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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Xcap Securities | LSE:XCAP | London | Ordinary Share | GB00B3WHZR16 | ORD 0.1P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 0.20 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From May 2019 to May 2024
TIDMHUME
RNS Number : 9610A
Hume Capital Securities PLC
26 February 2014
Hume Capital Securities plc ("Hume" or the "Company")
Formerly XCAP Securities plc
Final results for year ended 31 August 2013
Hume (AIM: HUME) (together with its subsidiaries the "Group"), a financial services group offering full service stockbroking, fund management, corporate advisory and market making services, presents its audited results for the year ended 31 August 2013.
-- GBP2.9 million raised of new equity capital to rebuild the capital position of the Company and improve the shareholder base in the financial year, with a further GBP0.9 million raised post year end;
-- The Group acquired the Hume Capital Management trading businesses in December 2012, and is pleased to report that these businesses have been consistently profitable since June 2013;
-- Revenue increased by 12.9 per cent. to GBP6.0 million (2012: GBP5.3 million);
-- Loss before tax reduced to GBP3.7 million (2012: GBP4.5 million); Trading during the first five months of the current financial year has been stronger than the same period last year and the directors believe that the Group's overall financial performance for the year ending 31 August 2014 will show a significant improvement;
-- Major cost cutting implemented post acquisition with over GBP1.9 million of annualised costs now taken out of the Group; additional savings of GBP500k per annum implemented post year end;
-- Key selective hires have improved our corporate offering;
-- Company growth strategy well entrenched with major referral and fund management agreement signed in India since the financial year end;
-- Continue to make markets in 288 stocks, including all the clients to which we are retained corporate broker.
The Directors' report and financial statements for the year ended 31 August 2013 has been sent to shareholders and uploaded to the Company's website at www.xcapgroup.com.
Enquiries:
Hume Capital Securities plc
Nitin Parekh (Chief Executive Officer) 0203 693 1470
Grant Thornton UK LLP, Nominated Adviser
Philip Secrett /Melanie Frean/ Jamie Barklem 020 7383 5100
Chief Executive's Report
The financial year under review involved rebuilding the Group against a backdrop of very difficult market conditions. The three priorities were rebuilding the capital position, tackling the inappropriate cost base and strengthening our market position in key business segments. The losses, whilst extremely disappointing, have arisen partly because of the substantial operational changes that needed to be implemented.
Overall, the Group made a pre-tax loss of GBP3.7 million, an improvement of GBP0.8 million from the previous year. Part of this loss is attributed to the costs associated with the Hume Capital Management acquisition along with associated re-structuring costs, and in part caused by poor market conditions.
Firstly, during the financial year we raised GBP2.9 million of new equity, and an additional GBP0.9 million has been raised post year end. The capital raisings have been supported by new shareholders as well as by staff, which is a positive indication of the confidence in the business. The Group will continue to seek to partner with strong investors to help execute the business plan.
Second, tackling the cost base, without impacting revenues, became a key focus for this financial year. This has been largely achieved. Across the Group we have managed to keep the costs static at GBP9.7 million (2012: GBP9.6 million) whilst increasing revenues by 12.9 per cent. It is important to note that these costs have remained flat despite including the costs of the acquired Hume Capital Management businesses from December 2012 onwards as well as the associated restructuring costs.
Since our interim statement, where we stated we had achieved an annualised cost reduction of GBP1.2 million per annum, we have now cut costs in total by GBP1.9 million, equating to over GBP700,000 in the second half of the financial year. There is a clear plan in place to reduce costs by a further GBP500,000 per annum, taking the overall annualised saving to GBP2.4 million; this equates to 24.7 per cent. reduction in costs compared to the 2011/12 financial year. As a result of the cost reduction plan, I am pleased to report that the Hume Capital Management businesses have been consistently profitable since June 2013.
Finally, the Group has strengthened its position in key market segments. Overall, revenues were up 12.9 per cent last year, including the Hume Capital Management business. For the pre-acquisition Group business, whilst overall revenues for the financial year were down 7.4 per cent. on the prior year, revenues recorded in the second half of the year were up 20.3 per cent. against the comparable period in the previous year. Crucially, second half year revenues for the pre-acquisition Group business were up 2.0 per cent. on the first half of this financial year. The trend in revenue growth is clearly improving.
The corporate pipeline has improved and we have a number of mandates to execute in 2014 including an IPO and two M&A transactions. This is in addition to the recent new corporate client wins and the sharp increase in secondary fundraising activity. It is particularly pleasing to have been awarded M&A transactions for the first time.
Further, asset gathering is picking up momentum, and the wealth management division is close to finalising a number of mandates in the early part of 2014, as well as launching new funds.
Post year end the Group has changed its name to Hume Capital Securities plc. This name change is part of the repositioning strategy adopted by the Board last year and reflects the significant changes in the balance of the business that have been made over the past 12 months. The new name aligns the two main aspects of Hume's business, capital markets and wealth management where the focus is on an integrated solution for our clients. This is an important development in the execution of Hume's corporate strategy.
