecasts that support the Board’s assessment and conclusions with respect to the going
concern basis of preparation of the Consolidated Financial Statements;
• checking the mathematical accuracy of management’s forecasts and corroborating this to supporting documentation;
• discussing with management to understand the judgements applied in the forecasts, challenging the underlying
assumptions and considering their potential responses to management’s stressed scenarios;
• performing our own reverse stress tests by calculating the required reduction in revenue and resultant impact on
cashflow that would impact on the Group’s ability to continue to meet the external debt financial covenants and
financial commitments as they fall due; and
• assessing the disclosures in the Consolidated Financial Statements relating to going concern to ensure they were in
compliance with IFRS.
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 the
period to 31 December 2022.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant
sections of this report. However, because not all future events or conditions can be predicted, this statement is not a
guarantee as to the Group’s ability to continue as a going concern.
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Overview of our audit approach
Audit scope
• We performed an audit of the complete financial information of 8 components and audit
procedures on specific balances for a further 3 components; and
• The components where we performed full or specific audit procedures accounted for 81% of
Revenue and 63% of Total assets.
Key audit matters
• Revenue recognition including the recoverability of contract assets and trade debtors;
• Accounting for business combinations in the year under IFRS 3 including deferred
consideration;
• Impairment of Goodwill assets under IAS 36; and
• Long term incentive plan under IFRS 2.
Materiality
• Overall group materiality of £201k which represents 0.5% of Revenue.
First year audit considerations
In preparation for our first year audit of the 30 June 2021 Consolidated Financial Statements, we prepared a detailed
transition plan. Our audit planning and transition commenced in July 2021 after we had confirmed our independence from
the Group to the Audit Committee. Our transition activities included:
• The review of the predecessor auditor’s 2020 audit work papers and gaining an understanding of their risk assessment,
key judgements and audit approach to address the risks identified;
• Held meetings with the Management and the Audit Committee of the Group agreeing the audit approach for the first year;
• Held an audit planning meeting with the senior members of our team in order to agree our first year audit approach;
• Obtained a specific understanding of the Group’s business, culture and operations through review, enquiry and
observation; and
• Obtained a detailed understanding of the financial statement close process of the Group.
This transition activity allowed us to gain an understanding of the Group’s key processes and controls over financial
reporting. We then established our audit base and formalised our audit strategy for the 2021 audit.
An overview of the scope of our audit
Tailoring the scope
Our assessment of audit risk, our evaluation of materiality and our allocation of performance materiality determine our
audit scope for each company within the Group. Taken together, this enables us to form an opinion on the Consolidated
Financial Statements. We take into account size, risk profile, the organisation of the Group and effectiveness of Group-wide
controls and changes in the business environment when assessing the level of work to be performed at each company.
In assessing the risk of material misstatement to the Consolidated Financial Statements, and to ensure we had adequate
quantitative coverage of significant accounts in the Consolidated Financial Statements of the 42 reporting components of the
Group, we selected 17 components covering entities within the UK and Channel Islands, Luxembourg, Netherlands and Ireland,
which represent the principal business units within the Group. The majority of operations are centralised within the UK.
Of the 17 components selected, we performed an audit of the complete financial information of 8 components (“full
scope components”) which were selected based on their size or risk characteristics. For 3 components (“specific scope
components”), we performed audit procedures on specific accounts within that component that we considered had the
potential for the greatest impact on the significant accounts in the Consolidated Financial Statements either because of
the size of these accounts or their risk profile.
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The reporting components where we performed audit procedures accounted for 94% of the Group’s Revenue and 88%
of the Group’s total assets. For the current year, the full scope components contributed 69% of the Group’s Revenue and
61% of the Group’s total assets. The specific scope component contributed 12% of the Group’s Revenue and 17% of the
Group’s Total assets. The audit scope of these components may not have included testing of all significant accounts of
the component but will have contributed to the coverage of significant account tested for the Group. We also instructed
6 locations to perform specified procedures over certain aspects of Revenue, Accrued Income, Debtors, Cash and Other
assets that were individually material to the Consolidated Financial Statements. These specified procedures components
contributed 13% of the Group’s Revenue and 10% of the Group’s assets.
Of the remaining 8 components that together represent 6% of the Group’s Revenue, none are individually greater than 1.5%
of the Group’s Revenue. For these components, we performed other procedures, including analytical review and testing
consolidation eliminations to respond to any potential risks of material misstatement to the Consolidated Financial Statements.
The table below illustrates the coverage obtained from the work performed:
Number
% of revenue
% Group assets
Full scope
8
69%
61%
Specific scope
3
12%
17%
Full and specific scope
11
81%
78%
Specified procedures
6
13%
10%
Total reporting components
17
94%
88%
Remaining components
8
6%
12%
Total
25
100%
100%
Involvement with component teams
In establishing our overall approach to the Group audit, we determined the type of work that needed to be undertaken
at each of the components by us, as the primary audit engagement team, or by component auditors from other EY global
network firms operating under our instruction. Of the 8 full scope components, audit procedures were performed on 7 of
these directly by the primary audit team and 1 of these by the component audit team, EY Luxembourg. For the 3 specific
scope components, audit procedures were performed on 2 of these directly by the primary audit team and 1 of these by
the component audit team, EY Netherlands. For the 1 full scope and 1 specific scope components, where the work was
performed by component auditors, we determined the appropriate level of involvement to enable us to determine that
sufficient audit evidence had been obtained as a basis for our opinion on the Group as a whole.
The Group audit team as primary team interacted regularly with component teams where appropriate during various stages
of the audit, including regular audit team conference/video calls covering audit approach, issues arising from their work, and
results prior to inter-office reporting. The group audit team also performed reviews of key audit working papers and were
responsible for the scope and direction of the audit process. This, together with the additional procedures performed at
Group level, gave us appropriate evidence for our opinion on the Consolidated Financial Statements.
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Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the
Consolidated Financial Statements of the current period and include the most significant assessed risks of material
misstatement (whether or not due to fraud) that we identified. These matters included 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 Consolidated Financial Statements as a whole, and in our
opinion thereon, and we do not provide a separate opinion on these matters.
Risk
Our response to the risk
Key observations
communicated
to the Audit Committee
Revenue recognition including
the recoverability of contract
assets and trade debtors
Revenue: £39.8m (note 6)
Contract assets: £5.0m
(note 19)
Trade debtors £7.0m (note 19)
Revenue is recognised by
reference to the stage of
completion for fixed fee
contracts and based on a time
spent basis for client matters
which have yet to be billed.
These amounts are reflected
in contract assets which are
required to be stated at the
amount which is recoverable.
Trade debtors are amounts
due from customers for
services performed in the
ordinary course of business.
Trade receivables and
contract assets are assessed
for objective evidence of
impairment in accordance
with IFRS 9
The assessment of the
Expected Credit Loss (“ECL”)
of the contract assets and
trade debtors at year-end
constitutes estimation
uncertainty and requires
judgements and estimates.
(See notes 6 and 19)
We performed a fully substantive audit approach
which included the following procedures over revenue,
contract assets and trade debtors:
We identified and evaluated design of the processes
and controls established in relation to revenue
recognition, contract assets and trade receivables by
walking through the processes with management,
but we did not test the operating effectiveness of the
control.
We performed an analytical review on the full year
population of revenue, contract assets and trade
debtors developing our expectations based on budgets
and prior year actuals and investigated movements
and differences that are inconsistent with these
expectations.
We performed an objective evaluation of the implied
expected recovery of contract assets and trade debtors
in order to assess whether there are any indicators of
management bias in the applied ECL.
We assessed the adequacy of the disclosures in the
Consolidated Financial Statements with regard to
revenue, contract assets and trade receivables to the
requirements of IFRS 15 and IFRS 9.
Revenue
Our procedures included agreeing a sample of revenue
to supporting documentation, including contracts,
invoices and cash receipts.
We performed cut off testing on a sample basis around
the year end to identify fees raised or contract assets
being recognised to assess if revenue was recorded in
the correct accounting period.
We performed journal entry testing at Group and
component level which focused on revenue accounts.
Contract Assets
For a sample of clients we, obtained contracts,
understood the stage of completion of the project,
confirmed subsequent billing and the amounts
recovered post year end recovery.
Based on the procedures
performed we did not identify
any evidence of material
misstatement in the revenues,
contract assets or trade
receivables.
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Risk
Our response to the risk
Key observations
communicated
to the Audit Committee
Contract Assets
Where contract assets were not billed post year end
within our sample, we challenged management’s
judgement and rationale associated with the
recoverability of the amounts through analysis
of underlying agreements and historic billing and
payment patterns.
We challenged management’s judgements and
estimates and evaluated the inputs and assumptions
used to determine the ECL on contract assets by
comparing the assumptions to historical performance,
taking into consideration current risks including the
Covid-19 pandemic.
We tested the mathematical accuracy of the ECL
calculation.
Trade debtors
We challenged management’s judgements and
evaluated the inputs and assumptions used to
determine the ECL on trade debtors by comparing
the assumptions to historical performance, taking
into consideration current risks including the
Covid-19 pandemic.
We tested the mathematical accuracy of the ECL
calculation.
For a sample of trade debtors we agreed the
settlement of outstanding balances at the year end
to post year end cash receipts. Where we identified
credit notes raised post year end we enquired of
management to obtain and explanation to determine if
such amounts were reflective of conditions which were
known at the year end.
Our audit procedures were led by the primary
team with input from our teams in Luxemburg and
Netherlands.
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Risk
Our response to the risk
Key observations
communicated
to the Audit Committee
Accounting for business
combinations in the year
under IFRS 3 (£15.68m
value of risk) and deferred
consideration (£13.68).
Refer to Note 27. Business
Combinations and Note 21.
Borrowings and deferred
consideration for the
respective Accounting policies
and disclosures.
Given the significant
judgements applied in
determining the fair value
of acquired assets and the
allocation of the purchase
price, we have determined this
as a key audit matter in the
current year.
The estimation aspect
includes the assumptions
contained within the valuation
models which are used to
determine the fair values of
intangible assets acquired.
There is also a judgement
applied by management
when considering whether
these acquisitions meet the
definition of a business.
Included in the consideration
for businesses acquired are
amounts whose payments
are deferred. The deferred
consideration on each
acquisition has key estimates
in relation to forecasted
earnings or revenue (as
per the SPA for each
respective acquisition) and/
or the discount rate. These
estimates, including whether
considerations are contingent
on performance impacts
the purchase price and the
accounting treatment of the
deferred consideration.
We understood the design and implementation
of controls around the preparation, review and
accounting for business combinations by walking
through the processes with management, but we did
not test the operating effectiveness of the control.
Business combinations
We obtained support for the acquisitions made in the
year, including the Share Purchase Agreements (SPA)
and agreed significant balances back to supporting
evidence, such as bank statements.
We obtained management’s assessment of the
acquisitions in the year under IFRS 3, including the
treatment of amounts paid or payable as consideration
or any remuneration for compensation of employees
under future employment arrangements.
We used EY specialist valuation professionals to
support our audit consideration of the appropriateness
of the methodology applied by management in their
business combination calculations. Specifically, the
valuation professionals utilised their knowledge
of similar businesses and transactions to challenge
the judgments applied by management in their
determination of the weighted average cost of capital
(WACC) and internal rate of return (IRR) used in their
calculations.
We reconciled the source data used in the deferred
consideration calculations for consistency with
management’s forecasts, budgets and going concern
analysis performed
We used our EY specialist valuations professionals to
assess whether the reported value fell within a range
of reasonable outcomes for Goodwill and acquired
intangibles, comparing these results to the values
calculated by Management and their Specialists.
We assessed the adequacy of the disclosures in the
Consolidated Financial Statements with regard to
business combinations to the requirements of IFRS.
Deferred consideration
We obtained each SPA and Purchase Price Allocation
report (PPA) prepared by Management’s specialist.
We read the SPAs and agreed deferred consideration
in management’s schedule to the SPA and PPA.
We gained an understanding of the SPA to determine
whether the amounts should be accounted for as
deferred consideration or remuneration.
Based on the procedures
performed we did not identify
any evidence of material
misstatement in the accounting
for business combinations.
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Risk
Our response to the risk
Key observations
communicated
to the Audit Committee
We recalculated the deferred consideration amounts
using the budgeted revenue provided and compared
this to the budgeted earnings or revenue (as per
the SPA for each respective acquisition) used in
management’s calculations.
We agreed any payments relating to deferred
consideration during the year to the bank statements.
For payments made post year end, we determined the
actual amount paid to be the fair value and we used this
amount in our recalculation.
We used EY specialist valuation professionals to
support our audit consideration of the appropriateness
of the discount rates applied by management.
Specifically, the valuation professionals utilised
their knowledge of similar businesses and macro-
economic factors to challenge the judgments applied
by management in their determination of the discount
rate used in their calculations.
For deferred consideration in foreign currencies, we
recalculated the translation based on observed market
foreign exchange rates.
We agreed the movement in fair value calculated to
that disclosed in the accounts.
We assessed the adequacy of the disclosures in the
Consolidated Financial Statements with regard to
deferred consideration to the requirements of IFRS.
The audit procedures were performed centrally by the
primary team.
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Risk
Our response to the risk
Key observations
communicated
to the Audit Committee
Impairment of Goodwill under
IAS 36 (£31.47m)
Refer to Note 13 of the
Consolidated Financial
Statements
There is a risk that Goodwill
is impaired, and as such,
management is required to
perform an annual impairment
assessment as required under
IAS 36.
The significant estimates
determined by management
when conducting the
impairment review include the
discount rate to be applied,
the volatility of share price,
the growth rate and the
forecasted future level of
adjusted EBITDA.
We performed the following audit procedures to
address the risk identified:
We understood the design and implementation
of controls around the preparation and review of
management’s assessment of impairment and the
associated controls around the accounting for the
impairment amounts identified by this assessment.
We developed this understanding by performing a
walkthrough of the processes with management. We
did not test the operating effectiveness of the controls.
We performed the follow substantive procedures over
Goodwill:
We obtained management’s experts assessment
and evaluated the assumptions used in the forecast
to calculate the value in use for each of the cash
generating units (CGUs). We assessed management’s
forecasts and understood the assumptions made
behind the forecasts, including performing a sensitivity
analysis on them and tested the mathematical accuracy
of management’s calculations.
We involved EY business valuation specialists
to assist us in our testing of the management’s
impairment assessment, including assessing the
valuation methodology used by management’s
specialist and challenging specific inputs used in the
determination of the discount rate with referenced to
independently sourced external data and benchmarks;
and in developing independently a reasonable
range of discount rates against which we compared
managements chosen rate.
We identified those inputs which are most sensitive to
change and performed sensitivity analysis to ascertain
what changes in estimates could produce significantly
different outcomes. In doing so we noted the future
forecast revenues, and the discount rate are the most
sensitive assumptions. We ascertained the extent of
changes that individually, or in combination, would be
required for the assets to be impaired; and
We assessed the fairness, accuracy and completeness
of required disclosures required by IAS36.
Based on the procedures
performed we did not identify
any evidence of material
misstatement in the accounting
for Goodwill.
The audit procedures were performed centrally by the
primary team.
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Risk
Our response to the risk
Key observations
communicated
to the Audit Committee
Long term incentive Plan
under IFRS 2 (£2.28m)
Refer to Note 24 of the
Consolidated Financial
Statements
There is a risk that the Long
term incentive Plan (LTIP)
is incorrectly valued and
that modifications to the
scheme are not appropriately
accounted for under IFRS 2.
In the prior year the LTIP was
accounted for as cash settled
and the Company’s settlement
policy changed in the current
year to equity settled.
There are significant
judgements applied by
management in their
forecasting of adjusted
EBITDA and risk free rate and
made by their specialists over
the valuation methodology
and the volatility used.
We consider this a key audit
matter due to the complexity
of calculation and the
modification in settlement
policy.
We performed the following audit procedures to
address the risk identified:
We understood the design and implementation
of controls around the preparation, review and
accounting for the Long term incentive plan by walking
through the processes with management, but we did
not test the operating effectiveness of the controls.
We performed a fully substantive audit approach
which included the following procedures over the LTIP:
We obtained the date of modification of the settlement
policy from management, we obtained and read
the underlying scheme documentation and agreed
the ability of the Group to unilaterally modify the
settlement policy in accordance with IFRS 2.
We obtained management’s expert’s calculation of the
fair value of the LTIP as at the modification date. We
involved EY valuation specialists to assist in performing
audit procedures including assessing the methodology
used by management’s specialist, challenging specific
inputs into the determination of the discount rate with
reference to independently sourced external data
and benchmarks, and in developing independently
a reasonable range of discount rates. We assessed
management’s choice of discount rate, in the context of
our independently determined range.
We agreed the adjustments made to EBITDA to derive
adjusted EBITDA and agreed that this was input into
the LTIP fair value calculation in accordance with the
scheme rules.
We agreed the LTIP expense for the year and the
reclassification, in accordance with IFRS 2, of the
liability recognised under the cash settled basis to
the share based payment reserve as a result of the
modification of the LTIP settlement policy from cash to
equity settled.
Based on the procedures
performed we did not identify
any evidence of material
misstatement in the accounting
for the LTIP.
The audit procedures were performed centrally by the
primary team.
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Changes from the Prior year
In the prior year the following matters were reported by BDO LLP as key audit matters: Valuation of contract assets under
IFRS 15 in respect of work performed by the Group’s legal division operating within MJ Hudson Limited; accounting for
business combinations in the year under IFRS 3; and impairment review of intangible assets under IAS 36. In the current
year our key audit matters are set out above and which includes a key audit matter Long term Incentive Plan under IFRS 2.
Our application of materiality
We apply the concept of materiality in planning and performing the audit, in evaluating the effect of identified
misstatements on the audit and in forming our audit opinion.
Materiality
The magnitude of an omission or misstatement that, individually or in the aggregate, could reasonably be expected to
influence the economic decisions of the users of the financial statements. Materiality provides a basis for determining the
nature and extent of our audit procedures.
We determined materiality for the Group to be £201k, which is 0.5% of Revenue. In their prior year audit, BDO LLP, adopted
a materiality of £330k based on 1.5% of reported revenue.
As a result of the loss making position of the group we have determined that a profit based measure for determined
materiality is not appropriate. Therefore, we have selected revenue as this is a measure of performance that we understand
is relevant to the users of the financial statements as a key performance measure against which the group reports.
As this our first period of appointment as auditor the basis above has been determined based on our understanding
of the current business and its ownership and operation in the current year, including the level at which we anticipate
misstatements would influence the economic decisions of a user of the financial statements.
We reassessed our materiality basis throughout the audit. We did not make any changes to our materiality as the reported
revenue was not materially different to the amount used during our planning phase given this utilised preliminary year-end data.
