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Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
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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 | |
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0.00 | 0.00% | 0.20 | 0.00 | 01:00:00 |
Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
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0 | 0 | N/A | 0 |
TIDMHUME
RNS Number : 1628I
Hume Capital Securities PLC
28 May 2014
Hume Capital Securities plc ("Hume" or the "Company")
Interim results for the six months ended 28 February 2014
Hume (AIM: HUME) (together with its subsidiaries the "Group"), presents its unaudited results for the six months ended 28 February 2014.
Highlights:
-- Revenues for the period of GBP3.5 million (H1 2013: GBP2.9 million)
-- Cost cutting efforts that commenced in 2013 are now being reflected in the Group's Income Statement, with administrative expenses falling to GBP4.2 million (H1 2013: GBP4.7 million);
-- Both Capital Markets and Wealth Management have shown improved results in the period under review with Capital Markets making a positive contribution of GBP0.9 million (H1 2013: GBP0.05 million)
-- Loss for the period of GBP0.7 million (H1 2013: loss of GBP1.9 million); -- Loss per share for the period of 0.04 pence (H1 2013: loss per share of 0.2 pence)
Commenting on the results, Jonathan Freeman, Interim CEO commented: "We continue to make progress towards the creation of a profitable financial services group that has a reasonable spread of diversified revenues and anticipate that the second half of the current financial year will show further improvement towards that goal."
Enquiries:
Hume Capital Securities Plc
Jonathan Freeman (Interim CEO)
+44 (0)20 3693 1470
Grant Thornton UK LLP (Nominated Adviser)
Philip Secrett / Melanie Frean / Jamie Barklem
+44 (0)20 7383 5100
Chief Executive Officer's Statement
I present the Company's unaudited results for the six months ended 28 February 2014.
The period under review has been one of steady improvement in the results of the Group. Revenues for the period were GBP3.5 million (H1 2013: GBP2.9 million), representing an increase of 20 per cent. In addition, the cost cutting efforts that commenced in 2013 are now being reflected in the Group's Income Statement, with administrative expenses falling to GBP4.2 million (H1 2013: GBP4.7 million).
However this improvement in the results of both revenues and costs were not enough to prevent us reporting an operating loss, albeit much reduced, for the period of GBP0.7 million (H1 2013: loss of GBP1.9 million). Our loss per share for the period under review was 0.04 pence (H1 2013: loss per share of 0.2 pence).
We are continuing our efforts to improve our revenues and reduce our costs further and so hope to be able to report a further improvement in our results for the second half of the current financial year.
Both Capital Markets and Wealth Management have shown improved results in the period under review. Capital Markets, which comprises Corporate Finance, Corporate Broking and Market Making made a positive contribution of GBP0.9 million (H1 2013: GBP0.05 million). This has been principally driven by the corporate team completing several larger transactions in the period.
As announced on 14 April 2014, the Group has ceased its market making activities in the short term.
Progress has been made on the Wealth Management side of the business and on 8 April 2014 it was announced that the Group had been appointed the Investment Manager of the newly created Peterborough Infrastructure Fund (the "Fund"). Hume will be responsible for establishing the Fund which is targeted to be GBP130 million. Both Hume Capital Management Limited and Hume Capital Guernsey Limited have been consistently profitable since April 2013.
On 8 May 2014 Nitin Parekh, CEO and a director of the Company, resigned with immediate effect. He has been replaced by Jonathan Freeman, a non-executive director of the company, as Interim CEO until a permanent replacement can be found.
During the period under review the Group completed a fundraising for GBP0.9 million and post year end the Group has raised a further GBP0.25 million, both through the issue of new equity. As announced on 8 May 2014 the Group is in advanced discussions with a group of investors who have indicated that they are willing to provide funding into the Group should this be necessary in either the short or medium term. Even with the improved results in the period under review, the Group has still made a loss and has had to restructure some of its operations in order to secure its liquidity and capital positions during the financial year. We refer the going concern section of note 1 of the accounts for further information.
We continue to make progress towards the creation of a profitable Financial Services Group that has a reasonable spread of diversified revenues and anticipate that the second half of the current financial year will show further improvement towards that goal.
Jonathan Freeman
Interim Chief Executive Officer
Director's Responsibility statement
The following statement is given by each of the directors. The directors confirm that to the best of their knowledge:
-- the condensed consolidated interim financial information has been prepared in accordance with IAS 34 'Interim Financial Reporting' as adopted by the European Union;
-- the Half-year Financial Report includes a fair review of the information required by DTR 4.2.7 (indication of important events during the first six months and description of principal risks and uncertainties for the remaining six months of the year); and
-- the Half-year Financial Report includes a fair view of the information required by DTR 4.2.8 (disclosure of related parties' transactions and changes therein).