Review of Business Units
Capital Markets
Capital Markets as a whole was profitable in the last financial year, highlighting how a focused strategy even in difficult markets can reap benefits. Market making performed credibly against a poor market backdrop. We took the necessary action to preserve capital whilst still remaining a key market player in the 288 companies in which we make a market.
Our strategy remains to be focused on stocks where we have an edge, to continue to manage our exposures well and to provide liquidity to our clients.
The corporate department has performed well in challenging market conditions. In total we raised GBP12 million for our corporate clients. We now have 22 corporate retained clients, with a number in the pipeline. Importantly, our overall quality of clients has improved and we are expecting this to generate additional transactional revenue during the current financial year.
We have seen a marked pick up in secondary cash raisings for our corporate clients, which will underpin future revenues. Post year end we have already raised GBP15 million for our corporate clients.
Wealth Management
Wealth Management is comprised of the Hume asset management business and Private Client Stockbroking, and refers to all third party investor activity. Overall, it made a loss for the period under review, driven by the Private Client business which saw a significant decline in activity. Over the course of the period under review, substantial progress has been made to reverse this. First, the Hume Capital Management businesses turned profitable in June 2013 after substantial business restructuring which included a rationalisation of the fund range and streamlining of the product offering. The net result is that investment performance has picked up (for example European Opportunities and Global Equity Funds are Top Quartile in their Investment Management Association peer group in 2013) and profitability secured.
Private Client stockbroking has been difficult in the period under review, given the market backdrop and a lack of deal flow. We took steps to address this by closing down areas that did not contribute to the bottom line and restructuring others. The loss was a result of the cost cutting not keeping pace with the revenue loss, but post year end this situation has improved. In addition, we have managed to attract, post year end, new hires with a better quality book of business and this already starting to deliver results.
The outlook for Wealth Management is particularly positive. Fund performance has improved, and new areas of distribution are expected to start to yield results. We will also be launching a new India Fund, with our partners in India and this will raise both assets and the profile of the Group.
Outlook
Looking forward, the Group is now stronger than when I took over in January 2013. The Group has raised capital, cut costs aggressively and invested in the business but there is further work to do. This will include rebuilding the capital base of the firm, which has been significantly impacted by losses in the year, in order that the Group meets its regulatory capital requirements. This will be achieved through a combination of retained profits plus potentially new capital raisings if considered appropriate.
However, the benefits are that the Group is now operating with a far more appropriate cost base, has an excellent pipeline of corporate deal flow and is starting to attract new assets under management in a competitive environment. Our original model of having a strong corporate offering supported by excellent distribution capabilities and an active market making function still applies whilst now also being supported by a strong fund management business.
I am pleased to report that trading during the first five months of the current financial year has been stronger than the same period last year and I believe that the Group's overall financial performance for the year ended 31 August 2014 will show a significant improvement. I would like to thank our clients, shareholders and staff for all their support.
Hume Capital Securities plc
Consolidated Statement of Comprehensive Income
For the year ended 31 August 2013
Hot Features
Premium
Year ended Year ended
31 August 31 August
2013 GBP'000 2012 GBP'000
Revenue 5,971 5,280
Administrative expenses (9,683) (9,566)
Share based payments 116 (78)
Operating loss (3,596) (4,364)
Profit on disposal of fixtures 23 -
and equipment
Fair value gains on investments - 10
Other losses - (46)
Finance costs (90) (89)
Interest income 3 6
Loss before tax (3,660) (4,483)
Tax (312) (229)
Total loss for the year (3,972) (4,712)
-------------- --------------
Total comprehensive loss for
the year (3,972) (4,712)
============== ==============
Loss per share
Basic and diluted (0.3p) (1.0p)
All the Group's revenue and operating loss was derived from continuing operations.
There were no items of comprehensive income in the current year or prior year other than the loss for that year shown above. Accordingly, no statement of comprehensive income is presented.
The loss and total comprehensive loss for the year are attributable to the equity holders.