Performance materiality
The application of materiality at the individual account or balance level. It is set at an amount to reduce to an appropriately
low level the probability that the aggregate of uncorrected and undetected misstatements exceeds materiality.
On the basis of our risk assessments, together with our assessment of the Group’s overall control environment, our
judgement was that performance materiality was 50% of our planning materiality, namely £100k. In their prior year audit,
BDO LLP, adopted a performance materiality of £215k based on 65% of materiality.
We have set performance materiality at this percentage due to the fact this is a first year audit.
Audit work at component locations for the purpose of obtaining audit coverage over significant financial statement accounts
is undertaken based on a percentage of total performance materiality. The performance materiality set for each component is
based on the relative scale and risk of the component to the Group as a whole and our assessment of the risk of misstatement
at that component. In the current year, the range of performance materiality allocated to components was £10k to £60k. In
their prior year audit, BDO LLP, carried out work on the components of the group using a performance materiality up to £165k.
Reporting threshold
An amount below which identified misstatements are considered as being clearly trivial.
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We agreed with the Audit Committee that we would report to them all uncorrected audit differences in excess of £10k,
which is set at 5% of planning materiality, as well as differences below that threshold that, in our view, warranted reporting
on qualitative grounds. In their prior year audit, BDO LLP, reported all uncorrected differences in excess of £7k.
We evaluate any uncorrected misstatements against both the quantitative measures of materiality discussed above and in
light of other relevant qualitative considerations in forming our opinion.
Other information
The other information comprises the information included in the annual report set out on pages 2 to 96 and 159 to 164,
other than the Consolidated 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 Consolidated Financial Statements does not cover the other information and, except to the extent
otherwise explicitly stated in this 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 Consolidated 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 there is a material misstatement in the Consolidated Financial Statements themselves. If,
based on the work we have performed, we conclude that there is a material misstatement of the other information, we are
required to report that fact.
We have nothing to report in this regard.
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 (Jersey) Law 1991
requires us to report to you if, in our opinion:
• proper accounting records have not been kept by the Company, or proper returns adequate for our audit have not been
received from branches not visited by us; or
• the financial statements are not in agreement with the Company’s 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 pages 93 to 94, the directors are responsible
for the preparation of the Consolidated 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 the Consolidated Financial
Statements that are free from material misstatement, whether due to fraud or error.
In preparing the Consolidated Financial Statements, the directors are responsible for assessing the Group’s and the
Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the directors either intend to liquidate the Group or the Company or to cease
operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the Consolidated 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 Consolidated Financial Statements.
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4 GOV E R N A N C E
Explanation as to what extent the audit was considered capable of detecting irregularities,
including fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line
with our responsibilities, outlined above, to detect irregularities, including fraud. The risk of not detecting a material
misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate
concealment by, for example, forgery or intentional misrepresentations, or through collusion. The extent to which our
procedures are capable of detecting irregularities, including fraud is detailed below. However, the primary responsibility for
the prevention and detection of fraud rests with both those charged with governance of the company and management.
• We obtained an understanding of the legal and regulatory frameworks that are applicable to the group and its underlying
entities and determined that the most significant are the regulations of the International Financial Reporting Standard
as adopted in the European Union (IFRS), the Companies (Jersey) Law 1991, AIM listing rules and the regulatory
requirements of its underlying entities.
• We understood how the Group and Company is complying with those frameworks by making inquiries with management
from various parts of the Group and the Directors who are responsible for legal and compliance procedures and
corroborated this by reading minutes of meetings of the Board of Directors and correspondence between the Group and
the London Stock Exchange.
• We assessed the susceptibility of the Consolidated Financial Statements to material misstatement, including how fraud
might occur by designing specific audit procedures in response to the key audit matters described above. We supported
our understanding through the following:
o Walkthroughs with management of the relevant transaction flows from initiation to financial reporting to identify any
potential susceptibilities to fraud.
o Reading minutes of the Group and key components board meetings throughout the year to date of authorisation
of the Consolidated Financial Statements to determine whether any matters of fraud or non compliance have been
identified or associated risks discussed.
o Reading correspondence with regulators in relation to compliance with laws and regulations for the Group and its
underlying entities.
o Performing specific procedures relating to judgemental areas which are subject to significant estimation or subject to
the application of accounting judgment.
o Incorporating a level of unpredictability surrounding the nature, timing or extent of testing when designing audit
procedures.
o Performing journal entry testing over manual journals and used data analysis techniques to identify journals deemed
susceptible to fraud risk.
• Based on this understanding we designed our audit procedures to identify non-compliance with such laws and
regulations. Our procedures involved reading minutes of meetings of the Board of Directors and correspondence
between the Group and its subsidiaries with their respective regulators, making inquiries of those charged with
governance and of management in key components, including understanding how the Group and its regulated
components maintain their capital requirements, and testing journal entries deemed susceptible to fraud risk.
• No instances of non-compliance or alleged non-compliance with laws were identified in responding to those matters in
relation to our audit work are set out above under key audit matters or components of the Group.
No instances of non-compliance or alleged non-compliance with laws were identified in responding to those matters in
relation to our audit work are set out above under key audit matters or components of the Group.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting
Council’s website at https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
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Use of our report
This report is made solely to the company’s members, as a body, in accordance with Article 113A of the Companies (Jersey)
Law 1991. Our audit work has been undertaken so that we might state to the Company’s members those matters we are
required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not
accept or assume responsibility to anyone other than the Company and the Company’s members as a body, for our audit
work, for this report, or for the opinions we have formed.
Richard Geoffrey Le Tissier
for and on behalf of Ernst & Young LLP
St Helier
24 November 2021
Notes:
1. The maintenance and integrity of MJ Hudson Group Plc web site is the responsibility of the directors; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors
accept no responsibility for any changes that may have occurred to the financial statements since they were initially presented on the web site.
2. Legislation in the United Kingdom and Jersey governing the preparation and dissemination of financial statement may differ from legislation in other jurisdictions.
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4 GOV E R N A N C E
Consolidated statement of comprehensive income 109
Consolidated statement of financial position
110
Consolidated statement of changes in equity
111
Consolidated statement of cash flows
112
Notes to the financial statements
113
Consolidated financial
statements
108
5 C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S
For the year ended 30 June 2021
Note
2021
£’000
2020
£’000
(restated)
Revenue
6
39,823
22,284
Direct cost of sales
(14,285)
(1,973)
Other cost of sales
(1,026)
(1,209)
Gross profit
24,512
19,102
Administrative and other expenses
7
(29,201)
(23,717)
Expected credit loss on trade receivables and contract assets
19
(788)
(585)
Other operating income
331
65
Operating loss
(5,146)
(5,135)
Finance expense
8
(973)
(1,134)
Fair value movements
9
835
(1,053)
Share of profit of a joint venture
6
-
Loss before taxation
(5,278)
(7,322)
Tax expense
11
(122)
(214)
Loss for the year
(5,400)
(7,536)
Attributable to:
Equity holders of the parent
(5,380)
(7,536)
Non-controlling interest
(20)
-
Loss for the year
(5,400)
(7,536)
Earnings per share attributable to the ordinary equity holders of the parent
Basic and diluted EPS
12
(0.032)
(0.056)
Other comprehensive income
May be reclassified to profit or loss in subsequent periods and attributable to
equity holders of the parent:
Exchange differences arising on translation of foreign operations
(116)
77
Total comprehensive loss for the year
(5,516)
(7,459)
The results above are all from continuing operations. The notes on pages 113 to 158 form part of these financial statements
Consolidated statement of
comprehensive income
109
5 CO NS O L I DAT ED FI NA NCI A L S TAT E M E N T S
As at 30 June 2021
Note
2021
£’000
2020
£’000
(restated)
A S S E T S
Non-current assets
Intangible assets
13
46,935
32,689
Tangible assets
15
2,067
2,196
Right-of-use asset
16
7,056
7,578
Investments
17
2,568
1,308
Other receivables
19
416
398
Total non-current assets
59,042
44,169
Current assets
Trade and other receivables
19
14,857
10,988
Income tax receivables
150
-
Cash and cash equivalents
9,785
13,388
Total current assets
24,792
24,376
Total assets
83,834
68,545
L I A B I L I T I E S A N D E Q U I T Y
Non-current liabilities
Borrowings
21
16,658
873
Deferred consideration
21
5,120
5,719
Lease liabilities
16
6,377
6,497
Other payables
20
405
497
Total non-current liabilities
28,560
13,586
Current liabilities
Trade and other payables
20
8,027
5,831
Income tax liabilities
396
114
Deferred tax liabilities
182
203
Borrowings
21
12
2,538
Deferred consideration
21
8,556
4,758
Lease liabilities
16
897
798
Total current liabilities
18,070
14,242
E Q U I T Y
Issued share capital
22
-
-
Share premium account
22
56,023
55,527
Owned shares
22
(928)
-
Other reserves
23
2,828
509
Retained loss
(20,699)
(15,319)
Total equity
37,224
40,717
Non-controlling interest
(20)
-
Total equity
37,204
40,717
Total liabilities and equity
83,834
68,545
The notes on pages 113 to 158 form part of these financial statements. The Consolidated Financial Statements on pages
109 to 158 were approved by the Directors, authorised for issue and signed by:
Andreas Tautscher
24 November 2021
Consolidated statement of financial position
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5 C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S
For the year ended 30 June 2021
Share
Capital
£’000
Share
Premium
£’000
Owned
Shares
£’000
Other
Reserves
£’000
Retained
Loss
£’000
Total
£’000
NCI
£’000
Total
Equity
£’000
Balance as at 30 June 2019
20
15,344
-
1,443
(9,027)
7,780
-
7,780
Share based payments
-
-
-
437
-
437
-
437
Exercise of options
1
1,506
-
(565)
565
1,507
-
1,507
Convertible loan note
options exercised
-
11,826
-
(883)
883
11,826
-
11,826
Loss for the year (restated)
-
-
-
-
(7,536)
(7,536)
-
(7,536)
Other comprehensive income
-
-
-
77
-
77
-
77
Net shares issue (note 22)
-
28,861
-
-
-
28,861
-
28,861
Cost of shares issued through IPO
-
(2,232)
-
-
-
(2,232)
-
(2,232)
Group restructure
(21)
21
-
-
(204)
(204)
-
(204)
B shares issued
-
201
-
-
-
201
-
201
Balance as at 30 June 2020
-
55,527
-
509
(15,319)
40,717
-
40,717
Share based payments
-
-
-
2,446
-
2,446
-
2,446
Exercise of options
-
(82)
236
(11)
-
143
-
143
Loss for the year
-
-
-
-
(5,380)
(5,380)
(20)
(5,400)
Other comprehensive income
-
-
-
(116)
-
(116)
-
(116)
Shares issued (note 22)
-
578
-
-
-
578
-
578
Shares repurchased
-
-
(1,164)
-
-
(1,164)
-
(1,164)
Balance as at 30 June 2021
-
56,023
(928)
2,828
(20,699)
37,224
(20)
37,204
The notes on pages 113 to 158 form part of these financial statements
Consolidated statement of changes in equity
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5 CO NS O L I DAT ED FI NA NCI A L S TAT E M E N T S
For the year ended 30 June 2020
Note
2021
£’000
2020
£’000
(restated)
Cash flows from operating activities:
Loss for the financial year before taxes
(5,278)
(7,322)
Adjustments for:
Depreciation and impairment of fixed assets and right-of-use assets
7
1,499
1,134
Amortisation and impairment of intangible assets
13
1,504
1,271
Loss on disposal of tangible and intangible assets
13/15
126
198
Revaluation (gain)/ loss on investments
17
(1,644)
(139)
Fair value (gain)/loss on deferred consideration
21
809
(856)
Fair value loss on convertible loan notes
9
-
543
Share based payments expense
24
1,998
437
Interest payable
8
973
2,639
(Increase)/decrease in trade and other receivables
(2,329)
(861)
Decrease in trade and other payables
(79)
(1,729)
Foreign exchange gains and losses
(582)
(45)
Cash from operations
(3,003)
(4,730)
Taxation paid
(54)
(85)
Net cash used in operating activities
(3,057)
(4,815)
Cash flows from investing activities:
Purchases of tangible assets
15
(241)
(2,084)
Purchase of intangible assets
13
(1,887)
(127)
Purchase of subsidiary undertaking
27
(1,524)
(4,995)
Payment of deferred consideration related to acquisitions
(9,236)
(3,350)
Purchase of financial instruments
(173)
-
Proceeds from sale of financial instruments
575
-
Net cash used in investing activities
(12,486)
(10,556)
Cash flows from financing activities:
Interest paid
(837)
(1,124)
Equity subscription
496
28,133
Owned shares purchased
(928)
-
Proceeds from issue of bank loan
26
18,191
1,023
Finance costs on bank loans
26
(760)
-
Repayment of bank loan
26
(3,590)
(964)
Repayment of loan notes
26
-
(600)
Repayment of loans to directors
20
(18)
(386)
Payment of lease liabilities
26
(614)
(422)
Net cash generated from financing activities
11,940
25,660
Net (decrease)/increase in cash and cash equivalents
(3,603)
10,289
Cash and cash equivalents at beginning of year
13,388
3,099
Cash and cash equivalents at end of year
9,785
13,388
Cash and cash equivalents comprise:
Cash at bank and in hand
9,785
13,388
Cash and cash equivalents at end of year
9,785
13,388
The notes on pages 113 to 158 form part of these financial statements
Consolidated statement of cash flows
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1. General information
MJ Hudson Group plc (the “Company”) is a company incorporated in Jersey, Channel Islands under the Companies (Jersey) Law
1991. The address of the registered office is P.O. Box 264, Forum 4, Grenville Street, St Helier, Jersey JE4 8TQ. The financial
statements consolidate the financial statements of the company and its subsidiary undertakings (together the “Group”).
The principal activity of the Group is acting as an independent advisory and infrastructure business, serving fund managers,
investors and advisers active in private equity, venture capital, hedge, credit, real estate and infrastructure. The group owns
two full scope AIFM management platform to fund managers, one in the UK and another in Luxembourg.
Correction of errors
Three errors have identified in relation to the FY 2020 financial statements which have been corrected as prior year
misstatements in these financial statements. They are described below:
An error was identified in the expected credit loss calculation for the prior year. This has resulted in an additional £334,000
charge to administrative and other expenses (notes 5 & 7) with an associated decrease in trade debtors (note19). This
resulted in the basic and diluted loss per share increasing from (0.053) to (0.056) (note 12)
As described in note 21 Deferred consideration includes payments which is dependent upon the results of the acquired
businesses and are accounted for at fair value through profit or loss. ,The fair value movement of £649,000 was previous
disclosed within Finance expenses in error and therefore have been reclassified as fair value movements in these financial
statements (notes 8 & 9)
In considering the completeness of related party disclosures (note 28) the directors have identified certain related parties
and associated disclosures that were omitted from the 2020 financial statements. These include information pertaining to
directors’ interests in other companies in which transactions had occurred, associated outstanding balances and deferred
consideration loans from directors of subsidiaries of the Group.
2. Basis of preparation and consolidation
2.1 Basis of Preparation
The financial statements of the Group have been prepared in accordance with International Financial Reporting Standards
as adopted by the European Union (“IFRS”).
The financial statements are prepared on a going concern basis, under the historical cost convention, except for certain
financial assets and liabilities, which are revalued and measured at fair value through profit or loss. The financial statements
are presented in pounds sterling and all values are rounded to the nearest thousand (£000), except when otherwise indicated.
The preparation of the financial statements in conformity with IFRS requires the use of certain critical accounting estimates.
It also requires management to exercise its judgement in the process of applying the Group’s accounting policies. The areas
involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the
financial statements are disclosed in note 4.
Notes to the financial statements
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5 CO NS O L I DAT ED FI NA NCI A L S TAT E M E N T S
2.2 Going concern
The financial statements have been prepared on a going concern basis. In adopting the going concern basis, the Directors have
considered the group’s operations and principal risks and uncertainties, along with the impact of the COVID-19 pandemic.
As described in note 24 the Group’s objectives when managing capital are to safeguard its ability to continue as a going
concern, so that it can provide returns for shareholders and benefits for other stakeholders and to maintain an optimum
capital structure to reduce the cost of capital. In determining if the Group is a going concern, the Directors have considered
the group’s operations and principal risks and uncertainties, along with the impact of the COVID-19 pandemic.
During FY21 the Group refinanced its debt facilities and entered into a five-year financing agreement with Santander UK
PLC. The financing comprises a facility of up to £17.5m, with repayment due in 2026 (see note 21). There is an option to
extend this amount over time, on an uncommitted basis. The facility is to be used to finance the Group´s M&A pipeline
including deferred consideration, regulatory capital requirements and general corporate needs. The previous loans totalling
approximately £4 million, were repaid in May and June 2021.
The regulated Irish acquisition, Bridge Fund Management Limited (BFML), has won a significant number of new clients off the
back of regulatory changes in Ireland and has seen significant growth. With that growth, has come an accelerated regulatory
capital need. £4.7 million (€5.5 million) was placed in the BFML regulatory capital deposit account in June and a further £2.4
million (€2.8 million) has been paid in September which has taken this entity’s regulatory capital up to the cap of £8.6 million (€10
million). As reported previously, we have also seen an increase in trade debtors and accrued income due to remote working and
lockdown impacts in extending the timing required for clients to complete transactions. This has begun to ease in June with record
law firm billing in the month and cashflow patterns are expected to return to previous levels over the next few months.
In order to compensate for this accelerated regulatory capital need and also the increased lockup of working capital a
further drawdown of £7 million was finalised in August 2021. This facilitated the expansion of the regulated Irish business
and restored the working capital buffer. £24.5 million of the facility has been drawn down to date.
To assess going concern the Directors have prepared ‘Base case’ financial forecasts for the period to 31 December 2022. The
base case budget data is derived from granular bottom-up data which was produced in conjunction with Business Unit Heads.
In addition, the Directors have considered the impact COVID-19 could have on the Group and assessed that impact on the business
has diminished considerably since the beginning of 2021 with strong levels of growth returning. In considering a ‘Worst case’
scenario the Group have reviewed the ability of the business to withstand reductions in revenue as set out in the table below:
Jul 2021 to
Dec 2021
Jan 2022 to
Dec 2022
Business units with primarily project based revenue (Advisory and part of Data & Analytics)
15%
10%
Business units with 12 months contracted revenue (Outsourcing and part of Data & Analytics)
10%
10%
In addition to the above ‘Worst case’ revenue assumptions this scenario assumes that debtor days do not recover from
current levels until 2022 across all business units. This is to reflect slowdown in cash collection as a result of a prolonged
COVID-19 and slow wider economic recovery. This is assumed to be mitigated by suspension of recruitment and reductions
(assumed halved) in FY22 salary reviews and bonuses.