Hume Capital Securities plc
Consolidated and Company Balance Sheet
As at 31 August 2013
Group Company
31 August 2013 31 August 31 August 31 August
GBP'000 2012 2013 2012
GBP'000 GBP'000 GBP'000
Non-current assets
Fixtures and equipment 382 526 382 526
Intangible assets
and goodwill 1,383 - - -
Deferred tax asset 480 792 480 792
2,245 1,318 862 1,318
Current assets
Trade and other receivables 33,156 16,579 32,812 16,579
Trading portfolio
assets 298 456 298 456
Investments 61 10 1,998 10
Cash and bank balances 830 328 276 328
34,345 17,373 35,384 17,373
Total assets 36,590 18,691 36,246 18,691
Current liabilities
Trade and other payables (34,454) (16,341) (33,908) (16,341)
Trading portfolio
liabilities (136) (210) (136) (210)
Bank overdraft - (328) - (328)
(34,590) (16,879) (34,044) (16,879)
Net current assets (245) 494 1,340 494
Total liabilities (34,590) (16,879) (34,045) (16,879)
Net assets 2,000 1,812 2,201 1,812
Equity
Share capital 1,764 2,196 1,764 2,196
Share premium account 10,583 7,632 10,582 7,632
Retained loss (12,104) (8,016) (11,902) (8,016)
Deferred share reserve 1,757 - 1,757 -
Total equity 2,000 1,812 2,201 1,812
Hume Capital Securities plc has five subsidiaries, EPIC Investment Partners Limited, Hume Capital Management Limited and Hume Capital Guernsey Limited, XCAP Securities (Middle East and India) Limited and XCAP Nominees Limited. The financial statements of Hume Capital Securities plc (registered number 6920660) were approved by the Board of Directors and authorised for issue on 25 February 2014. They were signed on its behalf by:
Michael Andrew Frame
Finance Director
25 February 2014
Hume Capital Securities plc
Consolidated and Company Statement of Changes in Equity
For the year ended 31 August 2013
Share Premium Retained
Share Capital Account Other Reserves Earnings Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 31 August
2011 1,939 6,479 - (3,382) 5,036
Loss for the year - - - (4,712) (4,712)
Issue of share capital 257 1,153 - - 1,410
Credit to equity for
equity-settled share
based payments - - - 78 78
Balance at 31 August
2012 2,196 7,632 - (8,016) 1,812
Loss for the year - - - (3,972) (3,972)
Issue of share capital 1,325 2,951 - - 4,276
Debit to equity for equity-settled
share
based payments - - - (116) (116)
Share capital re-organisation* (1,757) - 1,757 - -
Balance at 31 August
2013 1,764 10,583 1,757 (12,104) 2,000
*As part of the acquisition of the Hume Capital trading businesses a fundraising was undertaken. As the Placing Price was less than the nominal value of the Existing Ordinary Shares, to enable the Placing to proceed it was necessary to reorganise the Company's share capital by sub-dividing and redesignating each Existing Ordinary Share into one new ordinary share of 0.1 pence each (a "New Ordinary Share") and one deferred share of 0.4p each.
Hume Capital Securities plc Consolidated and Company Cash Flow Statement
For the year ended 31 August 2013
Group Company
Year ended Year ended Year ended Year ended
31 August 31 August 31 August 31 August
2013 2012 2013 2012
GBP'000 GBP'000 GBP'000 GBP'000
Net cash used in operating
activities (761) (1,385) (2,448) (1,385)
Investing activities
Proceeds on disposal of
fixtures and equipment - 4 - 4
Purchases of fixtures and
equipment (89) (205) (89) (205)
Goodwill and intangible
assets acquired in exchange
for shares issued less cash
acquired (1,133) - - -
Net cash used in investing
activities (1,222) (201) (89) (201)
Financing activities
Net proceeds on issue of
shares 2,900 1,409 2,900 1,409
Finance costs (90) (89) (90) (89)
Interest income 3 6 3 6
Net cash from financing
activities 2,813 1,326 2,813 1,326
Net increase/(decrease)
in cash and cash equivalents 830 (260) 276 (260)
Cash and cash equivalents
at beginning of year - 260 - 260
Cash and cash equivalents
at end of year 830 - 276 -
1. General information
The financial information set out above does not constitute the Group's statutory accounts for the year ended 31 August 2013 but is derived from those accounts. Statutory accounts for 2013 will be delivered to the Registrar of Companies and posted to shareholders in due course. The auditors' report on those accounts were unqualified, did not draw attention to any matters by way of emphasis and did not contain a statement under section 498(2) or (3) of the Companies Act 2006.
Going concern
The Financial Reporting Council issued a guidance note in November 2009 requiring all companies to provide fuller disclosures regarding the directors' assessment of going concern. The financial statements of the Group have been prepared on a going concern basis.
The Group has made a loss in the year and has had to restructure some of its operations in order to secure its liquidity and capital positions during the financial year. As highlighted in the Chief Executive's statement, the financial year under review was one of rebuilding the Group against a backdrop of very difficult market conditions. The losses for the year have arisen because of the substantial changes that needed to be implemented, in the context of poor market conditions.
In light of the acquisition and the fundraisings during and following the year end, the Directors have prepared detailed forecasts for the enlarged group for the foreseeable future which consider the liquidity and capital position of the Group. These forecasts assume an immediate increase in profitability based on the cost cutting measures already implemented together with increased revenue from the existing business divisions as discussed in both the Chief Executive's statement and the business review section of the Annual Report. If these forecasts are not achieved then the Group would need to rebuild its capital base, which has been significantly impacted by the retained losses in the year, within the going concern period in order to meet its regulatory capital requirements. In this respect the directors expect that the Group will be able to obtain sufficient capital resources and funding through the injection of new capital from the placement of new shares, as well as it having the ability to bring additional capital and cash in through further restructuring, and the redistribution of resources currently tied up in existing business divisions.
Taking these factors into account, the Directors have a reasonable expectation that the Group has adequate resources and has sufficient liquidity to continue in existence for the foreseeable future. Accordingly, the Directors have adopted the going concern basis in preparing the financial statements.