The Directors ‘Worst case’ financial modelling showed that the Group could withstand these revenue reductions, if combined
with a 50% reduction in budget salary review and bonus levels and meet ongoing covenants as well as still operate within
existing borrowing facilities to enable the Group to meet its liabilities as they fell due. In the event that the ‘Worst case’
scenario arose the Directors could also take further cost mitigating actions not currently included within the ‘Worst case’
forecast. It is estimated that cost mitigating factors could generate further savings in excess of £2 million in FY22. In addition,
non-essential spending could be deferred e.g. continued delay in launch of US Law operations. If cost mitigation factors are
necessary, they may include reductions in recruitment, further reduction in holiday pay accrual as highlighted in 2.3 below
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5 C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S
and restructuring. Group funds are not specifically earmarked for transactions. Further information on borrowing and
deferred consideration payments in respect of acquisitions are included in note 21 to the financial statements.
Based on the Group’s trading through to 31 October 2021 and the financial forecasts together with the possible cost mitigating
actions available the Board has a reasonable expectation that the Group has adequate financial resources to continue in
operational existence for the foreseeable future, and for a period to 31 December 2022 from the date of signing of these financial
statements. Accordingly, the Group continues to adopt the going concern basis in preparing its financial statements.
2.3 COVID-19 impact
As reported in our June 2020 Annual Report & Accounts, the COVID-19 pandemic has impacted the Group in a number of ways.
Operationally all of our offices have been subject to lockdowns of varying lengths and severity. In lockdown, all of the offices have
been made COVID compliant and are currently in a transitional phased return period, which will see a gradual return to normal
working patterns. Some increase in flexible working is part of a move to the ‘new normal’ and the Group is well placed to support this.
As at October 2021 the current status is that all our offices are open and we are currently phasing staff back to the office over
the remainder of the year and assessing flexible working opportunities on a case by case basis. We remain ready to adapt should
another lockdown occur in any of our jurisdictions.
In response to the COVID-19 pandemic the Group took swift and decisive action as a result of the anticipated reduction in
revenue and put in place a series of cost saving measures in April 2020 in order to preserve cash and liquidity to create a cash
buffer cushion in the event of a possible protracted downturn. We have adopted some of these measures again in FY21 with
senior executive management taking salary cuts for the first 3 months of 2021, scrapping of general bonuses re FY21 and
reduction in holiday pay accrual by requiring staff to take accrued leave by 30 June 2021. Other factors including reduced travel
and entertainment costs, office costs and marketing events costs also assisted and these remain suppressed compared to pre-
pandemic levels. The Group took advantage of the UK HMRC VAT deferral scheme in June 2020 but has not taken any additional
government funding to support the operation. No staff have been furloughed at any time.
The revenue shortfall experienced by the Advisory division from March 2020 to June 2020 was due to the temporary suspension
of client new fund launches and M&A activity. Since then we have seen a strong recovery in organic growth, particularly in the
second half of our financial year and new business pipelines are strong in most of our business units.
2.4 Basis of consolidation
The Group financial statements include the results of the Company and all of its subsidiary undertakings up to 30 June 2021.
Subsidiaries are all entities over which the Group has control. Control is achieved when the Group is exposed, or has rights, to
variable returns from its involvement with the investee and has the ability to affect those returns through its power over the
investee. Specifically, the Group controls an investee if, and only if, the Group has:
• power over the investee (i.e., existing rights that give it the current ability to direct the relevant activities of the investee);
• exposure, or rights, to variable returns from its involvement with the investee; and
• the ability to use its power over the investee to affect its returns.
The Group re-assesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or
more of the three elements of control. Consolidation of a subsidiary begins when the Group obtains control over the subsidiary
and ceases when the Group loses control of the subsidiary. Assets, liabilities, income and expenses of a subsidiary acquired or
disposed of during the year are included in the financial statements from the date the Group gains control until the date the
Group ceases to control the subsidiary.
Where a subsidiary has different accounting policies to the Group, adjustments are made to those subsidiary financial statements
to apply the Group’s accounting policies when preparing the financial statements. All intra-group assets and liabilities, equity,
income, expenses and cash flows relating to transactions between members of the Group are eliminated in full on consolidation.
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5 CO NS O L I DAT ED FI NA NCI A L S TAT E M E N T S
An associate is an entity, being neither a subsidiary nor a joint venture, in which the Group holds a long-term interest and
where the Group has significant influence. The Group considers that it has significant influence where it has the power to
participate in the financial and operating decisions of the associate. The results of associates are accounted for using the
equity method of accounting.
Any subsidiary undertakings or associates sold or acquired during the year are included up to, or from, the dates of change
of control or change of significant influence respectively.
If the Group loses control over a subsidiary, it derecognises the related assets (including goodwill), liabilities, non-controlling
interest and other components of equity, while any resultant gain or loss is recognised in consolidated statement of
comprehensive income. On disposal of a foreign operation, the component of Other Comprehensive Income relating to that
particular foreign operation is reclassified to profit or loss.
2.5 Foreign currency translation
(i) Functional and presentation currency
Items included in the financial information of each of the Company’s entities are measured using the currency of the
primary economic environment in which the entity operates (“the functional currency”). The financial statements are
presented in ‘pounds sterling’, which is the Company’s functional and the Group’s presentation currency.
On consolidation, the results of foreign operations are translated into sterling at rates approximating to those ruling when
the transactions took place. All assets and liabilities of foreign operations are translated at the rate ruling at the reporting
date, including any goodwill in relation to that entity. Exchange differences arising on translating the opening net assets at
opening rate and the results of overseas operations at actual rate are recognised in other comprehensive income.
(ii) Transactions and balances
Foreign currency transactions are translated into the Company’s functional currency using the exchange rates prevailing
at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and
from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are
recognised in profit or loss.
Foreign exchange gains and losses that relate to borrowings and cash and cash equivalents are presented in profit
or loss within ‘finance income or costs’. All other foreign exchange gains and losses are presented in the statement of
comprehensive income within ‘other operating income or expense’.
2.6 Company only financial statements
Under Article 105(11) of the Companies (Jersey) Law 1991, the directors of a holding company need not prepare separate
financial statements (i.e. company only financial statements). Separate financial statements for the Company are not prepared
unless required to do so by the members of the Company by ordinary resolution. The members of the Company had not passed
a resolution requiring separate financial statements and, in the Directors’ opinion, the Company meets the definition of a
holding company. As permitted by law, the Directors have elected not to prepare separate financial statements.
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5 C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S
3. Changes in account policies and disclosures
The accounting policies set out in these consolidated financial statements have been consistently applied to all the years
presented, unless otherwise stated.
3.1 New standards, amendments and interpretations effective from 1 July 2020
To the extent that they are relevant, the Group has adopted from 1 July 2020 all IFRS standards and interpretations including
amendments that were in issue and effective for accounting periods beginning on 1 July 2020. These are as follows:
• Definition of Material
• Amendments to IAS 1 and IAS 8
• Definition of a Business – Amendments to IFRS 3
• Interest Rate Benchmark Reform
• Amendments to IFRS 7, IFRS 9 and IAS 39
• Revised Conceptual Framework for Financial Reporting
These standards and interpretations have had no material impact for the Group.
3.2 New standards, amendments and interpretations issued but not yet adopted
Certain new accounting standards and interpretations have been published that are not mandatory for 30 June 2021
reporting periods and have not been early adopted by the Group. These standards are not expected to have a material impact
on the entity in the current or future reporting periods or on foreseeable future transactions.
4. Critical accounting judgements and estimation uncertainty
Estimates and judgements are continually evaluated and are based on historical experience and other factors, including
expectations of future events that are believed to be reasonable under the circumstances. The details of key accounting
estimates and assumptions are included within their respective notes as follows:
• Going concern, note 2.2
• Measurement of contract assets and liabilities, note 6
• Impairment of intangible assets and goodwill, note 14
• Impairment of trade receivables and contract assets, note 19
• Contingent consideration, note 21
• Long term incentive plan, note 24
• Valuation of level 3 investments, note 17
Critical judgements represent key decisions made by management in the application of the Groups’ accounting policies.
Where a significant risk of materially difference outcomes exists due to management assumptions this will represent a
critical accounting judgement. Accounting judgements are continually reviewed in light of new information and are based on
historical experience and other factors, including expectations of future events that are considered to be reasonable under
the circumstances. Management concluded that judgement was required around deciding cash generating unit and expected
credit losses, which are discussed in their respective notes. Management has concluded that there are no other judgements
which could have a material impact on the financial statements.
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5 CO NS O L I DAT ED FI NA NCI A L S TAT E M E N T S
5. Segment information
For management purposes, the Group is organised into business units based on its products and services and has three
established reportable segments plus organic investments as follows:
• Advisory: the provision of legal and investment consultancy services for alternative asset management and investors
across all areas of the alternative investment industry. This includes legal services to alternative asset managers, corporate
entities and institutional investors to advise on M&A and establishing investment funds along with support for primary
fund investments, co-investments and secondaries. This segment also includes consulting services and the provision of
individual independent investment advisers and professional trustees to corporate pension schemes, local government
pension schemes and charitable organisations.
• Outsourcing: a multi-service platform providing regulatory cover and support via a variety outsourced services to asset
managers and advisers. This includes the provision of all key front, middle and back office functions, including portfolio
management, risk management, fund and corporate administration, accounting and fiduciary services.
• Data & Analytics: research, consulting, benchmarking services underpinned by data and software tools to support
sustainable investment, tax-advantaged investing, risk monitoring and investor relations. These services are designed
to help investor and asset manager clients make better strategic choices, improve investment performance and investor
communications, and obtain better value from their service providers.
• Organic investments: incubated businesses form the organic investments business segment. This includes three
separate businesses including Luxembourg services, regulatory consulting team in London and international fund
administration business. This has been presented separately from the other segments to increase the transparency of
the profitability of the group before these activities. Going forward, these incubated businesses will be reported in our
Outsourcing division.
No operating segments have been aggregated to form the above reportable operating segments. Key management are the Chief
Operating Decision Makers (CODM) and they monitor the operating results of the business units separately for the purpose of
making decisions about resource allocation and performance assessment. Segment performance is evaluated based on adjusted
operating profit or loss. The adjustments include unallocated central costs, organic investments, fundraising and acquisition costs,
non-recurring items, and depreciation and amortisation. Unallocated central costs (Group expenses) are items incurred centrally
which are neither directly attributable nor can be reasonably allocated to individual segments, but are considered recurring in
nature. The organic investments are newly formed businesses which are still considered to be in their start-up phase. Fundraising
and acquisition costs are professional fees incurred relating to new debt or equity issuances and acquisition of new entities. Non-
recurring costs are one-off in nature such as office relocation costs, and other one-off costs.
Business unit performance is not driven from assets given the nature of business being primarily the provision of services. For
this reason, the CODM does not regularly obtain the split of asset and liabilities by reporting segment, which are monitored on
a Group basis. The Group’s depreciation and amortisation, financing costs (including finance costs, finance income and other
income), fair value movements and income taxes are also managed on a Group basis and are not allocated to operating segments.
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5 C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S
Year ended 30 June 2021
Advisory
£’000
Outsourcing
£’000
Data &
Analytics
£’000
Established
Segments
total
£’000
Organic
investments
£’000
Consolidated
£’000
Revenue
9,541
9,360
6,599
25,500
14,323
39,823
Direct cost of sales
-
(2,229)
-
(2,229)
(12,056)
(14,285)
Revenue less direct cost of sales
9,541
7,131
6,599
23,271
2,267
25,538
Other cost of sales
(520)
(171)
(313)
(1,004)
(22)
(1,026)
Gross profit
9,021
6,960
6,286
22,267
2,245
24,512
Administrative and other expenses
(8,354)
(5,550)
(4,786)
(18,690)
(3,263)
(22,953)
Other operating income
179
49
71
299
3
302
Segment profit/(loss)
846
1,459
1,571
3,876
(1,015)
2,861
Group income (expenses)
36
Fundraising and Acquisition costs
(3,166)
Non-recurring costs
(1,874)
Depreciation and amortisation
(3,003)
Operating loss
(5,146)
Finance expenses
(973)
Fair value movements
835
Share of profit in a joint venture
6
Tax
(122)
Loss for the year
(5,400)
Year ended 30 June 2020 (restated)
Advisory
£’000
Outsourcing
£’000
Data &
Analytics
£’000
Established
Segments
total
£’000
Organic
investments
£’000
Consolidated
£’000
Revenue
10,022
6,708
4,566
21,296
988
22,284
Direct cost of sales
-
(1,973)
-
(1,973)
-
(1,973)
Revenue less direct cost of sales
10,022
4,735
4,566
19,323
988
20,311
Other cost of sales
(967)
-
(242)
(1,209)
-
(1,209)
Gross profit
9,055
4,735
4,324
18,114
988
19,102
Administrative and other expenses
(8,182)
(2,962)
(3,313)
(14,457)
(1,910)
(16,367)
Other operating income
18
15
-
33
3
36
Segment profit/(loss)
891
1,788
1,011
3,690
(919)
2,771
Group expenses
(660)
Fundraising and Acquisition costs
(3,990)
Non-recurring costs
(853)
Depreciation and amortisation
(2,403)
Operating loss
(5,135)
Finance expenses
(1,783)
Fair value movements
(404)
Share of profit in a joint venture
-
Tax
(214)
Loss for the year
(7,536)
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5 CO NS O L I DAT ED FI NA NCI A L S TAT E M E N T S
6. Revenue
Accounting policy
The Group revenue recognition policy is in line with the requirements of IFRS 15 and the five step model. The majority of
contracts are identified by signed engagement letters. Revenue is generally recognised over time based on the satisfaction
of performance obligations stipulated in the letters. This is set out below by revenue stream.
Revenue is measured at the fair value of the consideration received or receivable and represents the amount receivable for
services rendered, net of refunds, discounts and rebates allowed by the Group and value added taxes. There are no incentives
given to customers that would have a material effect on the financial statements. The transaction price is determined by:
• fixed fee – the consideration is clearly allocated to the different performance obligations within the contract; or
• hourly rate specified in the contract – to account for the fact that these pieces of work can frequently be complex and
open ended; and
• in rare instances the contracts contain variable consideration however these are immaterial and Management’s policy is to
recognise these only when there is sufficient certainty over non-reversal of any income accrued on these work streams.
The allocation of the transaction price to performance obligations is non-complex for the Group as the amounts are
specifically stated within the contracts. Therefore, there is limited judgement involved in allocating the contract price to
each service provided. The allocation is reassessed in the event of any contract modifications.
The Group has three operating segments and the revenue policy is consistent across the segments based on two distinct
categorisations of services provided as follows:
(i) Legal and consultancy contracts
Where legal and consultancy services are provided, revenue comprises amounts chargeable to clients for services
performed during the period, exclusive of value added tax and net of discounts where applicable. The services provided are
bespoke advice specific to the contract with no alternative use for the advice created and the Group has an enforceable
right to receive payment for services rendered to date. Revenue from a contract to provide services is recognised in the
period in which the services are provided in accordance with the stage of completion of the contract.
The stages of work detailed in the engagement terms and conditions are heavily interrelated, completed sequentially and rarely
utilised separately. The revenue is recognised over time based on the period services are rendered. The Group is entitled to bill
for work completed to date in the event of a contract termination and since no alternative use for this work exists, over time
recognition is appropriate. If a project spans the year end and entitlement to revenue exceeds amounts billed, an adjustment is
made to the Consolidated Statement of Financial Position for amounts receivable using the estimated percentage completion of
the project based on expected costs to complete post year end and cost incurred to date as a percentage of the total project cost.
The majority of contract modifications undertaken are expansions of previous performance obligations at the same rates.
These are treated as a contract continuation under IFRS 15.
(ii) Service and subscription contracts
Where service and subscriptions are offered, revenue is the amount receivable for services provided to third parties to the
extent that there is a right to consideration and is recorded at the value of the consideration due. The customer receives
the benefit of services provided simultaneously with their delivery, as such the revenue is recognised evenly over the period
for which services are provided. Revenue earned in excess of amounts billed at the year end date are brought onto the
consolidated statement of financial position as accrued income.
Within the services and subscription contracts there are generally several performance obligations running concurrently.
These are separable into distinct promises of services to be provided, which are capable of being utilised separately by
clients of the Group. Revenue is recognised over time in the period services are rendered and the amount recognised to
revenue is based on the percentage of completion, which is calculated based on the amount of time at the agreed upon rate
spent on the project relative to the value of the contract for the specific performance obligation. For any contracts that have
been determined to be based on a point in time, revenue is recognised only once a performance obligation has been met.
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5 C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S
Contract modifications are less common within the service and subscription contracts but typically result in new services or
prices which leads to contract termination and replacement with the new contract.
Contract assets and liabilities
Contract assets are measured at the fair value of consideration receivable from clients, being the expected value of revenue
that will be received and recognised in the consolidated statement of financial position only to the extent that management
determine it more probable than not that these amounts will be recovered from clients. Due to the nature of the Group’s
clients, performance obligations part-satisfied on many of the Group’s legal and consultancy contracts are typically not
invoiced until completion (even though the Group retains the right to bill and collect for work performed to date) to allow
the clients to raise sufficient liquidity with which to pay the Group’s invoices. This leads to the accumulation of contract
assets on the consolidated statement of financial position (see below).
Contract liabilities are attributable to the continuing activity of the provision of advisory, investment and management
services to external clients and recognised evenly over the period of coverage. Amounts billed in advance that relate
to future periods as at the year-end date are brought onto the consolidated statement of financial position as contract
liabilities.
(i) On service and subscriptions provided
Contract assets and contract liabilities are measured as the difference between services billed and revenue rendered on
agreements with clients of the Group. In the absence of detailed timekeeping records, one-off assignments are presumed
to be worked on consistently over the time for which the one-off assignment spans, therefore leading to revenue being
recognised evenly over this time period.
(ii) On the rendering of legal and consultancy services provided
Contract assets are measured at the valuation of the fair value of consideration receivable from clients, which is determined
by management on the basis of best estimates of the value of time spent by reference to the percentage of the project
completed and the subsequent entitlement to revenue. Its valuation is subject to the following assumptions:
• the reliability of estimates of the percentage of completion on projects that span the statement of financial position
date, bearing in mind that the final result can be different to the budgeted costs expected to be incurred; and
• the probability of receiving the income based on the underlying circumstances of the work being undertaken, this
generally being a product of the structure on which the Group is advising proceeding to completion.
Estimates and assumptions are continually evaluated and are based on historical experience and other factors.
Management believe that the present method of estimating the valuation of contract assets is reasonable in the context of
the nature of the business and the availability of previous experience with clients on which preliminary judgments can be
formed. Refer to note 19 for sensitivity analysis.