Basis of consolidation
The consolidated financial statements incorporate the financial statements of the Group made up to 31 August each year. The Group consists of Hume Capital Securities plc and four 100% fully owned subsidiaries, EPIC Investment Partners Limited, Hume Capital Guernsey Limited, XCAP Securities (Middle East and India) Limited and XCAP Nominees Limited. EPIC Investment Partners Limited owns 100% of Hume Capital Management Limited.
XCAP Nominees Limited has net assets of GBP2 and therefore that Company's information is not shown separately.
Under section 408 (4) of the Companies Act 2006, XCAP Nominees Limited is exempt from the requirement to present its own income statement.
Hume Capital Management Limited and EPIC Investment Partners Limited both prepare annual accounts to 30 September.
Business combinations
All business combinations are accounted for by applying the purchase method. The purchase method involves recognition, at fair value, of all identifiable assets and liabilities, including contingent liabilities, of the subsidiary at the acquisition date, regardless of whether or not they were recorded in the financial statements of the subsidiary prior to acquisition. The cost of business combinations is measured based on the fair value of the equity or debt instruments issued and cash or other consideration paid, plus any directly attributable costs.
Goodwill arising on a business combination represents the excess of cost over the fair value of the Group's share of the identifiable net assets acquired and is stated at cost less any accumulated impairment losses. Goodwill is tested biannually for impairment. Any impairment is recognised immediately in the income statement and is not subsequently reversed. Negative goodwill arising on an acquisition is recognised immediately in the income statement. On disposal of a subsidiary the attributable amount of goodwill that has not been subject to impairment is included in the determination of the profit or loss on disposal.
Intangible assets
The cost of intangible assets acquired in a business combination is their fair value at the date of acquisition.
After initial recognition intangible assets are carried at cost less accumulated amortisation and impairment losses. The carrying amounts are reviewed at each reporting date when events or circumstances indicate that the assets may be impaired. If any such indication exists or as in the case of goodwill, when annual impairment testing is required, the asset's recoverable amount is estimated.
The recoverable amount is the higher of the asset's fair value less costs to sell (or net selling price) and its value-in-use. Value-in-use is the discounted present value of estimated future cash inflows expected to arise from the
continuing use of the asset and from its disposal at the end of its useful life.
Impairment is identified at the individual asset level where possible. Where the recoverable amount of an individual asset cannot be identified, it is calculated for the smallest cash-generating unit (CGU) to which the asset belongs.
A CGU is the smallest identifiable group of assets that generates cash inflows independently. When the carrying amount of an asset (or CGU) exceeds its recoverable amount, the asset (or CGU) is considered to be impaired and is written down to its recoverable amount. An impairment loss is immediately recognised as an expense.
Share-based payments
Equity-settled share-based payments to employees and others providing similar services are measured at the fair value of the equity instruments at the grant date. The fair value excludes the effect of non market-based vesting conditions. Details regarding the determination of the fair value of equity-settled share-based transactions are set out in note 13 to this announcement.
The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over the vesting period, based on the Group's estimate of equity instruments that will eventually vest. At each balance sheet date, the Group revises its estimate of the number of equity instruments expected to vest as a result of the effect of non market-based vesting conditions. The impact of the revision of the original estimates, if any, is recognised in profit or loss such that the cumulative expense reflects the revised estimate, with a corresponding adjustment to the equity-settled employee benefits reserve.
Accounting period
The financial statements cover a 12 month period from 1 September 2012 to 31 August 2013.
Hume Capital Management Limited and EPIC Investment Partners Limited both have accounting periods that end on 30 September. Their results have been consolidated as at 31 August 2013 for inclusion in these financial statements.
Critical accounting judgements and key sources of estimation uncertainty
In the application of the Group's accounting policies, which are described in note 3 in the full Annual Report, the Directors are required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the year in which the estimate is revised if the revision affects only that year, or in the year of the revision and future years if the revision affects both current and future years.
Critical judgements in applying the group's accounting policies
The following are the critical judgements that the Directors have made in the process of applying the Group's accounting policies and that has the most significant effect on the amounts recognised in financial statements.
Share based payments
The calculation of the fair value of share based payments requires assumptions to be made regarding market conditions and future events. These assumptions are based on historic knowledge and industry standards. Changes to the assumptions used would materially impact the charge to the income statement. Details of the assumptions are set out in note 13 to this announcement.
Liquidity adjustment
Positions at the year end are assessed to ensure that the carrying value reflects the fair value of the asset. Positions held in illiquid stocks are adjusted to reflect this.
Deferred tax rates
The recognition of deferred tax assets is based upon whether it is more likely than not that sufficient and suitable taxable profits will be available in the future against which the reversal of temporary differences canbe deducted.
As outlined in note 15 in the full Annual Report, the directors have recognised a deferred tax asset of GBP480,000 and have not recognised an asset in respect of remaining losses.
Goodwill
The amount of goodwill initially recognised as a result of a business combination is dependent on the allocation of the purchase price to the fair value of the identifiable assets acquired and the liabilities assumed. The determination of the fair value of the assets and liabilities is based, to a considerable extent, on management's judgement.