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5 CO NS O L I DAT ED FI NA NCI A L S TAT E M E N T S
Set out below is the disaggregation of the Group’s revenue from contracts with customers:
Year Ended 30 June 2021
Advisory
£’000
Outsourcing
£’000
Data &
Analytics
£’000
Established
Segments
total
£’000
Organic
investments
£’000
Consolidated
£’000
Legal and consultancy
8,633
-
4,637
13,270
-
13,270
Service and subscription
908
9,360
1,962
12,230
14,323
26,553
Total revenue
9,541
9,360
6,599
25,500
14,323
39,823
Year Ended 30 June 2020
Advisory
£’000
Outsourcing
£’000
Data &
Analytics
£’000
Segments
total
£’000
Organic
investments
£’000
Consolidated
£’000
Legal and consultancy
9,163
434
2,358
11,955
40
11,995
Service and subscription
859
6,274
2,208
9,341
948
10,289
Total revenue
10,022
6,708
4,566
21,296
988
22,284
During the year ended 30 June 2021 the Group derived over 10% of its revenue from one customer, which amounted to
£12,308,000 arising from sales in Organic investments. This amount is offset by direct cost of sales and on a net basis would
not be greater than 10% of gross profit. During the year ended 30 June 2021 the Group did not derive over 10% of its
revenue from any one customer.
Contract balances are as follows:
2021
£’000
2020
£’000
(restated)
Trade receivables (note 19)
7,013
4,109
Contract assets (note 19)
4,979
3,902
Contract liabilities (note 20)
(2,521)
(2,165)
Contract assets relate to revenue earned from ongoing services. As such, the balances of this account vary and depend on
the number of ongoing services at the end of the year. In 2021, £468,000 (2020 - £713,000) was recognised as provision for
expected credit losses on contract assets, see note 19.
The following table outlines the movements in contract assets for the year:
2021
£’000
2020
£’000
Opening balance 1 July
3,902
3,600
Contract assets acquired through purchase of a subsidiary (note 27)
302
521
Invoiced relating to previous years
(4,128)
(2,333)
Accrued in the current year
4,881
2,114
Closing balance 30 June
4,957
3,902
Contract liabilities include short-term advances received to render services. The outstanding balances of these accounts
increased in 2021 and 2020 due to the continuous increase in the Group’s customer base. The acquisition of a subsidiary
also resulted in an increase in contract liabilities of £53,000 in 2021 (2020 - £626,000), see note 27. The contract liabilities
satisfied over time are all 12 months or less in duration, as such the full amount of contract liabilities outstanding in 2020
have been recognised into revenue in 2021.
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5 C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S
7. Administrative and other expenses (restated)
Accounting policy
Direct costs of sales are comprised of costs incurred by the Group to provide services for customers that are outsourced to
a third party where the Group meets the definition of a principal but does not add value or influence the nature and level of
those specific services provided. Other costs of sales are primarily comprised of direct labour costs that are subcontracted
to a third party under the direct supervision of the Group. The split of the costs into direct and other costs of sales provides
additional disclosure on the impact of costs (direct costs of sales) that are not considered to be a significant contributor to
the Group’s gross profit or result before taxation.
Expenses are accounted for on the accrual basis and recognised into profit and loss as incurred.
2021
£’000
2020
£’000
(restated)
Employment costs
16,456
12,424
Professional fees
2,491
1,325
Auditor’s remuneration (note 7.1)
300
894
Marketing, training, travel & entertainment
403
775
IT costs
930
439
Premises and office costs
790
610
Depreciation of tangible fixed assets (note 15)
386
256
Amortisation charge of right-of-use assets (note 16)
1,113
878
Amortisation and impairment of intangible assets (note 13)
1,504
1,271
Fundraising and Acquisition costs (note 5)
3,166
3,990
Non-recurring costs (note 5)
1,874
853
Foreign exchange movements
(212)
2
Total administrative and other expenses
29,201
23,717
For the year ended 30 June 2021, there were employment related costs of £1,391,000 (2020 - £1,758,000) that were
considered non-recurring or related to fundraising and acquisitions and have been included within those respective
categories in the table above.
7.1 Auditor remuneration
During the year the Group incurred the following costs in relation to the Group’s current and former auditor:
2021
£’000
2020
£’000
Audit fee for audit of consolidated and subsidiary financial statements
248
201
Non-audit fees
52
486
Other services
-
207
Total remuneration
300
894
Please note that 2021 balances refer to Ernst and Young LLP and 2020 balances refer to BDO LLP
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5 CO NS O L I DAT ED FI NA NCI A L S TAT E M E N T S
7.2 Employees and key management
Accounting policy
The Group provides a range of benefits to employees, including annual bonus arrangements and paid holiday arrangements.
(i) Annual bonus plan
The Group operates a discretionary annual bonus plan for employees. An expense is recognised in the consolidated profit
and loss account when the Group has a legal or constructive obligation to make payments under the plan as a result of past
events and a reliable estimate of the obligation can be made.
(ii) Share-based payments
The Group provides share-based payment arrangements to certain employees. Equity-settled arrangements are measured
at fair value (excluding the effect of nonmarket based vesting conditions) at the date of the grant. The fair value is expensed
on a straight-line basis over the vesting period. The amount recognised as an expense is adjusted to reflect the actual
number of shares or options that will vest.
Where equity-settled arrangements are modified, and are of benefit to the employee, the incremental fair value is
recognised over the period from the date of modification to date of vesting. Where a modification is not beneficial to
the employee there is no change to the charge for share based payment. Settlements and cancellations are treated as an
acceleration of vesting and the unvested amount is recognised immediately in the profit and loss account.
(iii) Holiday pay accrual
A liability is recognised to the extent of any unused holiday pay entitlement which has accrued at the statement of financial
position date and carried forward to future periods. This is measured at the undiscounted salary cost of the future holiday
entitlement so accrued at the statement of financial position date.
(iv) Pension obligations
A defined contribution pension scheme is operated by the Group on behalf of the employees. The assets of the scheme are
held separately from those of the Group in an independently administered fund. The Group has no legal or constructive
obligations to pay further contributions if the funds do not hold sufficient assets to pay all employees the benefits relating to
employee service in the current and prior periods.
The Group has no further payment obligations once the contributions have been paid. The contributions are recognised as
employee benefit expense when they are due. Contributions payable by the group to the fund at year end and are included
in payables. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in the future
payments is available.
Employment costs
2021
£’000
2020
£’000
Staff costs (including directors) consist of:
Wages and salaries
13,464
11,518
Social security costs
1,394
1,155
Contributions to defined contribution scheme
662
451
Share based payments (note 24)
166
437
Other staff costs
330
174
Long term incentive plan (note 24)
1,832
447
Total employment costs
17,848
14,182
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The average number of employees (including directors) during the year was as follows:
2021
Number
2020
Number
Advisory
53
52
Outsourcing
57
29
Data & Analytics
37
28
Administration
59
41
Total average employees
206
150
Organic investment employee count is included in Outsourcing in the above table.
A defined contribution pension scheme is operated by the Group on behalf of the employees. The assets of the scheme
are held separately from those of the Group in an independently administered fund. The pension charge represents
contributions payable by the group to the fund and amounted to £662,000 (2020 - £451,000). Contributions amounting to
£104,000 (2020 - £49,000) were payable to the fund at year end and are included in payables.
Key management compensation
Key management personnel include all directors of the Company, who together have authority and responsibility for
planning, directing, and controlling the activities of the Group.
2021
£’000
2020
£’000
Wages and salaries
2,501
2,265
Social security costs
302
275
Cost of defined contribution scheme
96
82
Share based payments and other staff costs
1,862
541
Total key management compensation
4,761
3,163
Total remuneration to highest paid key management personnel in the year amounted to £551,460 (2020 - £685,000).
8. Finance income and costs (restated)
Accounting policy
(i) Finance income
Finance income comprises interest receivable on funds invested and loans to related parties. Interest income is recognised
in profit or loss as it accrues using the effective interest method. Interest income of £48,000 was included within other
operating income for the year end 30 June 2021 (2020 - £58,000).
(ii) Finance costs
Finance costs comprise interest on bank loans, lease obligations and other interest payable. Interest on bank loans and
other interest is charged to the consolidated statement of comprehensive income over the term of the debt using the
effective interest rate method so that the amount charged is at a constant rate on the carrying amount. Issue costs are
initially recognised as a reduction in the proceeds of the associated capital instrument.
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5 CO NS O L I DAT ED FI NA NCI A L S TAT E M E N T S
Finance costs
2021
£’000
2020
£’000
(restated)
Bank loan interest
628
704
Interest on lease liabilities
345
223
Deferred consideration fair value loss (note 21)
-
207
Total finance costs
973
1,134
June 2020 Finance costs have been restated to move the unwind of discount on deferred consideration totalling £649,000
to Fair value movements shown in note 9 as described note 1.
9. Fair value movements (restated)
Accounting policy
Refer to notes 17 and note 21 respectively for accounting policy regarding fair value recognition.
During the year the Group recorded the following fair value adjustments:
2021
£’000
2020
£’000
(restated)
Investments fair value gain (note 17)
1,644
139
Deferred consideration fair value loss (note 21)
(809)
(649)
Convertible bonds fair value loss
-
(543)
Total fair value movements
835
(1,053)
June 2020 Fair value movements have been restated to move the unwind of discount on deferred consideration totalling
£649,000 from Finance income and costs shown in note 8 as described note 1.
10. Dividends
Accounting policy
Dividends and other distributions to Group’s shareholders are recognised as a liability in the financial statements in the
period in which the dividends and other distributions are approved by the Group’s shareholders. These amounts are
recognised in the consolidated statement of changes in equity.
The Directors recommend the payment of a maiden dividend of 0.125p per share and a resolution to approve this dividend
will be placed before shareholders for approval at the forthcoming AGM (2020 – nil).
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5 C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S
11. Taxation on profit on ordinary activities
Accounting policy
Taxation expense for the period comprises current and deferred tax recognised in the reporting period. Tax is recognised in
the consolidated income statement, except to the extent that it relates to items recognised in other comprehensive income
or directly in equity. In this case tax is also recognised in other comprehensive income or directly in equity respectively.
Current or deferred taxation assets and liabilities are not discounted.
(i) Current tax
Current tax is the amount of income tax payable in respect of the taxable profit for the year or prior years. Current income
tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities. Tax
is calculated on the basis of tax rates and laws that have been enacted or substantively enacted by the period end.
Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax
regulation across differing jurisdictions is subject to interpretation. It establishes provisions where appropriate on the basis
of amounts expected to be paid to the tax authorities.
(ii) Deferred tax
Deferred tax arises from temporary differences that are differences that arise between the carrying amount of an asset or
liability and that taxable basis.
Deferred tax is recognised on all temporary differences that have originated, but not reversed at the reporting date except for:
• unrelieved tax losses and other deferred tax assets are only recognised when it is probable that they will be recovered
against the reversal of deferred tax liabilities or other future taxable profits.
• any deferred tax balances are reversed if and when all conditions for retaining associated tax allowances have been met; and
• where temporary differences relate to interests in subsidiaries and associates and the Group can control their reversal
and such reversal is not considered probable in the foreseeable future.
Deferred tax balances are not recognised in respect of permanent differences except in respect of business combinations,
when deferred tax is recognised on the differences between the fair values of assets acquired and the future tax deductions
available for them and the differences between the fair values of liabilities acquired and the amount that will be assessed for
tax. Deferred tax is measured using tax rates and laws that have been enacted or substantively enacted by the period end
and that are expected to apply to the reversal of the temporary difference.
The Group offsets deferred tax assets and deferred tax liabilities if and only if it has a legally enforceable right to set off current
tax assets and current tax liabilities. The deferred tax assets and deferred tax liabilities must also relate to income taxes levied by
the same taxation authority on either the same taxable entity or different taxable entities which intend either to settle current tax
liabilities and assets on a net basis. The Group will also offset deferred tax liabilities or assets to realise the assets and settle the
liabilities simultaneously, in each future period in which significant amounts are expected to be settled or recovered. The deferred
tax temporary differences noted in the table below all relate to capital allowances for tax purposes and net book value.
2021
£’000
2020
£’000
Current tax
Current tax arising for the year
220
82
Adjustment in respect of previous periods
(77)
(43)
Total current tax
143
39
Deferred tax
Arising from origination and reversal of temporary differences
(65)
178
Adjustment in respect of previous periods
(15)
(3)
Effect of tax rate change on opening balances
59
-
Taxation on loss on ordinary activities
122
214
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5 CO NS O L I DAT ED FI NA NCI A L S TAT E M E N T S
The tax assessed for the year is higher than the standard rate of income tax in Jersey applied to the loss before tax. The
differences are explained below:
2021
£’000
2020
£’000
Loss on ordinary activities before tax
(5,278)
(7,322)
Loss on ordinary activities at the standard rate of Corporation tax in Jersey of 0% (2020 - 0%)
-
-
Effects of:
Tax arising on UK domiciled subsidiaries
(77)
145
Tax arising on Netherlands domiciled subsidiaries
97
54
Tax arising on Ireland domiciled subsidiaries
77
-
Tax arising on Jersey domiciled subsidiaries
25
-
Tax arising on Guernsey domiciled subsidiaries
-
13
Tax arising on Luxembourg domiciled subsidiaries
-
2
Total tax charge/(credit) for the year
122
214
12. Earnings per share (EPS) (restated)
Basic EPS is calculated by dividing the profit for the year attributable to ordinary equity holders of the parent by the
weighted average number of ordinary shares outstanding during the year.
Diluted EPS is calculated by dividing the profit attributable to ordinary equity holders of the parent by the weighted average
number of ordinary shares outstanding during the year plus the weighted average number of ordinary shares that would be
issued on conversion of all the dilutive potential ordinary shares into ordinary shares.
The following table reflects the income and share data used in the basic and diluted EPS calculations:
2021
£’000
2020
£’000
(restated)
Loss for the year attributable to equity holders of the Group
(5,380)
(7,536)
Weighted average number of ordinary shares for basic EPS (Thousands)
170,281
134,308
Basic loss per share attributable to the ordinary equity holders of the parent
(0.032)
(0.056)
The following instruments are not included in the diluted EPS calculation because they would have an antidilutive effect on
EPS. The number of instruments outstanding is as follows:
2021
Thousands
2020
Thousands
Share options (note 24)
14,569
11,845
Total of antidilutive instruments not included
14,569
11,845
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5 C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S
13. Intangible assets
Accounting policy
(i) Internal software development
Research expenditure is written off in the year in which it is incurred. Expenditure on internally developed products is
capitalised if, and only if an entity within the Group can demonstrate all of the following:
• its ability to measure reliably the expenditure attributable to the asset under development;
• the product or process is technically and commercially feasible;
• its future economic benefits are probable;
• its ability to use or sell the developed asset;
• the availability of adequate technical, financial and other resources to complete the asset under development; and
• its intention to use or sell the developed asset.
Where the costs are capitalised, they are written off over their economic life which is considered by the Directors to be
3 to 5 years.
(ii) Goodwill
Goodwill represents the difference between amounts paid on the cost of a business combination and the fair value of
the Group’s share of the identifiable assets and liabilities of the acquiree at the date of acquisition. Subsequent to initial
recognition, goodwill is measured at cost less accumulated impairment losses. Goodwill is allocated on acquisition to the
cash generating unit expected to benefit from the synergies of the combination. Goodwill is included in the carrying value of
cash generating units for impairment testing.
(iii) Other intangible assets
Other intangible assets are initially recognised at cost or, if recognised as part of a business combination, at fair value. After
recognition, intangible assets are measured at cost or fair value less any accumulated amortisation and any accumulated
impairment losses. Amortisation is calculated to write off the cost or fair value of intangible assets on a straight line basis
over their estimated useful lives and is included within administrative expenses. The estimated useful lives for other
intangible assets range as follows:
• customer relationships – 10 - 15 years; and
• acquired software – 3 - 5 years.
The useful lives of intangible assets have been chosen at the above rates as this reflects the period in which assets will stop
receiving economic benefit.
Where factors, such as technological advancement or changes in market price, indicate that residual value or useful life have
changed, the residual value, useful life or amortisation rate are amended prospectively to reflect the new circumstances.
The assets are reviewed for impairment if the above factors indicate that the carrying amount may be impaired.
(iv) Impairment of non-financial assets
Refer to note 14 below for accounting policy on impairment of non-financial assets.
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5 CO NS O L I DAT ED FI NA NCI A L S TAT E M E N T S
Software
£’000
Customer
relationships
£’000
Goodwill
£’000
Total
£’000
Cost or valuation
At 1 July 2019
2,752
2,305
18,587
23,644
Additions
127
-
113
240
FX translation adjustments
-
24
32
56
Acquisition of subsidiaries
-
4,318
6,634
10,952
At 30 June 2020
2,879
6,647
25,366
34,892
Additions
1,887
-
92
1,979
Disposals
(918)
-
-
(918)
FX translation adjustments
(17)
(81)
(111)
(209)
Acquisition of subsidiaries (note 27)
570
7,243
6,275
14,088
At 30 June 2021
4,401
13,809
31,622
49,832
Amortisation
At 1 July 2019
795
133
-
928
Charge for the year
707
409
-
1,116
Impairment
-
-
155
155
FX translation adjustments
-
4
-
4
At 30 June 2020
1,502
546
155
2,203
Charge for the year
747
757
-
1,504
Disposals
(799)
-
-
(799)
FX translation adjustments
(1)
(10)
-
(11)
At 30 June 2021
1,449
1,293
155
2,897
Net book value
At 30 June 2020
1,377
6,101
25,211
32,689
At 30 June 2021
2,952
12,516
31,467
46,935
14. Goodwill and intangibles with indefinite useful lives
Accounting policy
At each statement of financial position date non-financial assets not carried at fair value are assessed to determine whether
the asset may be impaired. The assessment is performed annually or more frequently if there is an indication of impairment.
For the assessment the recoverable amount of the asset is compared to the carrying amount of the asset.
The recoverable amount of the asset is the higher of the fair value less costs to sell and value in use. Value in use (VIU) is
defined as the present value of the future cash flows before interest and tax obtainable as a result of the asset’s continued
use. These cash flows are discounted using a pre-tax discount rate that represents the current market risk- free rate and the
risks inherent in the asset.
If the recoverable amount of the asset is estimated to be lower than the carrying amount, the carrying amount is reduced
to its recoverable amount. An impairment loss is recognised in profit or loss, unless the asset has been revalued when the
amount is recognised in other comprehensive income to the extent of any previously recognised revaluation. Thereafter any
excess is recognised in profit or loss.