Allocation of the purchase price affects the results of the Group as finite lived intangible assets are amortised, whereas indefinite lived intangible assets, including goodwill, are not amortised and could result in differing amortisation charges based on the allocation to indefinite lived and finite lived intangible assets.
2. Business and geographical segments
Products and services from which reportable segments derive their revenues
Information reported to the Group's Chief Executive Officer for the purposes of resource allocation and assessment of segment performance is focussed on the category of customer for each type of activity. The Group's reportable segments under IFRS 8 are as follows:
-- Capital Markets -- Wealth Management
Information regarding the Group's operating segments is reported below.
Segment revenues and results
The following is an analysis of the Group's revenue and results by reportable segment for the year to 31 August 2013:
Capital Wealth Management Consolidated
Markets
Year ended Year ended Year ended
31 August 31 August 31 August
2013 2013 2013
GBP'000 GBP'000 GBP'000
Revenue
External sales 1,931 4,040 5,971
Result
Segment result 391 (828) (437)
Central administrative expenses (3,159)
-------------
Operating loss (3,596)
Profit on disposal of fixed
assets 23
Finance costs (90)
Interest income 3
Loss before tax (3,660)
Tax (312)
Loss after tax (3,972)
=============
The accounting policies of the reportable segments are the same as the Group's accounting policies described in note 3 in the full Annual Report.
The following is an analysis of the Group's revenue and results by reportable segment for the year ended 31 August 2012:
Capital Markets Wealth Management Consolidated
Year ended Year ended Year ended
31 August 31 August 31 August
2012 2012 2012
Revenue GBP'000 GBP'000 GBP'000
External sales 1,968 3,312 5,280
Result
Segment result (402) (567) (969)
Central administrative expenses (3,395)
-------------
Operating loss (4,364)
Fair value gains on investments 10
Other income (46)
Finance costs (89)
Interest income 6
Loss before tax (4,483)
Tax (229)
Loss after tax (4,712)
=============
Segment profit represents the profit incurred by each segment without allocation of the share of central administration costs including Directors' salaries, investment revenue and finance costs, and income tax expense. This is the measure reported to the Group's Chief Executive Officer for the purpose of resource allocation and assessment of segment performance. All one off non-recurring costs are included in central administrative expenses.
The Directors do not consider the net assets readily identifiable and consequently have not disclosed these separately in this note.
Geographical information
All of the Group's revenue is generated within the UK.
3. Loss for the year
Loss for year ended 31 August 2013 has been arrived at after charging:
Year ended Year ended
31 August 2013 31 August
GBP'000 2012
GBP'000
GBP'000
Depreciation of fixtures and equipment 210 176
Gain on disposal of fixtures and
equipment 23 -
Operating lease - property 253 253
Operating lease - equipment 143 164
Staff costs 2,960 3,104
4. Loss per share
The calculation of the basic and diluted loss per share is based on the following data:
Losses
Year ended
31 August Year ended
2013 31 August 2012
GBP'000 GBP'000
Losses for the purposes of basic loss
per share being net loss attributable
to owners of the Group (3,972) (4,712)
Number of shares '000 '000
Weighted average number of ordinary shares
for the purposes of basic loss per share 1,273,527 439,177
Effect of dilutive potential ordinary
shares:
Share options 49,600 87,800
Ordinary shares issued post year end 323,214 439,177
Weighted average number of ordinary shares
for the purposes of diluted loss per
share 1,646,341 966,154
Share options and ordinary shares issued post year end are antidilutive and therefore are disregarded in the calculation of diluted loss per share.
5. Acquisition, intangible assets and goodwill
On 14 December 2012, Hume acquired 100 per cent of the issued share capital of EPIC Investment Partners Limited and 100 per cent of the issued share capital of Hume Capital Guernsey Limited, obtaining control of both companies. EPIC Investment Partners Limited owns 100 per cent of the issued share capital of Hume Capital Management Limited.
These companies were the trading or fund management companies within the Hume Capital LLP group of companies. They are multi-asset, multi-disciplinary firms with a focus on equities, fixed income, absolute return strategies and multi-manager products with total assets under management in excess of GBP100 million.
The Group believes that the financial stability that this transaction provides will create opportunities for the enlarged group to gain critical mass and to increase both assets under management and the level of trading and corporate advisory work we undertake.
Acquisition of Hume Capital Guernsey Limited, Hume Capital Management Limited and EPIC Investment Partners Limited:
GBP'000
Financial assets
Net assets 154
Identifiable intangible assets 451
Total identifiable assets 605
Goodwill 932
--------
Total consideration 1,537
========
Satisfied by:
Ordinary shares of Hume Capital
Securities plc 1,537
Less cash acquired on acquisition (404)
Goodwill and intangible assets
acquired in exchange for shares
issued less cash acquired 1,133
========
Pre-acquisition financial details of the companies acquired are as follows:
Date of latest pre-acquisition Losses before
Company audited accounts Revenue tax Gross Assets
Hume Capital
(Guernsey) Limited Year to 31 March 2012 1,712,574 (94,156) 627,426
EPIC Investment
Partners Limited Year to 31 March 2011 - (1,817,352)* 2,015,093
Hume Capital
Management Limited Year to 31 March 2011 3,363,511 (390,692) 1,271,202
* Includes GBP1.34 million impairment of investments
Table detailing financial results of acquired businesses as though the acquisition date for all businesses was the beginning of the annual reporting period under review. Please note that actual acquisition date was 14 December 2012.
Losses before
Company Revenue tax
Hume Capital
(Guernsey) Limited 722,004 (128,754)
EPIC Investment
Partners Limited - -
Hume Capital
Management Limited 604,773 (343,140)
Goodwill
Hume has recognised goodwill in respect of the Hume Capital Management businesses acquisition as per the table below. The factors that make up the goodwill recognised include but are not limited to, the greater P/E ratio valuations placed on firms with assets under management compared to pure trading houses and assisting in delivering the benefits of recurring and non-trading dependent revenue. In addition, goodwill was attributable to the synergies from the Group's ability to combine clients and contact bases and reduce head office costs to enhance shareholder returns.
Group
GBP'000
Cost
At 31 August 2012 -
Additions 932
At 31 August 2013 932
Impairment
At 31 August 2012 -
Charge for the year -
At 31 August 2013 -
Net book values
At 31 August 2013 932
At 1 September 2012 -
The Group tests, for each Cash Generating Unit (CGU), at least annually for goodwill impairment. The recoverable amount of a CGU is determined based on value-in-use calculations. These calculations use pre-tax cash flows based on financial budgets prepared by management covering a five year period and then extrapolated for the remaining useful economic life based on relevant estimated growth rates of 9.8% for revenue and 6.7% for costs. This is then adjusted for the anticipated terminal growth value of 5% per annum. This net cash flow is then discounted by an appropriate cost of capital of 11% in order to estimate their present value.
The key assumptions for the value-in-use calculations are those regarding the discount rate, growth rates and expected changes to revenues and costs in the period. Management has made these assumptions based on past experience and future expectations in the light of anticipated market conditions, combined with the actions taken during this and last year to streamline the Group's operations whilst maximising revenue potential.
Where the value-in-use exceeds the carrying value of the goodwill asset, it has been concluded that no impairment is necessary. However, where this is not the case, goodwill is written down to the net present value of cash flows at the balance sheet date.
The amounts recognised in respect of the identifiable assets required and liabilities assumed are as set out in the table below:
Intangible assets
Group
GBP'000
Cost
At 31 August 2012 -
Additions 451
At 31 August 2013 451
Amortisation
At 31 August 2012 -
Charge for the year -
At 31 August 2013 -
Net book values
At 31 August 2013 451
At 1 September 2012 -
The above addition to intangible assets represents the value of the funds under management acquired and client base acquired as part of the Hume acquisition. The Board has assessed the carrying value of this intangible asset and confirms it remains appropriate. This intangible asset is assumed to have an indefinite useful life.
The asset was valued using a combination of the value applied to the assets under management and a discounted cashflow model.
6. Investments
Group Company
Investments Investments
GBP'000 GBP'000
Cost
At 31 August 2011 8 8
Additions 10 10
Disposals (8) (8)
At 31 August 2012 10 10
Additions 51 51
Acquisition of subsidiary in year
(note 14) - 1,537
Capitalisation of intercompany loan - 400
Disposals - -
At 31 August 2013 61 1,998
On 14 December 2012, XCAP Securities plc acquired 100 per cent of the issued share capital of EPIC Investment Partners Limited and 100 per cent of the issued share capital of Hume Capital Guernsey Limited, obtaining control of both companies. EPIC Investment Partners Limited owns 100 per cent of the issued share capital of Hume Capital Management Limited.
These companies were the trading or fund management companies within the Hume Capital LLP group of companies. They are multi-asset, multi-disciplinary firms with a focus on equities, fixed income, absolute return strategies and multi-manager products.
The Company believes that the financial stability that this transaction provides will create opportunities for the enlarged group to gain critical mass and to increase both assets under management and the level of trading and corporate advisory work we undertake.
The amount recognised as an investment in the Company accounts represents the purchase price plus the capitalisation during the year of an intercompany loan. The purchase price was 439,176,582 shares in XCAP Securities plc which were issued at a price of 0.35p per share.
7. Subsidiaries
Hume Capital Securities plc has four 100% fully owned subsidiaries, EPIC Investment Partners Limited, Hume Capital Guernsey Limited, XCAP Securities (Middle East and India) Limited and XCAP Nominees Limited. EPIC Investment Partners Limited owns 100% of Hume Capital Management Limited.
8. Cash, cash equivalents and bank overdraft
Group Company
31 August 31 August
31 August 2012 31 August 2012
2013 GBP'000 GBP'000 2013 GBP'000 GBP'000
Cash at bank and in
hand 830 328 276 328
Bank overdraft - (328) - (328)
830 - 276 -
Client money
Client money, held in segregated accounts not included in the balance sheet, was GBP2.37 million (31 August 2012 - GBP2.68 million).