Non-financial assets that have been previously impaired are reviewed at each reporting date to assess whether there is
any indication that the impairment losses recognised in prior periods may no longer exist or may have decreased. If an
impairment loss is subsequently reversed, the carrying amount of the asset is increased to the revised estimate of its
recoverable amount, but only to the extent that the revised carrying amount does not exceed the carrying amount that
would have been determined (net of depreciation or amortisation) had no impairment loss been recognised in prior periods.
A reversal of an impairment loss is recognised in profit or loss.
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5 C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S
Goodwill acquired through business combinations are allocated to cash generating units (CGU) and there are no other
intangibles with indefinite useful lives. The goodwill as summarised by the operating segments to which its CGU belongs is
as follows:
Advisory
£’000
Business
Outsourcing
£’000
Data &
Analytics
£’000
Total
£’000
At 30 June 2020
5,714
9,203
10,294
25,211
At 30 June 2021
5,714
10,288
15,465
31,467
The goodwill allocated to each CGU is tested annually for impairment. The VIU calculations use pre-tax cash flow
projections covering a three year period. Cash flows beyond the three year period are extrapolated using long term average
growth rates.
The key assumptions in the discounted cash flow projections for the CGU’s are as follows:
• the future level of revenue - which is based on past performance and expected changes based on management
knowledge of the business;
• long term growth rate - which has been assumed to be 2.0% (2020 – 2.0%) per annum based on the average historical
growth in gross domestic product in the United Kingdom over the past fifty years; and
• the discount rate - which is the Group’s pre-tax weighted average cost of capital and has been assessed at 12.1% (2020
- 12.1%) and has been assessed for any country specific risk factors. The range for the Group allocated to individual
CGU’s is between 12.1% - 14%.
Based on the discounted cash flow projections, the value in use exceeds recoverable amount. The Group performed
sensitivity analysis by adjusting the discount rate and reducing revenues. The decrease in future forecast revenues was
performed without a corresponding reduction in costs for each of the CGUs. The recoverable amount and sensitivity
analysis are provided below:
Advisory
Outsourcing
Data &
Analytics
Compound annual growth rate (CAGR) of revenue over three years
17.9%
24.5%
24.1%
Estimated excess over carrying values
150.7%
53.4%
58.2%
Decrease in forecasted revenues to trigger an impairment
10.4%
8.9%
8.8%
Increase in discount rate required for impairment
13.3%
5.3%
7.3%
The percentage decrease in future forecast revenues and the increase in the discount rate noted above are the amounts that
would be required for the carrying amounts to exceed the recoverable amount under the VIU calculation. Management believes
that the carrying value of goodwill remains recoverable given the conservative nature of the underlying forecasts prepared.
Within the reportable segment totals above there are four CGU’s which have a reasonably possible risk of impairment The
CGU’s at risk of potential impairment are: MJH Investment Advisors and MJH Services Jersey CGU’s within the Advisory
segment; MJH Fiduciaries Jersey CGU within the Outsourcing segment, and Amaces CGU within the Data & Analytics
segment the headroom and sensitivities are outlined in the following table:
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5 CO NS O L I DAT ED FI NA NCI A L S TAT E M E N T S
MJH
Investment
Advisors
£’000
MJH
Services
Jersey
£’000
MJH
Fiduciaries
Jersey
£’000
Amaces
£’000
Goodwill
1,458
770
3,264
6,800
Total carrying value
2,841
974
7,137
10,119
Headroom based on forecast, as a percentage of carrying value
29.4%
3.2%
18.3%
1.5%
CAGR forecasted
21.1%
20.5%
17.6%
14.2%
CAGR required to trigger an impairment
19.8%
20.0%
16.0%
13.8%
Discount rate required to trigger an impairment
14.9%
12.7%
13.9%
12.5%
The changes to CAGR and discount rate to trigger an impairment have been evaluated independently of each other. The
percentages stated above would result in the CGU’s headroom being completely eliminated and therefore are considered to
be sensitive input assumptions. Management concludes there are sufficient cashflow projections to support the carrying value
and associated goodwill but continues to monitor as the threshold for impairment is reasonably close to being breached.
15. Tangible fixed assets
Accounting policy
Tangible assets are stated at cost (or deemed cost) less accumulated depreciation and accumulated impairment losses.
Cost includes the original purchase price, costs directly attributable to bringing the asset to its working condition for its
intended use, dismantling and restoration costs and borrowing costs capitalised.
(i) Depreciation and residual values
Depreciation on tangible assets is calculated, using the straight-line method, to allocate the cost to their residual values
over their estimated useful lives, as follows:
• Leasehold improvements – over lease periods up to 10 years
• Office equipment – 3 - 5 years
• Fixtures and fittings – 3 - 7 years
The assets’ residual values and useful lives are reviewed, and adjusted, if appropriate, at the end of each reporting period.
The effect of any change is accounted for prospectively.
(ii) Subsequent additions and major components
Subsequent costs, including major inspections, are included in the assets’ carrying amount or recognised as a separate asset,
as appropriate, only when it is probable that economic benefits associated with the asset will flow to the Group and the cost
can be measured reliably. Repairs, maintenance and minor inspection costs are expensed as incurred.
(iii) Derecognition
Tangible assets are derecognised on disposal or when no future economic benefits are expected. On disposal, the difference
between the net disposal proceeds and the carrying amount is recognised in the statement of comprehensive income.
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5 C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S
Leasehold
improvements
£’000
Office
Equipment
£’000
Fixtures, fittings,
tools & equipment
£’000
Total
£’000
Cost or valuation
At 1 July 2019
295
454
172
921
Additions
1,919
159
6
2,084
Acquisition of subsidiary
19
71
11
101
Disposals
(295)
(14)
(141)
(450)
At 30 June 2020
1,938
670
48
2,656
Additions
134
99
8
241
Acquisition of subsidiary
-
26
4
30
Disposals
-
(34)
(4)
(38)
FX translation adjustments
(1)
(10)
(1)
(12)
At 30 June 2021
2,071
751
55
2,877
Depreciation
At 1 July 2019
107
241
108
456
Charge for the year
123
112
21
256
Disposals
(133)
(14)
(105)
(252)
At 30 June 2020
97
339
24
460
Charge for the year
222
153
11
386
Disposals
-
(28)
(3)
(31)
FX translation adjustments
-
(5)
-
(5)
At 30 June 2021
319
459
32
810
Net book value
At 30 June 2020
1,841
331
24
2,196
At 30 June 2021
1,752
292
23
2,067
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16. Leases
Accounting policy
At inception of a contract the Group assesses whether the contract is, or contains a lease that transfers the right to
use assets. The assessment considers whether the arrangement is, or contains, a lease based on the substance of the
arrangement. 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.
Lease liabilities are measured at the present value of the contractual payments due to the lessor over the lease term (excluding
any adjustments related to an inflation index), with the discount rate determined by reference to the rate inherent in the
lease unless (as is typically the case) this is not readily determinable, in which case the Group’s incremental borrowing rate on
commencement of the lease is used.
On initial recognition, the carrying value of the lease liability also includes:
• amounts expected to be payable under any residual value guarantee;
• the exercise price of any purchase option granted in favour of the Group if it is reasonably certain to exercise that option; and
• any penalties payable for terminating the lease, if the term of the lease has been estimated on the basis of the
termination option being exercised.
Right of use assets are initially measured at the amount of the lease liability, reduced for any lease incentives received, and increased for:
• lease payments made at or before commencement of the lease;
• initial direct costs incurred; and
• the amount of any provision recognised where the Group is contractually required to dismantle, remove or restore the
leased asset.
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. 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 remaining payments to be made over the revised term and reviews the discount rate applied to
ensure it is still appropriate and will adjust if applicable. 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.
Nature of leasing activities
The Group leases a number of assets including buildings and office equipment in the jurisdictions from which it operates
in. Leases generally have lease terms between 3 and 10 years. The Group’s obligations under its leases are secured by the
lessor’s title to the leased assets. Generally, the Group is restricted from assigning and subleasing the lease. The majority of
lease payments fixed are over the lease term or are linked with an inflation index.
2021
2020
Number of active leases
17
15
There are several lease contracts that include extension and termination options, which have been taken into consideration
upon recognition of the right-of-use asset and reassessed annually. On a case-by-case basis, the Group will consider
whether the absence of a break clause would expose the Group to excessive risk. Typically, factors considered in deciding to
negotiate a break clause include:
• the length of the lease term;
• the economic life of assets purchased for the fit out of the lease if applicable;
• the economic stability of the environment in which the property is located; and
• whether the location represents a new area of operations for the Group.
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Each individual lease is assessed as to whether or not management expects to exercise the break clause. Where we have
concluded it is reasonably certain to be exercised the carrying amounts of lease liabilities are reduced by the amount of
payments that would be avoided from exercising break clauses. During the year, one of the Group’s leases was terminated in
respect of its London property. This termination did not result in the recognition of any accelerated depreciation of the right
of use asset or amendment to the accounting for the lease liability since the Group originally made the assessment that the
Group would take advantage of the early termination option on this lease.
The Group also has certain leases with lease terms of 12 months or less and leases of office equipment with low value. The
Group applies the ‘short-term lease’ and ‘lease of low-value assets’ recognition exemptions for these leases. The short-term
and low-value leases portfolio at 30 June 2021 and 2021 is materially consistent with the ongoing costs of the leases as
seen below during the year of £61k (2020: £54k).
Right-of-use assets
Leasehold
property
£’000
Office
equipment
£’000
Total
£’000
At 1 July 2019
507
48
555
Additions
7,730
171
7,901
Depreciation charge for the year
(850)
(28)
(878)
At 30 June 2020
7,387
191
7,578
Additions
485
106
591
Depreciation charge for the year
(1,035)
(78)
(1,113)
At 30 June 2021
6,837
219
7,056
Lease liability and movements during the period
2021
£’000
2020
£’000
At 1 July
7,295
554
Additions
591
7,104
Interest expense
345
223
Lease payments
(957)
(586)
At 30 June
7,274
7,295
Current (note 25)
897
798
Non-current (note 25)
6,377
6,497
Amounts recognised in profit or loss
2021
£’000
2020
£’000
Depreciation of right-of-use assets
1,113
878
Interest on lease liabilities
345
223
Expenses relating to low value and short term-leases (included in administrative expenses)
61
54
1,519
1,155
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5 CO NS O L I DAT ED FI NA NCI A L S TAT E M E N T S
17. Investments
Accounting policy
Investments in equity instruments and convertible loan notes are held at fair value.
Where the investment is not traded on a public market, the fair value is estimated by management based on a number of
factors including but not limited to, the net asset value of the shares as per the most recently prepared statutory accounts,
recent shares and prices offered for new subscribers to those investments and prices given to private sales where investors
have exited those investments. Management considers this basis to be materially reflective of the fair value of those shares.
A joint venture is a type of joint arrangement whereby the parties that have joint control of the arrangement have rights to the
net assets of the joint venture. Joint control is the contractually agreed sharing of control of an arrangement, which exists only
when decisions about the relevant activities require the unanimous consent of the parties sharing control. The considerations
made in determining significant influence or joint control are similar to those necessary to determine control over subsidiaries.
The Group’s investment in its associate and joint venture are accounted for using the equity method. Under the equity method,
the investment in a joint venture is initially recognised at cost. The carrying amount of the investment is adjusted to recognise
changes in the Group’s share of net assets of the joint venture since the acquisition date. Goodwill relating to the joint venture
is included in the carrying amount of the investment and is not tested for impairment separately. The statement of profit or loss
reflects the Group’s share of the results of operations of the associate or joint venture.
Unrealised gains and losses resulting from transactions between the Group and the associate or joint venture are
eliminated to the extent of the interest in the associate or joint venture. The aggregate of the Group’s share of profit or loss
of a joint venture is shown on the face of the statement of profit or loss outside operating profit and represents profit or loss
after tax and non-controlling interests in the subsidiaries of the associate or joint venture.
The financial statements of the joint venture are prepared for the same reporting period as the Group. When necessary,
adjustments are made to bring the accounting policies in line with those of the Group. After application of the equity
method, the Group determines whether it is necessary to recognise an impairment loss on its investment in its joint venture.
At each reporting date, the Group determines whether there is objective evidence that the investment in the associate
or joint venture is impaired. If there is such evidence, the Group calculates the amount of impairment as the difference
between the recoverable amount of the joint venture and it’s carrying value, and then recognises the loss as ‘Share of profit
of an associate and a joint venture’ in the statement of profit or loss. Upon loss of joint control over the joint venture, the
Group measures and recognises any retained investment at its fair value. Any difference between the carrying amount of
the associate or joint venture upon loss of significant influence or joint control and the fair value of the retained investment
and proceeds from disposal is recognised in profit or loss.
2021
£’000
2020
£’000
Listed investments
1,970
586
Unlisted investments
572
722
Investment in joint venture
26
-
Total investments
2,568
1,308
In February 2020, the Group’s investment in Making Science Group (”Making science”) listed on the Spanish stock exchange.
During the year ended 30 June 2021, the Group disposed of 23,525 shares in Making science at a value of £589,000. The
fair value as at 30 June 2021 is based on the listed priced of EUR5.7 per share.
Valuation of unlisted investments is based on the management’s estimate of the value of investments that will be realised,
which is dependent on the investments performing as expected. The primary significant unobservable input into valuation
of the fair value of unlisted investments is the share value from the most recent funding rounds for the related company
that the Group holds and investment in. Management performed a sensitivity analysis over the unlisted investment at the
end of the year and the fair value would need to be increased or decreased by 58-88% (2020 – 56-85%) in order to have a
significant impact on the financial statements.
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5 C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S
The Group has a 50% interest in Bridge Independent Risk Solutions Ltd, a joint venture brought on as part of the Bridge
Group acquisition. The Group’s interest is accounted for using the equity method.
2021
£’000
2020
£’000
Fair value
At 1 July
1,308
707
Additions during the year
180
462
Acquisition of joint venture
26
-
Disposal
(589)
-
Fair value gain/(loss) during the year
1,643
139
At 30 June
2,568
1,308
18. Cash and cash equivalents
Accounting policy
Cash and cash equivalents includes cash in hand, deposits held on call with banks, other short-term highly liquid
investments with original maturities of three months or less and bank overdrafts. Bank overdrafts are shown within
borrowings in current liabilities if applicable. Bank overdraft for the year ended 30 June 2021 was £nil (2020 - £nil).
19. Trade and other receivables (restated)
Accounting policy
The Group presents assets in the statement of financial position based on current/non-current classification. An asset is
current when it is:
• expected to be realised or intended to be sold in the normal operating cycle;
• held primarily for the purpose of trading;
• expected to be realised within twelve months after the reporting period; or
• cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months
after the reporting period.
The Group classifies all other assets as non-current.
Trade receivables are amounts due from customers for goods sold or services performed in the ordinary course of business.
They are generally due for settlement within 7 to 30 days and therefore are all classified as current. The majority of
trade and other receivables are non-interest bearing. Where the effect is material, outstanding balances are discounted
using discount rates which reflect the relevant costs of financing. The carrying amount of trade and other receivables
approximates fair value. An outstanding balance is written off when there is no reasonable expectation of recovering the
contractual cash flows.
Impairment provisions for trade receivables and contract assets are assessed for objective evidence of impairment based
on the simplified approach within IFRS 9 using 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 and contract assets. For
trade receivables and contract assets, which are reported net; such provisions are recorded in a separate provision account
with the loss being recognised within administrative expenses in the consolidated statement of comprehensive income.
On confirmation that the trade receivable or contract asset will not be collectable, the gross carrying value of the asset is
written off against the associated provision.
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5 CO NS O L I DAT ED FI NA NCI A L S TAT E M E N T S
For other receivables, at the end of each reporting period financial assets measured at amortised cost are assessed
for objective evidence of impairment based on the general impairment model within IFRS 9. If an asset is impaired
the impairment loss is the difference between the carrying amount and the present value of the estimated cash flows
discounted at the asset’s original effective interest rate. The impairment loss is recognised in profit or loss.
The General Approach utilises a forward looking expected credit loss model. The methodology to determine the amount of
the provision is based on credit risk of the financial asset. For financial assets with no significant increase in credit risk, twelve
month expected credit losses along with gross interest income are recognised. For those where the 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.
If there is a decrease in the impairment loss arising from an event occurring after the impairment was recognised the
impairment is reversed. The reversal is such that the current carrying amount does not exceed what the carrying amount
would have been had the impairment not previously been recognised. The impairment reversal is recognised in profit or loss.
The following table summarises the current trade and other receivables:
2021
£’000
2020
£’000
(restated)
Current trade and other receivables
Trade receivables
7,013
4,109
Prepayments
1,578
1,239
Contract assets
4,979
3,902
Other receivables
1,287
1,738
Total current
14,857
10,988
Non-current trade and other receivables
Other receivables
416
398
Total trade and other receivables
15,273
11,386
The June 2020 trade receivables balance has been decreased by £334,000 to reflect additional expected credit loss as
discussed in note 1.
The primary decrease to current other receivables for the year ended 30 June 2021 is from repayments of amounts
receivable from directors of £426,000 (2020 – £888,000), refer to note 28. The balance within non-current other
receivables relates to the lease rental deposit for the lease of 1 Frederick’s place with a fair value of £416,000 (2020
– £398,000) which is expected to be returned after a minimum of three years subject to meeting specific financial
performance criteria. The deposit and amounts receivable from directors do not have expected credit loss allowances
booked against them as they are expected to be repaid in full to the business.
Analysis of trade receivables and contract assets based on age of invoices
Trade receivables
30 June 2021
Contract
assets
< 30
£’000
31-60
£’000
61-90
£’000
91-120
£’000
> 120
£’000
Total
£’000
Expected credit loss rate
8.63%
0.77%
1.83%
10.88%
12.50%
63.83%
Gross carrying amount
5,425
4,242
867
298
739
2,877
9,023
Expected credit loss
(468)
(33)
(16)
(32)
(92)
(1,837)
(2,010)
Net receivable
4,957
4,209
851
266
647
1,040
7,013
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Trade receivables
30 June 2020 (restated)
Contract
assets
< 30
£’000
31-60
£’000
61-90
£’000
91-120
£’000
> 120
£’000
Total
£’000
Expected credit loss rate
15.45%
1.14%
4.01%
8.70%
22.22%
51.37%
Gross carrying amount
4,615
2,488
222
476
267
1,633
5,086
Expected credit loss
(713)
(28)
(9)
(41)
(59)
(840)
(977)
Net receivable
3,902
2,460
213
435
208
793
4,109
The Group applies the IFRS 9 simplified approach to measuring expected credit losses (ECL) which uses a provision matrix
to calculate a lifetime expected loss allowance for all trade receivables. The provision rates are based on days past due for
groupings of various customer segments that have similar loss patterns. The balances are segmented by age for the entire
Group as there is no sector or client type within the Group that has a disparate loss rate compared to the other sectors in
the Group.