9. Borrowings
Group Company
31 August 31 August 31 August 31 August
2013 2012 2013 2012
GBP'000 GBP'000 GBP'000 GBP'000
Secured borrowing at amortised
cost
Bank overdrafts - 328 - 328
Total borrowings
Amount due for settlement
within 12 months - 328 - 328
The bank overdraft is repayable on demand.
10. Share capital
Share capital
GBP'000
Authorised, allotted, issued and fully paid:
As at 1 September 2012
439.2 million ordinary shares of 0.5 pence each 2,196
Issue of shares 1,325
Share capital re-organisation (1,757)
As at 31 August 2013:
1,764.324 million ordinary shares of 0.1 pence each 1,764
The Company has one class of ordinary shares which carries no right to fixed income.
On 14 December 2012 Hume announced that it received regulatory approval to allow the acquisition of the Hume Capital Management companies, together with a placing to raise approximately GBP2.4 million. All conditions have now been satisfied and the Acquisition and Placing, as defined in the announcement on 3 October 2012, have completed.
Accordingly, on 14 December 2012 the Company applied for 439,176,582 new ordinary shares of 0.1 pence each in the Company ("Ordinary Shares") issued pursuant to the Acquisition and 678,783,514 Ordinary Shares issues pursuant to the Placing. The shares were admitted to trading on AIM on 20 December 2012.
As the Placing Price was less than the current nominal value of the Existing Ordinary Shares, to enable the Placing to proceed it was necessary to reorganise the Company's share capital by sub-dividing and re-designating each Existing Ordinary Share into one New Ordinary Share of 0.1 pence nominal value and one Deferred Share of 0.4 pence nominal value (as set out in the table below).
Pre Capital Reorganisation Post Capital Reorganisation
--------------------------- ----------------------------------------------
Existing Ordinary Shares Number of New Ordinary Number of Deferred
of 0.5 pence each Shares of 0.1 pence Shares of 0.4 pence
each each
--------------------------- ----------------------- ---------------------
1 1 1
--------------------------- ----------------------- ---------------------
The Capital Reorganisation has had no material impact on the rights of the holders of Existing Ordinary Shares, which will continue to carry the same voting rights and rights to dividends and capital as previously. The New Ordinary Shares will continue to be admitted to trading on the AIM market as currently. The New Ordinary Shares will reflect the same proportion of the Company's value as the Existing Ordinary Shares and therefore their intrinsic value will be the same.
The Deferred Shares have very limited rights (contained in the New Articles) such that, in practical terms they have no value and, in the same way, nor do they carry any rights to voting, dividends or a return on capital (otherwise than on a winding up). No application has been made for admission of the Deferred Shares to trading on AIM. It is envisaged that at a convenient time the Deferred Shares will be purchased by or on behalf of the Company and cancelled in accordance with the provisions of the New Articles.
On 18 June 2013 the Company announced that it has raised GBP525,000 through the issue of 175,000,000 new ordinary shares of 0.1p each in the Company ("Ordinary Shares") at 0.3 pence per share.
Post year end, on 8 November 2013 the Company raised a total of GBP905,000 via the issue of 323,214,285 new ordinary shares of 0.1p each in the Company at 0.28p per share.
11. Share premium account
Share premium
GBP'000
Balance at 31 August 2011 6,479
Premium arising on issue of equity shares 1,158
Less expenses of issue of equity shares (5)
Balance at 31 August 2012 7,632
Premium arising on issue of equity shares 2,951
Balance at 31 August 2013 10,583
12. Retained loss
Share premium
GBP'000
Balance at 31 August 2011 (3,382)
Net loss for the year (4,712)
Credit to equity for equity-settled share-based
payments 78
Balance at 31 August 2012 (8,016)
Net loss for the year (3,972)
Debit to equity for equity-settled share-based
payments (116)
Balance at 31 August 2013 (12,104)
13. Share based payments
The Group has 3 share option schemes which have been established for the Group's employees or consultants (as appropriate). They are:
1. the XCAP Securities plc Group Share Option Plan 2009, an HMRC approved scheme under Schedule 4 of the Income Tax (Earnings and Pensions) Act 2003 pursuant to which options over ordinary shares of the Group may be granted to individuals (as selected by and in amounts determined by the Group's Remuneration Committee) who are employees of the Company or of other members of its group;
2. the XCAP Securities plc Unapproved Share Option Scheme 2001 pursuant to which options over ordinary shares of the Group may be granted to individuals (as selected by and in amounts determined by the Group's Remuneration Committee) who are employees of the Company or other members of its group; and
3. the XCAP Securities plc Consultant's Share Option Plan 2010, pursuant to which options over ordinary shares of the Group may be granted to individuals (as selected by and in amount determined by the Group's Remuneration Committee) who are engaged to provide consultancy services to the Company or other members of its group or who are officers or employees of any Group member and are engaged to provide consultancy services to any seed Group member.