The provision matrix and ECL rates have been determined based on historical loss data available to management in addition
to forward looking information utilising management knowledge. For instance, if forecast economic conditions (i.e., gross
domestic product) are expected to deteriorate over the next year which can lead to an increased number of defaults, the
historical default rates are adjusted. At every reporting date, the historical observed default rates are updated and changes
in the forward-looking estimates are analysed. An asset is written off when there is no reasonable expectation of recovering
the contractual cash flows.
The assessment of the correlation between historical observed default rates, forecast economic conditions and ECLs is an
estimate. The amount of ECLs is sensitive to changes in circumstances and of forecast economic conditions. The Group’s
historical credit loss experience and forecast of economic conditions may also not be representative of customer’s actual
default in the future.
For the forward looking element this is evaluated on a client by client basis and an additional provision is recorded for
any specific debtors that are considered to be individually doubtful. As at 30 June 2021 included within the ECL for trade
receivables is a provision of £1,009,000 (2020 - £532,000 one debtor) related to two specific debtors that were added after
considering their current financial status and other forward looking factors.
Management performed a sensitivity analysis over contract assets and trade receivables at the end of the year. If the full
ECL provision noted above was increased or decreased by 10% this would have a £247,000 impact on the provision and
related expense (2020 - £169,000).
Set out below is the movement in allowance for expected credit losses of trade receivables and contract assets:
2021
£’000
2020
£’000
(restated)
As at 1 July
1,690
1,105
Provision for expected credit losses
2,430
1,662
Write-offs
(1,642)
(1,077)
As at 30 June
2,478
1,690
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20. Trade and other payables
Accounting policy
Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from
suppliers. Trade payables are recognised initially at transaction price, which approximates the fair value due to the short
term natures of these balances, and subsequently measured at amortised cost using the effective interest method.
The Group presents liabilities in the statement of financial position based on current/non-current classification. A liability is
current when its:
• expected to be settled in the normal operating cycle;
• held primarily for the purpose of trading;
• due to be settled within twelve months after the reporting period; or
• There is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period.
The Group classifies all other liabilities as non-current.
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it
is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a
reliable estimate can be made of the amount of the obligation. When the Group expects some or all of a provision to be
reimbursed, for example, under an insurance contract, the reimbursement is recognised as a separate asset, but only when
the reimbursement is virtually certain. The expense relating to a provision is presented in the statement of profit or loss net
of any reimbursement.
If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, when
appropriate, the risks specific to the liability. When discounting is used, the increase in the provision due to the passage of
time is recognised as a finance cost.
2021
£’000
2020
£’000
Current trade and other payables
Trade payables
1,629
1,115
Accruals
1,969
1,342
Other payables
783
372
Current financial liabilities (note 25)
4,381
2,829
Contract liabilities
2,521
2,165
Social security and other taxes
1,186
837
Total current
8,027
5,831
Non-current trade and other payables
Other payables (note 25)
405
497
Total trade and other payables
8,432
6,328
Other payables include amounts payable in the next 12 months in respect of deferred consideration loan from a director of
nil (2020 - £18,000), and non-current of nil (2020 - nil).
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21. Borrowings and deferred consideration
Accounting policy
Borrowings and deferred consideration are initially recognised at fair value, net of any transaction costs incurred.
Borrowings are subsequently stated at amortised cost, using the effective interest rate method. Meaning that any
difference between the proceeds (net of any transaction costs) and the redemption value is recognised in the income
statement over the period of the borrowings. Fees paid on the establishment of loan facilities are recognised as transaction
costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is
deferred until the draw-down occurs.
To the extent there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalised
as a pre-payment for liquidity services and amortised over the period of the facility to which it relates.
Borrowings
2021
£’000
2020
£’000
Current borrowings
Bank loans
12
2,538
Non-current borrowings and other liabilities
Bank loans
16,658
144
Other loans
-
729
Total non-current
16,658
873
Total borrowings and other liabilities (note 25)
16,670
3,411
Bank loans
In April 2021 the Group secured a five-year loan facility with Santander for a mix of Sterling and Euros of which £8,573,000
and £8,932,000 (€10,301,000) were drawn down at an interest rate of 3.5% above Bank of England and EURIBOR,
respectively, payable quarterly in arrears. The loan facility is subject to specific debt covenants, the covenants are
monitored to ensure that the Group remains in compliance. There have been no breaches to these covenants for the year
ended 30 June 2021. Management has performed a sensitivity analysis over the debt balances and if there was a 1.0%
increase to the interest rate the total interest expense and related payable would increase by £110,000. Since there is a
minimum interest rate, as noted above, the amount of interest expense will not decrease from current rates.
This loan facilitated the repayment of £2,000,000 from Bermuda Commercial Bank (interest of 7% was previously payable
6-monthly in arrears), Metro bank secured loan (interest at fixed rate of 4.25% plus an additional floating charge on the
assets of that company, which was 0.5% at the commencement of the loan balance at 2020 – £214,000) and a majority of
the capital loans to facilitate cashflow management. The remaining loan balances of £12,000 (2020 - £1,200,000) have now
been repaid (2020 - length of the loans varied from 3 months to 5 years and the interest rates are between 0.6% - 1.9%).
Deferred consideration
2021
£’000
2020
£’000
Current deferred consideration
8,556
4,758
Non-current deferred consideration
5,120
5,719
Total deferred consideration (note 27)
13,676
10,477
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5 CO NS O L I DAT ED FI NA NCI A L S TAT E M E N T S
Deferred consideration relates to outstanding payments due on acquisitions. This includes payments that are due after the
passage of time with no other conditions attached to payments and contingent consideration which is dependent upon the
results of the acquired business.
Deferred consideration is initially recognised at an estimated fair value amount where the contingent consideration is
probable and can be measured reliably. Where settlement of any part of cash consideration is deferred, the amounts
payable in the future are discounted to their present value as at the date of exchange. The discount rates used are selected
on the basis of the assessed risks and expected returns. A market rate, on cash flows of high certainty, is assumed to be at
a risk-free rate, while cash flows contingent on business performance are discounted based on the acquiree’s weighted
average cost of capital.
The contingent consideration based on business performance is estimated based on forecasts for the respective business
acquired and linked to achieving certain performance thresholds. If these performance thresholds are not met the total
consideration will decrease, or if the thresholds initially considered to not be probable are met or exceeded the total
consideration may increase.
During the year ended 30 June 2021 a net fair value loss of £809,000 (2020 restated– £649,000) was recorded in profit
and loss (note 9) resulting in a corresponding decrease to the deferred consideration. This fair value adjustment was due to
revisions in the consideration agreements and changes in the expected performance of the businesses acquired.
Key assumptions in calculating the fair value of deferred consideration can be summarised as follows:
• future business performance - which is based on past performance and expected changes based on management
knowledge of the business;
• risk-free rate – range used between 1.0% - 2.5%
• discount rate adjusted for the risk associated with the acquired business – range used between 10.6% - 25.0%
Included in the above total deferred consideration is £2,243,000 (2020 - £1,979,000) that is due after the passage of time.
The remaining £11,433,000 deferred consideration is linked to the achievement of future performance criterion by the
businesses acquired. If these performance thresholds are not met the total consideration will decrease, or if the thresholds
initially considered to not be probable are met or exceeded the total consideration may increase.
For those acquisitions that have a cap on the maximum amount of consideration this could result in an additional
£2,414,000 of undiscounted consideration in addition to the amounts currently recognised. For other acquisitions there
are no caps on the amount of consideration as the subsequent amounts paid out are set at a percentage of financial
performance metrics. Management performed a sensitivity analysis over the various expected pay outs for a range of
possible outcomes. Changing the future business performance by increasing revenue by 10% all acquisitions, with no
corresponding increase in costs, would result in an additional £1,221,000 of undiscounted consideration. A decrease in
revenue of 10% would result in a decrease to undiscounted consideration of £1,634,000.
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22. Share capital and Share Premium
Accounting policy
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new ordinary shares or
options are shown in equity as a deduction, net of tax, from the proceeds. Owned shares represent the shares of the
Company that are unallocated and current held by the MJ Hudson Group plc Employee Benefit Trust (EBT). Owned shares
are recorded at cost and deducted from equity.
MJ Hudson Group plc was incorporated on 29 July 2019 and was admitted to the Alternative Investment Market (AIM)
on 12 December 2019. Prior to admission the Group undertook a reorganisation such that MJ Hudson Group plc was
established as the parent and holding company of MJH Group Holdings Limited.
2021
£’000
2020
£’000
Issued Ordinary Share capital
Allotted, called up and fully paid
172,627,765 Ordinary shares in MJ Hudson Group plc at £nil each (2020 – 171,320,220)
-
-
Share premium*
56,023
55,527
Treasury shares
1,881,658 Ordinary shares in MJ Hudson Group plc at £nil each (2020 – £nil)
(928)
-
*Share premium includes premium paid on B shares of Subsidiary as stated below
Date
Shares
Share
Capital
£’000
Share
premium
£’000
Ordinary Share capital
Opening balance
1 Jul 2020
171,320,220
-
55,326
Shares issued in MJ Hudson Group plc
1,307,545
-
578
Cost of owned shares in excess of cash on exercise of share options
-
-
(82)
Outstanding at the end of the year
30 Jun 2021
172,627,765
-
55,822
Date
Shares
Owned
shares
£’000
Owned shares
Opening balance
1 Jul 2020
-
-
Shares repurchased
(2,429,824)
(1,164)
Issued for cash on exercise of share options
495,000
236
Outstanding at the end of the year
30 Jun 2021
(1,934,824)
(928)
At the time of the admission to AIM the ordinary share capital of MJH Group Holdings Limited contained 2 classes of shares
– A and B shares. The A ordinary shares were all acquired by MJ Hudson Group plc in exchange for 45 shares in MJ Hudson
Group plc and each share issued carries one voting right. The B share capital of MJH Group Holdings Limited, a subsidiary of
MJ Hudson plc, was not acquired under the takeover. The B shares were issued during 2020 at market value of £201,000 to
senior management under a subsidiary growth share plan.
The 20,000 B shares issued have no voting rights and a par value of £0.01 each. There are no restrictions on the distribution
of dividends and the repayment of capital.
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5 CO NS O L I DAT ED FI NA NCI A L S TAT E M E N T S
Date
Shares
Share
Capital
Share
premium
B Shares
Opening balance
1 Jul 2020
20,000
-
201
Outstanding at the end of the year
30 Jun 2021
20,000
-
201
The total share premium includes share premium from ordinary shares of £55,822,000 and the share premium of B shares
of £201,000 total of £56,023,000.
Capital risk management
The Group’s objectives when managing capital are to safeguard its ability to continue as a going concern, so that it can provide
returns for shareholders and benefits for other stakeholders and to maintain an optimum capital structure to reduce the
cost of capital. In addition, the Group capital management policy takes into consideration debt covenants with lenders and
the capital adequacy requirements of relevant regulatory bodies to ensure that capital structure is in compliance with those
requirements. The capital risk management policy remains unchanged throughout the periods presented.
Capital is regarded as total equity, as recognised in the consolidated statement of financial position and stated in the table above,
plus debt as disclosed in note 21. Debt is calculated as total borrowings (excluding lease liabilities) less cash and cash equivalents.
In order to maintain or adjust the capital structure, the Group may adjust the number of dividends paid to shareholders,
return capital to shareholders, issue new shares, issue new debt or sell assets to reduce debt.
The Group would look to raise capital when an opportunity to invest in a business or company was seen as value adding
relative to the current share price at the time of the investment. The Group will explore new acquisitions as part of its
growth strategy and continues to integrate and grow its existing businesses in order to maximise synergies.
23. Other Reserves
Share based
payment reserve
£’000
Convertible debt
option reserve
£’000
Foreign currency
translation reserve
£’000
Total other
Reserves
£’000
Balance as at 1 July 2019
584
883
(24)
1,443
Share based payments
437
-
-
437
Exercise of options
(565)
-
-
(565)
Exercise of convertible debt
-
(883)
(883)
Currency translation difference
-
-
77
77
Balance as at 30 June 2020
456
-
53
509
Share based payments
2,446
-
-
2,446
Exercise of options
(11)
-
-
(11)
Currency translation difference
-
-
(116)
(116)
Balance as at 30 June 2021
2,891
-
(63)
2,828
Share-based payments
Employees of the Group are granted options to acquire shares in the Group, refer to note 24. The charge for the period was
£166,000 ended 30 June 2021 (2020 - £437,000). There were also charges related to the long-term incentive plan (LTIP) for
the period of £1,385,000. The LTIP may be settled in cash or shares. Management has modified the settlement policy as of
30 June 2021 and concluded that this plan will be settled with shares rather than in cash. As such the Group has transferred
the liability of £447,000 previously recorded into the share-based payment reserve from other long term liabilities. The
valuation has been updated effective 30 June 2021, refer to note 24 below for further details.
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5 C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S
24. Share-based remuneration
Share-based payment scheme
The Group operates two equity-settled share-based payment scheme.
In the Employee Share Option scheme, employees of the Group are granted options to acquire shares in the Company, which are
exercisable on the condition that either the three-year vesting period is worked by the employee, or that there is an exit event
which triggers vesting of the options. The total cost recognised in the income statement was £166,000 (2020 - £437,000).
The Share Incentive Plan was introduced in April 2021 whereby employees of the UK subsidiaries are granted two shares
in the Company if two vesting conditions are met. The first being the employee must buy and hold in trust one share in the
Group for the vesting period of three years and the second being the employee is employed during the three-year vesting
period, alternatively if an exit event occurs, which triggers vesting of the options. The total cost recognised in the income
statement was £600 (2020 - £nil). Given the immaterial nature of this scheme this scheme is not included in any of the
further disclosures.
2021
Number
of options
in issue
Weighted
average
exercise
price £
2020
Number
of options
in issue
Weighted
average
exercise
price £
Outstanding at the beginning of the year
11,845,030
0.43
18,485,100
0.42
Granted during the year
3,732,888
0.48
3,391,509
0.58
Forfeited during the year
(514,042)
0.55
(1,253,729)
(0.44)
Cancelled during the year
-
-
-
-
Exercised during the year
(495,000)
0.32
(8,777,850)
0.45
Outstanding at the end of the year
14,568,876
0.44
11,845,030
0.43
The exercise price of options per share outstanding at the end of the year ranged between £0.18 and £0.58 (2020 -between
£0.18 and £0.58) and their weighted average contractual remaining life was 0.9 years (2020 -0.9 years).
The estimated fair value of the awards granted during the year under the option plan was £301,000 (2020 – £406,000)
Of the total number of options outstanding at the end of the year, 8,007,750 (2020 – 8,502,750) have vested and are
exercisable at the year-end date.
The options were awarded with non-market performance conditions. During the reorganisation of the Group on 12 December
2019 shares in MJH Group Holdings Limited were exchanged for shares in MJ Hudson Group plc at a ratio of 45 to 1. The
stock option exercise prices below are shown at the original exercise prices at the date of issue. The exercise prices had a
corresponding decrease in price and increase in the number of share options resulting in no impact to the option holders.
Fair values are calculated using the Black-Scholes option pricing model. Inputs into the model at initial grant are as follows:
Grant Date
Share price
at grant date
Exercise
Price
Expected
life
Risk free Rate/
Modified Rate
Volatility
1 Jan 2014
£6.85
£8.00
5.5
2.32%
25%
1 Sep 2014
£7.00
£8.00 - £16.00
5.0
1.82%
25%
1 Jan 2015
£7.00
£8.00 - £18.00
5.0
1.20%/0.91%
25%
1 July 2015
£7.00
£8.00 - £18.00
4.5
1.51%/0.91%
25%
1 Jan 2016
£7.00
£16.00 - £18.00
4.5
1.28%/0.91%
25%
27 April 2016
£13.44
£14.00
4.5
0.90%
25%
1 July 2016
£13.44
£7.95-£18.00
4.5
0.34%/0.91%
25%
1 Jan 2017
£15.00
£18.00
4.5
0.46%/0.91%
25%
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5 CO NS O L I DAT ED FI NA NCI A L S TAT E M E N T S
Grant Date
Share price
at grant date
Exercise
Price
Expected
life
Risk free Rate/
Modified Rate
Volatility
1 April 2017
£15.00
£18.00
4.5
0.36%/0.91%
25%
1 July 2017
£17.50
£18.00
4.5
0.57%/0.91%
25%
1 Jan 2018
£17.50
£18.00-£24.00
4.5
0.69%/0.91%
25%
1 July 2018
£17.50
£20.00
4.5
0.92%
25%
1 Jan 2019
£22.00
£23.00
4.5
0.87%
25%
13 Jan 2020
£0.59
£0.59
4.5
0.50%
25%
12 Oct 2020
£0.59
£0.59
4.5
-0.04%
25%
14 Dec 2020
£0.59
£0.59
4.5
-0.05%
25%
14 Dec 2020
£0.46
£0.46
4.5
-0.05%
25%
5 Feb 2021
£0.46
£0.46
4.5
0.11%
25%
23 Mar 2021
£0.43
£0.43
4.5
0.27%
25%
Expected volatility is determined based on a number of listed comparable entities. The expected useful life used in the
model has been determined based on management’s best estimate of the effects of non-transferability, vesting/exercising
restrictions and behavioural conditions. Risk free rate is the yield on a zero coupon government security for the period
equivalent to the expected life of the option, at the respective grant date. A nil dividend yield (2020 – nil) has been used for
all options.
Long-term incentive plan
The Group has put in place a long-term incentive plan (“LTIP”) for management, targeted at the long-term performance of
the Group. The LTIP incentivises the CEO, CFO and COO, together with nine other members of the senior management
team, to seek to achieve superior returns for shareholders over a three-year period. It also provides a mechanism to retain
key individuals and align their interests with shareholders.
The LTIP is a subsidiary growth share plan. Its rules are contained in the articles of association of MJ Hudson Group
Holdings Limited (the “Subsidiary”). Participants in the LTIP hold B Shares of the Subsidiary, the rights of which are linked to
performance under the rules of the LTIP.
Pay-out to participants in the LTIP was conditional on Admission occurring and the Group achieving certain three-year
performance targets, timed to run from the date of Admission. The LTIP awards 17.5 percent of the aggregate gain
(“Aggregate Gain”) in value of the business over 3 years from the date of Admission. The Aggregate Gain is calculated using
two independent measures, namely a TSR gain and an adjusted EBITDA per share gain (´The Adjusted EBITDA Gain´) giving
a 50 percent weighting to each. The pay out to participants can be settled in cash or shares in the Company. Management
has accounted for these within the financial statements as if the full amount will be settled in shares, refer to note 23 above
for details of the change in settlement policy.