In the case of options granted during the year, all such options are exercisable at prices between 1.5p and 1.875p per ordinary share. The vesting period for all options granted under the Approved Scheme is three years.
Options granted during the year under the Unapproved Scheme and the Consultant's Scheme have a three year vesting period.
If options granted under any of the schemes remain unexercised for a period of ten years from the date of grant then the options expire.
In certain circumstances, options may be exercised earlier than the vesting date if the option holder ceases to be an employee of the relevant Group member. In particular, options may be exercised for a period of six months after the option holder ceases to be employed within the Group by reason of injury, ill health or disability (evidenced to the satisfaction of the Remuneration Committee), redundancy or retirement on or after reaching the age of 55 or upon the sale or transfer out of the Group of the relevant Group member or undertaking employing or contracting with him.
In the event of cessation of employment or engagement of the option holder by reason of his death, his personal representatives will be entitled to exercise the option within twelve months following the date of his death. Where an option holder ceases to be employed within the group for any other reason, options may also become exercisable for a limited period at the discretion of the Remuneration Committee. There are no additional performance conditions attached to the share options presently issued.
2013
Weighted
average
Number exercise
of share price
options (in pence)
Outstanding at 1 September 2012 71,100,000 2.99
Forfeited during the year (21,500,000) 3.72
Outstanding at the end of the year 49,600,000 2.99
Exercisable at 31 August 2013 49,600,000 2.67
The Company has adopted the provisions of IFRS 2 as regards share-based payment charges. These provisions require a calculation of the fair value at the date of grant of share options granted to directors and employees. This fair value is then charged to the income statement over the vesting period of the options, and is based on an expected number of employees leaving before their options vest. The fair value is calculated using a variant of the Black Scholes model.
The options outstanding at 31 August 2013 had a weighted average exercise price of approximately 2.67p (2012: 2.99p) and a weighted average remaining contractual life of approximately 7 years (2012: 8 years).
During the year ended 31 August 2013 no options were granted.
During the year ended 31 August 2012, options were granted on 3 December 2011 and 29 February 2012. The aggregate of the estimated fair value as at year end of the options granted during that year was GBP155,429 which is spread over the life of the options.
The net credit to the income statement in relation to share based payments was the net effect of the charge for the year and the credit in relation to leavers in the year who held share options.
The inputs into the Black-Scholes model are as follows:
31 August 31 August
2013 2012
Weighted average share price 2.67p 2.99p
Weighted average exercise price 2.67p 2.99p
Range of exercise price 1.5p - 4.5p 1.5p - 4.5p
Expected volatility 36% 36%
Expected life 5 Years 5 Years
Risk-free rate 0.74% 0.74%
Expected dividend yields 0% 0%
Expected volatility was determined by taking the average one year historic volatility figure of a peer group. The expected life used in the model has been adjusted, based on management's best estimate, for the effects of non-transferability, exercise restrictions, and behavioural considerations.
14. Events after the balance sheet date
On 8 November 2013, the Group raised approximately GBP0.9 million (before expenses) through the issue of 323,214,285 New Ordinary Shares ("Placing Shares") at a subscription price of 0.28 pence per share (the "Placing"). The Placing Shares were placed with a number of high net worth individuals, institutional investors and existing shareholders. Proceeds will be used for general working capital purposes as the Company continues to execute its corporate strategy.
15. Related party transactions
Remuneration of key management personnel
The remuneration of the Directors, who are the key management personnel of the group, is set out below in aggregate for each of the categories specified in IAS 24 Related Party Disclosures. Further information about the remuneration of individual Directors is provided in the audited part of the Directors' Remuneration Report on page 21 of the Annual Report.
Year ended Year ended
31 August 31 August 2012
2013 GBP'000
GBP'000
Short-term employee benefits 699 451
Post-employment benefits 78 30
777 481
Intercompany transactions
Hume Capital Securities plc charges Hume Capital Management Limited a monthly management fee. During the period under review these fees totalled GBP125,000 (2012: GBPnil). The monthly fees are at the discretion of the Hume Capital Securities plc and Hume Capital Management Limited's respective boards. As at the balance sheet date GBPnil was outstanding (2012: GBPnil) in relation to these fees.
Shares issued to significant shareholder
Following the termination of Mr Christopher Potts' consultancy agreement on 31 December 2011 and its replacement with effect from 1 January 2012 with a business introducing agreement (with no fixed fee element but a commission arrangement based on business introduced), the Directors issued New Ordinary Shares in lieu of fees of GBP50,000 due to Mr Potts for the period from 1 July 2011 to 31 December 2011 under his former consultancy agreement.
Accordingly, on 14 December 2012 Mr Potts was issued 14,285,714 New Ordinary Shares issued at 0.35p
In addition, Mr Potts participated in the placing that occurred at as part of the Hume acquisition and subscribed for 35,714,285 placing shares at the placing price of 0.35p (being an aggregate subscription of approximately GBP125,000).
The combined issues of these shares is classed as a related party transaction pursuant to the AIM Rules.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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