The TSR gain is the capital appreciation, adjusted for the payment of dividends, over three years with reference to the total
shares in issue immediately following the Admission.
The Adjusted EBITDA Gain is the gain in value of the Company implied by the growth of adjusted EBITDA with respect to
a reference adjusted EBITDA figure. The gain is calculated as the growth in adjusted EBITDA per share over three years
multiplied by the market capitalisation immediately following Admission.
The calculation of the Aggregate Gain is subject to two limits, an upper and a lower limit. The lower limit is a CAGR of
7.5 percent applied for the TSR Gain and 8.9 percent for the Adjusted EBITDA Gain. In the case of the TSR Gain, TSR
performance below CAGR 7.5 percent over the three-year period shall result in no reward under this measure as part of
the LTIP. In the case of the Adjusted EBITDA Gain, adjusted EBITDA in year 3 below a figure of £4.73m (being CAGR 8.9
percent applied to a base target adjusted EBITDA of £3.66m) shall result in no reward under this measure as part of the
LTIP. The upper limit will be a total value payable under the LTIP of £20m being a maximum of £10m applied separately to
each measure.
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5 C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S
The fair value of the LTIP options granted is estimated using an appropriate model to take into account market conditions
attaching to the model in particular for determining the TSR portion noted above. This was valued using the Monte-Carlo
model and resulted in an expected TSR pay out of £896,000 for the year ended 30 June 2021. Key inputs to the model were:
• share price - £0.57 on date of award and £0.52 on date of valuation 30 June 2021
• expected life – 1.5 years;
• volatility – 35%; and
• risk free rate – 0.05% expected to be settled in the normal operating cycle.
• Dividend yield – 0%
The pay-out of Adjusted EBITDA Gain is estimated based on discounted cash flow projections for the Group and resulted in
an expected EBITDA gain payout of £3,575,000 for the year ended 30 June 2021. Key assumptions are as follows:
• future level of adjusted EBITDA - which is based on past performance and expected changes based on management
knowledge of the business. This utilises a weighted average of possible outcomes;
• estimated total number of shares outstanding at hurdle date - which has been assumed to be 194,970,000 based on the
average historical growth and expected issuances
• discount rate – 15%
The combined total of both measures is an estimated a pay out of £4,471,000 to be settled on the third anniversary of the
date of admission. Of this future obligation, £2,280,000 is recognised in other reserves and £1,832,000 has been recognised
in the profit and loss of the current year to reflect the proportion earned in the current financial year.
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5 CO NS O L I DAT ED FI NA NCI A L S TAT E M E N T S
25. Financial instruments
Accounting policy
(i) Financial assets
Financial assets that meet the criteria required under IFRS 9 to be held at amortised cost (being held for collection and
passing the test of comprising solely payments of principal and interest) include trade and other receivables and cash and
bank balances. These are initially recognised at fair value, which is the transaction price, due to the short term nature of
these instruments. Such assets are subsequently carried at amortised cost using the effective interest method.
Financial assets are derecognised when (a) the contractual rights to the cash flows from the asset expire or are settled, or
(b) substantially all the risks and rewards of the ownership of the asset are transferred to another party or (c) control of the
asset has been transferred to another party who has the practical ability to unilaterally sell the asset to an unrelated third
party without imposing additional restrictions.
(ii) Financial liabilities
Financial liabilities recognised at amortised cost as required under IFRS 9 include trade and other payables, overdraft and
bank and other loans, and are initially recognised at fair value, which is the transaction price, due to the short term nature
of these instruments, unless the arrangement constitutes a financing transaction, where the debt instrument is measured at
the present value of the future receipts discounted at a market rate of interest.
Transaction costs that relate to the issue of the instrument are allocated to the liability and equity components of the
instrument in proportion to the allocation of proceeds.
Financial liabilities are derecognised when the liability is extinguished, that is when the contractual obligation is discharged,
cancelled or expires.
The Group’s financial instruments may be analysed as follows:
Level
2021
£’000
2020
£’000
(restated)
Financial assets:
Financial assets measured at fair value:
Listed investments
1
1,970
586
Unlisted investments
3
572
722
Financial assets measured at amortised cost:
Cash and bank balances
9,785
13,388
Trade and other receivables
13,695
10,147
Total financial assets
26,022
24,843
Financial liabilites:
Financial liabilities measured at fair value:
Deferred consideration
3
13,676
10,477
Financial liabilities measured at amortised cost:
Bank loans
3
16,670
3,411
Trade and other payables
4,725
3,326
Lease Liabilities
7,274
7,295
Total financial liabilities
42,345
24,509
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5 C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S
Financial assets measured at fair value are comprised of investments in listed and unlisted company shares. Financial assets
measured at amortised cost comprise cash, trade debtors and other debtors. It does not include other taxes receivable or
prepayments.
Financial liabilities measured at fair value are comprised of deferred consideration related to various business acquisitions,
refer to note 21 above for further details.
Financial liabilities measured at amortised cost are comprised of convertible loan stock, bank loans and overdrafts, trade
payables, other payables and accruals. It does not include other taxes and social security payable or contract liabilities.
The fair value measurement of the Group’s financial and non-financial assets and liabilities utilises market observable inputs
and data as far as possible. Inputs used in determining fair value measurements are categorised into different levels based
on how observable the inputs used in the valuation technique utilised are (the ‘fair value hierarchy’):
Level 1: Quoted prices in active markets for identical items;
Level 2: Observable direct or indirect inputs other than Level 1 inputs; and
Level 3: Unobservable inputs, thus not derived from market data.
The classification of an item into the above levels is based on the lowest level of the inputs used that has a significant effect
on the fair value measurement of the item. Transfers of items between levels are recognised in the period they occur.
Financial risk management
The Group’s activities expose it to a variety of financial risks: credit and counter party risk, liquidity risk, market risk
(including cash flow and interest rate risk), and foreign exchange risk. These risks are described in additional detail below.
Risk management is carried out by Key management of the Group. The Group finances its operations through a mixture of
debt finance, cash and liquid resources and various items such as trade debtors and trade payables which arise directly from
the Group’s operations.
(i) Credit and counterparty risk
The Group’s revenues derive principally from selling the services of its people on a time and materials basis. The Group
typically does not work on a contingent fee basis and so invoices its clients as projects progress. The Group’s financial
position and access to working capital is dependent on collecting cash on a timely basis. There is a risk that clients will not
pay invoices on a timely basis, due to administrative issues, financial restrictions or other reasons. The Group does not have
any other significant liquid assets other than cash in hand, and so an inability to collect substantial debts on a timely basis
may result in a material adverse effect on the Group’s financial position. In order to minimise the risk, the Group endeavours
only to deal with companies which are demonstrably creditworthy and this, together with the aggregate financial exposure,
is continuously monitored.
The Group does not consider that there is any concentration of risk within either trade or other receivables. The balance as
at 30 June 2021 was £13,695,000 (2020 – £10,147,000) as stated in the table above. The receivables’ age analysis is also
evaluated on a regular basis for potential doubtful debts, considering historic, current and forward-looking information,
refer to note 19 for further details.
In order to minimise the credit exposure to financial institutions that are counterparties to cash holdings, the Group’s
largest cash & cash equivalents are held with large banks and recognised financial intermediaries with acceptable credit
ratings of BBB or higher according to Standard & Poor’s Rating Services and Fitch Ratings Ltd for long-term credit rating. As
a result, the credit risk on cash and cash equivalents is considered to be very low since the counterparties are all substantial
banks with high credit ratings. The Group’s net exposure and credit assessment of its counterparties are continuously
monitored to ensure any risk is minimised.
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5 CO NS O L I DAT ED FI NA NCI A L S TAT E M E N T S
(ii) Liquidity and cash flow risk
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group currently
has an operating cash outflow. The Group benefits from sufficient working capital for the near term, and also currently
makes use of a debt facility as described in note 21 above. However, there is a risk that the Group may need to raise funding
in the future for a number of reasons, including working capital, to fund an acquisition or expansion, general corporate
purposes or to restructure its balance sheet. There can be no guarantee that such funding will be made available on terms
acceptable to the Group or in the timescale envisaged.
The Group’s seeks to maintain sufficient cash balances. The Group manages liquidity cash flow risk to maintain adequate
reserves by regular review around the working capital cycle using information on forecast and actual cash flows. This
ensures the Group has sufficient cash reserves to meet future working capital requirements including maintenance of
regulatory capital in certain subsidiaries and to take advantage of business opportunities.
A maturity analysis of the Group’s gross financial liabilities is shown below.
Year ended 30 June 2021
Bank loans
£’000
Trade and
other payables
£’000
Deferred
consideration
£’000
Lease
liabilities
£’000
Total
£’000
In one year or less, or on demand
622
4,381
8,555
897
13,845
In more than one year but not more than two years
610
55
3,652
878
4,585
In more than two years but less than five
19,116
-
3,223
4,668
28,227
In more than 5 years
-
355
-
2,406
2,761
20,348
4,791
15,430
8,849
49,418
Expected future charges through the income statement
(3,678)
(5)
(1,754)
(1,575)
(7,012)
Financial liabilities
16,670
4,786
13,676
7,274
42,406
Year ended 30 June 2020
Bank loans
£’000
Trade and
other payables
£’000
Deferred
consideration
£’000
Lease
liabilities
£’000
Total
£’000
In one year or less, or on demand
2,813
2,829
4,839
798
11,279
In more than one year but not more than two years
617
-
3,376
689
4,682
In more than two years but less than five
426
506
3,771
4,150
8,853
In more than 5 years
-
-
-
3,529
3,529
3,856
3,335
11,986
9,166
28,343
Expected future charges through the income statement
(445)
(9)
(1,509)
(1,871)
(3,834)
Financial liabilities
3,411
3,326
10,477
7,295
24,509
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5 C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S
(iii) Interest rate risk
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes
in market interest rates. The Group’s exposure to the risk of changes in market interest rates relates primarily to the
Group’s long-term debt obligations with floating interest rates.
The Group manages its interest rate risk by having a balanced portfolio of variable rate loans and borrowings. The applicable
interest rates and quantitative sensitivity analysis on the Group’s borrowings are shown in note 21 above.
(iv) Foreign currency risk
The Group presents its financial statements in pounds sterling but has business units operating in Europe and North
America (and may choose to expand elsewhere) that generate revenues and costs in other currencies. To the extent that the
Group does not hedge against currency fluctuations, the income and cash flow generated by those international operations,
and the value of any assets located outside of the UK, may fluctuate with exchange rates. The Group maintains bank
accounts in foreign currencies in order to mitigate this risk and the net foreign currency risk is not considered material by
the Group.
26. Changes in liabilities from financing activities
The following is a reconciliation of cash flow and non-cash flow movements relating to financing of the Group, in accordance
with the requirements of IAS 7.44(A).
Year ended 30 June 2021
2020
£’000
Repayments
£’000
New loans
£’000
New leases
£’000
Interest paid
£’000
Non cash
£’000
Total
£’000
Long term borrowings
873
(873)
16,746
-
-
(88)
16,658
Short term borrowings
2,556
(2,735)
685
-
(494)
-
12
Lease liabilities
7,295
(614)
-
591
(343)
345
7,274
Total debt liabilities
10,724
(4,222)
17,431
591
(837)
257
23,944
The non-cash decrease in long term borrowings of £88,000 for the year ended 30 June 2021 is due to the foreign currency
translation of Euro denominated loans introduced during the year.
Year 30 June 2020
2019
£’000
Repayments
£’000
New loans
£’000
New leases
£’000
Interest paid
£’000
Non cash
£’000
Total
£’000
Long term borrowings
14,563
(805)
499
-
(627)
(12,757)
873
Short term borrowings
978
(759)
524
-
(238)
2,051
2,556
Lease liabilities
554
(422)
-
7,104
(164)
223
7,295
Total debt liabilities
16,095
(1,986)
1,023
7,104
(1,029)
(10,483)
10,724
The non-cash decrease in long term borrowings of £12,757,000 for the year ended 30 June 2020 is due to the conversion of
convertible loan notes into equity of £10,706,000 and the transfer from long term to short term borrowings of £2,051,000.
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27. Business combinations
Accounting policy
Business combinations are accounted for by applying the acquisition method. The cost of a business combination is the
fair value of the consideration given, liabilities incurred or assumed and of equity instruments issued and the amount of
any non-controlling interest in the acquiree. Where control is achieved in stages the cost is the consideration at the date of
each transaction. For each business combination, the Group elects whether to measure the non-controlling interests in the
acquiree at fair value or at the proportionate share of the acquiree’s identifiable net assets. Acquisition-related costs are
expensed as incurred.
Contingent consideration is initially recognised at an estimated fair value amount where the consideration is probable and can
be measured reliably. Where settlement of any part of cash consideration is deferred, the amounts payable in the future are
discounted to their present value as at the date of exchange. The discount rates used are selected on the basis of the assessed
risks and expected returns. A market rate on cash flows of high certainty is assumed to be at a risk-free rate, while cash flows
contingent on business performance are discounted based on the acquiree’s Weighted Average Cost of Capital (WACC).
Contingent consideration classified as equity is not remeasured and its subsequent settlement is accounted for within
equity. Contingent co4nsideration classified as an asset or liability that is a financial instrument and within the scope of IFRS
9 Financial Instruments, is measured at fair value with the changes in fair value recognised in the statement of profit or loss
in accordance with IFRS 9. Other contingent consideration that is not within the scope of IFRS 9 is measured at fair value at
each reporting date with changes in fair value recognised in profit or loss.
On acquisition of a business, fair values are attributed to the identifiable assets, liabilities, and contingent liabilities unless
the fair value cannot be measured reliably, in which case the value is incorporated in goodwill. Where the fair value of
contingent liabilities cannot be reliably measured, they are disclosed on the same basis as other contingent liabilities. No
contingent liabilities were identified for the acquisitions in the current year.
Goodwill recognised represents the excess of the fair value and directly attributable costs of the purchase consideration
over the fair values of the Group’s interest in the identifiable net assets, liabilities and contingent liabilities acquired.
On acquisition, goodwill is allocated to cash-generating units (‘CGU’s’) that are expected to benefit from the combination.
After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purpose of
impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the
Group’s cash-generating units that are expected to benefit from the combination, irrespective of whether other assets or
liabilities of the acquiree are assigned to those units.
Acquisitions during the year
On 13 October 2020, the Group acquired 100% of Bridge Group Limited (Bridge), a funds service provider based in Ireland,
conditional on regulatory approval for £9,793,000 paid in cash, shares and deferred consideration. Full regulatory approval
from the Central Bank of Ireland was obtained on 12 February 2021. The acquisition will build on the Group’s specialist
funds operations in London, Luxembourg and Guernsey and adds a strategically important geography to the Group’s
network. It also brings a number of new international asset management clients.
On 29 December 2020, the Group acquired 100% of Prof. Gottschalg UG and its subsidiary PERACS GmbH (PERACS), a fund
and portfolio performance specialist company for £3,902,000 paid in cash, shares and deferred consideration. The acquisition
of PERACS extends the services provided by MJ Hudson’s Data & Analytics division. PERACS Group offers investors and asset
managers in the alternative assets industry a set of proprietary tools to produce authoritative metrics and insights into the
performance of funds. The business was subsequently renamed to MJ Hudson Performance Analytics (German) UG.
On 24 June 2021, the Group acquired 100% of FinTech risk specialist Clarus Risk Limited (Clarus), for £1,984,000 paid in
cash, shares and deferred consideration, to widen the breadth of services in the Group’s data and analytics division. Clarus
offers its clients risk and regulatory risk reporting either as managed service, or via software as a service (SaaS). Such
services are deployed through an advanced, customisable dashboard environment.
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5 C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S
The goodwill represents the experience and expertise of the staff of businesses acquired and non-contractual relationships.
In calculating the goodwill arising on acquisition, the fair values of net assets of businesses have been assessed and
adjustments from book value have been made where necessary. The goodwill values recorded upon acquisition are not
deductible for tax purposes.
PERACS
£’000
Bridge
£’000
Clarus
£’000
Total
£’000
Intangible fixed assets
388
-
182
570
Tangible fixed assets
-
30
1
31
Right-of-use asset
-
99
-
99
Investments
-
20
-
20
Trade receivables
447
612
65
1,124
Other receivables
15
98
32
145
Contract assets
-
302
-
302
Cash at bank and in hand
73
1,730
9
1,812
Total assets
923
2,891
289
4,103
Trade and other payables
(698)
(1,003)
(83)
(1,784)
Contract liabilities
(53)
-
-
(53)
Lease liability
-
(106)
-
(106)
Net assets
172
1,782
206
2,160
Customer relationships
20
6,757
467
7,244
Goodwill at cost (note 13)
3,710
1,254
1,311
6,275
Total purchase consideration
3,902
9,793
1,984
15,679
Initial cash consideration of £3,336,000 was paid at the time of acquisitions, which is shown net of cash acquired within
the statement of cashflows. In the current period £7,243,000 has been settled of the total consideration of £15,679,000
noted above. Included within the remaining £8,436,000 of consideration to be paid to the vendors of businesses acquired
£6,909,000 is contingent upon the achievement of future performance criterion by those businesses. This consideration is
based on the estimated fair value where the achievement of targets is probable and can be measured reliably.
If these performance thresholds are not met the total consideration will decrease, or if the thresholds initially considered
not probable are met or exceeded the total consideration may increase. Refer to note 21 above for further details on
contingent consideration.
The useful economic life of customer relationships has been estimated to be 5 years for PERACS; 15 years for Bridge and 11
years for Clarus based on estimates of the timing of the expected future net present cashflows attributable to the business.
The results of the businesses since their acquisition for the year ended 30 June 2021 are as follows:
PERACS
£’000
Bridge
£’000
Clarus
£’000
Total
£’000
Results since acquisition
Revenue
181
1,931
13
2,125
Profit/(loss) for the year
(88)
275
3
190
Estimated results if owned since the beginning of the reporting period
Revenue
1,273
4,007
595
5,875
Profit for the year
(70)
831
76
837
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5 CO NS O L I DAT ED FI NA NCI A L S TAT E M E N T S
28. Related party disclosures
Accounting policy
The Group discloses transactions with related parties which are not wholly owned within the same Group. Where
appropriate, transactions of a similar nature are aggregated unless, in the opinion of the directors, separate disclosure is
necessary to understand the effect of the transactions on the Group financial statements. In considering the completeness
of related party disclosures the directors have identified certain related parties and associated disclosures that were
omitted from the 2020 financial statements. These include information pertaining to directors’ interests in other
companies in which transactions had occurred, associated outstanding balances and deferred consideration loans from
directors of subsidiaries of the Group.
Transactions with related entities
Matthew Hudson (“Mr. Hudson”) is a director and shareholder of HCO Global Limited. Mr. Hudson’s wife, Katherine, is also
a shareholder and director of this company. During the year the Group was charged £61,449 (2020 - £205,923) by HCO
Global Limited. At 30 June 2021 the Group owed HCO Global Limited £nil (2020 - £20,973).
Mr. Hudson is a director and shareholder of Sports Apps Limited. Mr. Hudson’s wife, Katherine, is also a shareholder of
this company. During the year the Group invoiced Sports Apps Limited £98,035 (2020 - £61,311) in respect of legal and
corporate administration services and this was settled by addition to a convertible loan note. At 30 June 2021 Sports Apps
Limited owed the Group £33,700 (2020 - £4,752). As at the 30 June 2021 Sports Apps Limited owed the Group £161,831
(2020 - £143,683) in respect of the convertible loan note which has been written down to £nil. At 30 June 2021 the fair
value of the Group’s equity investment in the entity is £nil (2020 – £83,029).
Mr. Hudson is a director of Alpha Hawk Limited. During the year the Group invoiced Alpha Hawk Limited £18,187 (2020 –
£nil) in respect of legal services. As at 30 June 2021 Alpha Hawk Limited owed the Group £117,291 (2020 - £55,873). Due to
performance of this business the Group has made a full provision in respect of this loan balance in the 2021 financial statements.
Bridge Consulting Limited was acquired by the Group on 13th October 2020 (refer to note 27). During the year, Bridge
Consulting Limited provided £2,534 in funds administration services to Bridge Independent Risk Solutions, a joint venture
to the Group.
Directors’ loans
Included in the consolidated accounts are certain amounts due from directors of group companies. No new director loans
were created in the twelve month period to 30 June 2021.
As disclosed as part of the Group’s RNS announcement on 18 November 2020 under AIM Rule 19, the following disclosures
were omitted from the Group’s 2020 financial statements. As part of the Company’s IPO in December 2019 Mr. Hudson
and others entered into a share subscription agreement. Under this agreement, Mr. Hudson subscribed but did not pay
for 659,191 shares in the Company at the IPO issue price of 57p per share resulting in a payable due to the Company
of £375,739. The details of this loan were previously included in other receivables from directors in the 2020 financial
statements. The balance of the loan remained unpaid as at 30 June 2020. The loan should originally have been repaid by
3 March 2020. In January of 2021 the repayment date of the loan was extended, with the consent of the Board, to 31
December 2021. The loan was repaid by Mr. Hudson on 30 April 2021.
The remaining loan payable by Mr. Hudson to the Company at 30 June 2021 is £462,703 (2020 - £462,703). This loan
balance and the terms remain unchanged in the 12 months ending 30 June 2021. As the loan remained outstanding this
triggered corporation tax payable of £150,378, which is fully recoverable at the time of repayment of the loan by the
director. The loan is non-interest bearing and is repayable on demand. All amounts are expected to be received in full and no
provision has been recorded against these balances (2020 – £nil).
A separate share subscription of £50,000 at the IPO by Charles Spicer, the Company’s chairman, was outstanding at 30 June
2020 and was settled on 18 August 2020.
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5 C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S
Loans from directors of subsidiaries
Deferred consideration loans from directors of £nil (2020 – £159,236) relate to deferred consideration on the acquisition
of Amaces Limited by MJH Group Holdings Limited in December 2018. These loans were repaid during the year in line with
the contractual requirement in respect of the acquisition. The loan balances were due to the former directors of Amaces
Limited, and their immediate family, and the breakdown was as follows at the end of 2020 – Aidan Dennis £49,761; Sandra
Dennis £49,761; and James Economides £59,714. A further deferred consideration loan from Jonathan Bale of £nil (2020
- £17,967) which related to the 2014 acquisition of MJ Hudson Services Jersey Limited (formerly Verras Services Limited)
was settled in the year. This loan balance was incorrectly shown as relating to deferred consideration on the acquisition of
MJ Hudson Law LLP on 2 December 2013.
29. Provisions and contingent liabilities
The Group is subject to certain unasserted claims related to the provision of services but without contractual support. As of
30 June 2021, none of these claims has resulted in the commencement of legal action. Where losses arising from asserted
and unasserted claims are considered probable (and where such losses can be reasonably estimated), the Group is required
to record a provision under its accounting policies.
No such provisions have been recognised as of 30 June 2021 (2020: nil) but Management and legal counsel have concluded
that there are possible, not probable, unasserted claims in aggregate of £1,391,000. After taking into account insurance that
the company has in place, the amount of future losses in aggregate should not exceed £50,000. This includes an unasserted
claim in respect of which Management and legal counsel have concluded that there is a possibility of an adverse outcome
but the amount of this claim and its likely timing are currently unknown. The Directors consider additional disclosure of the
matters would be seriously prejudicial to the outcome of handling of these unasserted claims and the Company is vigorously
defending all such matters.
The Group did not have any other contingent liabilities and contractual commitments as of 30 June 2021 (2020 – nil). Refer
to note 21 for details of continent consideration payable for the acquisition of businesses.
30. Post balance sheet events
On 23 July 2021, the Group entered into a share purchase agreement relating to the purchase of the entire share
capital of Saffery Champness Fund Services Limited (´SCFS´), a Guernsey based fund administration business, from
the accountancy group Saffery Champness. The acquisition is expected to double MJ Hudson´s fund administration
revenues in Guernsey with a 50% increase in local staff numbers. The deal was approved by the Guernsey Financial
Services Commission and completed on 31 October 2021. It is expected to be modestly accretive to earnings per share.
The maximum consideration for SCFS is £2.8m in cash and is subject to performance criteria over a two-year period. The
acquired business generated revenues of £1.4m for the twelve-month period to March 2021 with an EBITDA margin
comparable with the Group´s Outsourcing division on a pro forma basis.
On 20 August 2021 the Group borrowed £7 million from Santander under the terms of the Uncommitted Facility described
more fully in note 21. This was to fund accelerated regulatory capital required in the Irish operations due to new business
gains and working capital.
The Board of Directors have approved a resolution to recommend to shareholders at the AGM of the Company that a final
dividend be declared in respect of FY21 of 0.125p per share.
There are no other transactions which occurred in the period after the consolidated statement of financial position date up to the
date of the authorisation of these financial statements which would affect the figures stated within these financial statements.
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5 CO NS O L I DAT ED FI NA NCI A L S TAT E M E N T S
31. Subsidiaries and related undertakings
Company
Nature of business
Country of
incorporation and
registered address
Class and
% holding
MJ Hudson Advisers Limited
Provision of appointed representative
services to third party clients
(A)
Ordinary - 100%
Tower Gate Guernsey GP Limited
General Partner of limited partnership
(B)
Ordinary - 100%
Tower Gate capital Limited
Holding Company
(A)
Ordinary - 100%
MJ Hudson Fund Management Limited
Investment management services
through AIFM platform
(A)
Ordinary - 100%
TG FAR Blue II LP
Investment in technology
(A)
Ordinary - 100%
MJ Hudson Management S.A
Investment management services
through AIFM platform
(C)
Ordinary - 100%
MJ Hudson Investment Consulting Limited
Investment consulting
(A)
Ordinary - 100%
Verras Professional Services Limited
Channel Islands securities
(D)
Ordinary - 100%
MJ Hudson Switzerland GmbH
Legal services
(E)
Ordinary - 100%
Amaces Limited
Data and analytics
(A)
Ordinary - 100%
MJ Hudson Investment Solution
Investment advisors
(A)
Ordinary - 80%
Amaces Inc
Data and analytics
(F)
Ordinary - 100%
MJ Hudson Fund Management Guernsey
Limited
Investment management
(B)
Ordinary - 100%
MJ Hudson IQ Limited
Investor relations
(A)
Ordinary - 100%
MJ Hudson Fiduciaries Limited
Fiduciary and secretarial services
(B)
Ordinary - 100%
MJ Hudson Services Jersey Limited
Legal infrastructure
(D)
Ordinary - 100%
MJ Hudson Holdco Limited
Holding and management company
for UK companies of the group
(A)
Ordinary - 100%
MJH Group Holdings Limited
Holding company
(D)
Ordinary - 100%
MJ Hudson Limited
Legal services
(A)
Ordinary - 100%
MJ Hudson IR Limited
Marketing and IR
(A)
Ordinary - 100%
MJ Hudson Investment Advisors
Investment advisors
(A)
Ordinary - 100%
VFS Directors One Limited
Nominee
(B)
Ordinary - 100%
VFAS Directors 2 Limited
Nominee
(B)
Ordinary - 100%
VFS Nominees Limited
Nominee
(B)
Ordinary - 100%
VFS Trustees Limited
Nominee
(B)
Ordinary - 100%
MJ Hudson North America Inc
Holding company
(F)
Ordinary - 100%
MJ Hudson IR Inc. (formerly MJ Hudson
Meyler Inc.)
Holding company
(F)
Ordinary – 100%
MJ Hudson (IR) LLC (formerly MJ Hudson
Meyler LLC)
Marketing and IR
(F)
Ordinary - 100%
MJ Hudson Finance Limited
Capital/Fund raising/AR
(A)
Ordinary - 100%
MJ Hudson ESG B.V. (formerly MJ Hudson
Spring B.V.)
ESG Consulting
(G)
Ordinary - 100%
MJ Hudson Trustee Services Limited
Corporate trustee/services
(A)
Ordinary - 100%
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5 C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S
31. Subsidiaries and related undertakings
Company
Nature of business
Country of
incorporation and
registered address
Class and
% holding
MJ Hudson Fiduciaries Jersey Limited (formerly
MJ Hudson Anglo Saxon Trust Limited)
Administrator/Co-Sec
(D)
Ordinary - 100%
Georgian Nominee Limited
Nominee
(D)
Ordinary - 100%
Georgian Trust Limited
Administrator/Co-Sec
(D)
Ordinary - 100%
Anglo Nominee Limited
Nominee
(D)
Ordinary - 100%
AST Nominee Limited
Nominee
(D)
Ordinary - 100%
AST Secretaries Limited
Nominee
(D)
Ordinary - 100%
First Director Limited
Nominee
(D)
Ordinary - 100%
Second Director Limited
Nominee
(D)
Ordinary - 100%
MJ Hudson Capital Limited*
Provision of capital related services
(A)
Ordinary - 100%
MJ Hudson Consulting Limited*
Provision of business and
management advice and support to
investment management and funds
services industry
(A)
MJ Hudson Fund Administration Limited*
Provision of Fund admin services
(A)
Ordinary - 100%
The Company Machine Limited*
Provision of CoSec, Accounting and
related services
(A)
Peracs GmbH*
Performance of performance analytic
services
(H)
Ordinary - 100%
MJ Hudson Performance Analytics (German) UG
(formerly Prof Gottschalg UG)*
Performance of performance analytic
services
(H)
Ordinary - 100%
Bridge Fund Management Limited*
Investment management services
through AIFM platform
(I)
Ordinary - 100%
Bridge Independent Risk Solutions Limited*
Provision of business advisory services (I)
Ordinary - 50%
Bridge Consulting Limited*
Provision of business and
management advice and support to
investment management and funds
services industry
(I)
Ordinary - 100%
MJ Hudson Quantitative Solutions Limited
(formerly Clarus Risk Limited)*
Money and credit broker and other
unregulated finance activities
(J)
Ordinary – 100%
*Entities formed or acquired during the year to 30 June 2021.
During the year ended 30 June 2021, MJ Hudson Corporate Services Limited and TGC Investments Limited were dissolved
and struck off the UK company register; MJH Group Finance Limited was dissolved and struck off the Jersey company
register; and MJH Services (Guernsey) Limited was dissolved and struck off the Guernsey company register.
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5 CO NS O L I DAT ED FI NA NCI A L S TAT E M E N T S
Country of incorporation and registered office address:
Reference
Country of incorporation
Registered address
(A)
England & Wales
1 Frederick's Place, London, EC2R 8AE
(B)
Guernsey
Hadsley House, Lefebvre Street, St Peter Port, Guernsey, GY1 2JP
(C)
Luxembourg
99 Grand-Rue, 1661 Luxembourg
(D)
Jersey
P.O. Box 264, Forum 4, Grenville Street, St Helier, Jersey JE4 8TQ
(E)
Switzerland
Löwenstrasse 66, PO Box 4016, CH-8021, Zurich, Switzerland
(F)
United States of America
3500 South Dupont Highway, Dover, Delaware 19901, Kent, USA
(G)
The Netherlands
Stadhouderskade 140, 1074 BA Amsterdam, Netherlands
(H)
Germany
Frankfurt am Main, Römerberg 8, 60311 Frankfurt am Main
(I)
Ireland
Ferry House, 48-53 Mount Street Lower, Dublin 2 D02 PT98
(J)
Guernsey
Anson Court, La Route des Caps, St Martin, Guernsey GY1 6BR
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5 C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S
Glossary
160
Financial calendar AW – update for ex div date etc 163
Shareholder contacts and company advisers
163
Additional information
159
6 A D D I T I O NA L I NF O R M AT I O N
Glossary of Terms
Alternative Financial Performance Measures
This document contains certain financial measures which are not defined or separately recognised under IFRS. We believe
that this information is useful to the Board, investors other users of the accounts to evaluate the Group’s underlying trading
performance excluding the impact of any non-recurring items and items that do not reflect the underlying operational
performance of the Group. These measures are not audited and are not standard measures under IFRS. Non-IFRS financial
measures should not be considered in isolation from, or as a substitute for, financial information presented in compliance
with IFRS. Non-IFRS financial measures as reported by us may not be comparable with similarly titled amounts reported by
other companies.
Net debt
Net Debt is calculated as total borrowings (excluding lease liabilities) less cash and cash equivalents.
Underlying Revenue
Revenue under IFRS as set out in the consolidated statements of comprehensive income in this document adjusted for direct
cost of sales. Within the Group’s FMS subdivision (Outsourcing) a material proportion of revenue is typically passed through
to clients as a specific payment linked to the performance of the clients’ funds. This is reflected in direct costs of sales. In
managing the business and looking at underlying trends for the Group as a whole, management consider that these payments
can have a distorting effect. Underlying Revenue is a measure defined to specifically exclude these items. It provides a more
representative metric, especially in relation to the value created by the Group, its underlying growth and the operating
efficiency of its activities. The table below shows growth of Underlying Revenue in respect of continuing business.
£ millions
FY21
FY20
FY19
FY18
FY17
Revenue
39.7
21.7
21.2
22.6
14.4
Less: Direct cost of sales
14.2
2.0
4.5
8.6
3.2
Underlying Revenue
25.5
19.7
16.7
14.0
11.2
% change
29%
18%
19%
25%
133%
Organic Investments
The Group has made a number of organic investments in new businesses over time and sees this growth strategy as an
important adjunct to its acquisition’s activity. Since 2014, the Group has set up six start-up operations. Amongst these start-
ups, the Group’s investment into Guernsey fiduciary services has already reached profitability.
Management has prioritised investing activities, where: the target client base is known to the Group and where such
investment offers more attractive returns than available acquisitions. This activity is informed by management’s assessment
of customer needs; typically, they have reached profitability on a three-year timescale, supported by the introduction of a
material client.
As at FY21 this comprises the Group’s Luxembourg AIFMD platform, licenced fund administration in London and Guernsey
plus regulatory consulting. This is consistent with FY20 and FY19. These operations are expected to be included within the
Outsourcing division’s results from FY22.
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6 A D D I TION AL IN F ORMATI ON
Underlying EBITDA
Underlying continuing EBITDA is segment profit/(loss) before share based payments expense (including LTIP) unallocated
group expenses and discontinued business losses.
Underlying Profit Before Tax
Underlying EBITDA adjusted for recurring depreciation and amortisation (note this excludes £0.8m of amortisation in respect
of acquired intangible assets (FY20 – excludes £0.3m doubled depreciation relating to rent cost for the period from December
2019 to April 2020 where London leases overlapped and £0.5m of finance charges relating to interest on convertible loan
notes that converted at IPO and the deemed interest on the deferred consideration).
Underlying Profit for the year
Underlying Profit Before Tax less tax expense
Underlying Basic Earnings Per Share
Underlying Profit for year divided by weighted average number of shares in issue during the year
Other definitions
AI
Artificial intelligence
AIM
The AIM market of the London Stock Exchange
Alternative, alternatives,
alternative investments
A subsector of the global asset management industry, which includes private equity funds;
real estate funds; hedge funds; infrastructure funds; and alternative credit funds
AUM
Assets under management
Benchmarking
The process of comparing a firm or asset manager´s performance and metrics to other
businesses within their trade
CAGR
Compound annual growth rate
Debtor Days
Debtor days are calculated as trade debtors, net of any associated bad debt provision divided
by average daily revenue for the financial period concerned
EBITDA
Earnings before interest, tax, depreciation, and amortisation
ESG
Environmental, social and governance, being factors used to evaluate companies or fund
manager´s metrics as regards sustainability and ethics
FY21
Financial year ended 30 June 2021
FY20
Financial year ended 30 June 2020
FY19
Financial year ended 30 June 2019
FY18
Financial year ended 30 June 2018
FY17
Financial year ended 30 June 2017
FY16
Financial year ended 30 June 2016
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6 A D D I T I O NA L I NF O R M AT I O N
Other definitions
IFRS
- International Financial Reporting Standards as adopted in the European Union
Lockup
Debtor days plus WIP days as at a specific point in time
Organic Growth
Growth of a financial measure over a given period adjusted to exclude the impact of acquisitions or
the disposal of businesses
Recurring revenue
This is calculated as the amount of revenue in a year that occurs in the financial year from clients
onboarded in previous financial years
Underlying Debtor Days
Group debtor days excluding the ‘passthrough’ revenue in the FMS business unit – see definition of
underlying revenue
162
6 A D D I TION AL IN F ORMATI ON
Shareholder contacts and
company advisers
Financial calendar
Registered Office
MJ Hudson Group plc, PO Box 264, Forum 4,
Grenville Street, St Helier,
Jersey JE4 8TQ
Company Number 129535
Nominated adviser and broker
Cenkos Securities plc,
6.7.8. Tokenhouse Yard,
London EC2R 7AS
Auditors
Ernst & Young LLP,
Liberation House,
Castle Street, St Helier,
JE1 1EY, Jersey
Registrars
Link Market Services (Jersey) Limited,
12 Castle Street, St Helier,
Jersey JE2 3RT
Solicitors
Walker Morris,
33 Wellington Street,
Leeds LS1 4DL
AGM
20 January 2022
Investor relations contact
Andrew Walsh IRO
andrew.walsh@mjhudson.com
6 A D D I T I O NA L I NF O R M AT I O N
163
1 Frederick’s Place, London EC2R 8AE
mjhudson.com