The directors are responsible for the maintenance and integrity of the Company's website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
Independent review report to the members of Hume Capital Securities plc
We have been engaged by the Company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 28 February 2014 which comprises the condensed consolidated statement of comprehensive income, the consolidated balance sheet, the consolidated statement of changes in equity, the consolidated cash flow statement and related notes 1 to 12. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.
This report is made solely to the company in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board. Our work has been undertaken so that we might state to the Company those matters we are required to state to it in an independent review 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, for our review work, for this report, or for the conclusions we have formed.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the AIM Rules of the London Stock Exchange.
As disclosed in note 1, the annual financial statements of the Group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting," as adopted by the European Union.
Our responsibility
Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.
Scope of review
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 28 February 2014 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the AIM Rules of the London Stock Exchange.
Deloitte LLP
Chartered Accountants and Statutory Auditor
Manchester, United Kingdom
27 May 2014Hume Capital Securities plc
Condensed Consolidated Statement of Comprehensive Income Statement
For the half year ended 28 February 2014
Delto plc31 December 20XX2006[insert]LondonDeloitte & Touche LLP1 January 200631 December 20051 January 20051 January31 December
Unaudited Unaudited Audited Half year ended Half year Year ended 28 February ended 29 February 31 August 2014 2013 2013 Note GBP'000 GBP'000 GBP'000 Revenue 3 3,527 2,887 5,971 Administrative expenses (4,217) (4,745) (9,683) Share based payments - (28) 116 Operating loss (690) (1,886) (3,596) Profit on disposal of fixtures and equipment - - 23 Other income 55 - - Finance costs (57) (39) (90) Interest income - 2 3 Loss before tax (692) (1,923) (3,660) Tax 9 - - (312) Total loss for the period (692) (1,923) (3,972) Total comprehensive loss for the period (692) (1,923) (3,972) Loss per share Basic and diluted 4 (0.04p) (0.2p) (0.3p)
All the Group's revenue and operating loss was derived from continuing operations.
The loss and total comprehensive loss for the period is attributable to the equity holders.
Hume Capital Securities plc
Consolidated Balance Sheet
As at 28 February 2014
Unaudited Unaudited Audited 28 February 29 February 31 August 2014 GBP'000 2013 GBP'000 2013 Note GBP'000 Non-current assets Fixtures and equipment 285 505 382 Intangible assets and goodwill 1,383 1,383 1,383 Deferred tax asset 9 480 792 480 2,148 2,680 2,245 Current assets Trade and other receivables 26,138 24,574 33,156 Trading portfolio assets 5 312 406 298 Investments 61 61 61 Cash and bank balances 6 441 560 830 26,952 25,601 34,345 Total assets 29,100 28,281 36,590 Current liabilities Trade and other payables (26,610) (24,224) (34,454) Trading portfolio liabilities 5 (277) (169) (136) Total liabilities (26,887) (24,393) (34,590) Net current assets 65 1,208 (245) Net assets 2,213 3,888 2,000 Equity Share capital 7 2,088 1,589 1,764 Share premium account 8 11,164 10,453 10,583 Retained loss (12,796) (9,911) (12,104) Deferred share reserve 1,757 1,757 1,757 Total equity 2,213 3,888 2,000
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 27 May 2014. They were signed on its behalf by:
Michael Andrew Frame
Finance Director
27 May 2014Hume Capital Securities plc
Consolidated Statement of Changes in Equity
For the half year ended 28 February 2014
Share Share Other Retained Total Capital Premium reserves Earnings Account GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 Balance at 31 August 2012 2,196 7,632 - (8,016) 1,812 Audited Loss for the period - - - (1,923) (1,923) Issue of share capital 1,150 2,821 - - 3,971 Credit to equity for equity-settled share 28 28 based payments Share capital re-organisation (1,757) - 1,757 - - Balance at 28 February 2013 1,589 10,453 1,757 (9,911) 3,888 Unaudited Loss for the period - - - (2,049) (2,049) Issue of share capital 175 130 - 305 Debit to equity for equity-settled share based payments - - - (144) (144) Balance at 31 August 2013 1,764 10,583 1,757 (12,104) 2,000 Audited Loss for the period - - - (692) (692) Issue of share capital 324 581 - - 905 Balance at 28 February 2014 2,088 11,164 1,757 (12,796) 2,213 Unaudited --------- --------- ---------- ---------- --------
Hume Capital Securities plc
Consolidated Cash Flow Statement For the half year ended 28 February 2014
Unaudited Unaudited Audited Half year Half year ended 28 ended 28 Year ended February February 31 August 2014 2013 2013 Note GBP'000 GBP'000 GBP'000 Net cash used in operating activities 10 (1,231) (1,697) (763) Investing activities Purchases of fixtures and equipment (6) (82) (89) Goodwill and intangible assets acquired in exchange for shares issued less cash acquired - - (1,133) Net cash used in investing activities (6) (82) (1,222) Financing activities Net proceeds on issue of shares 905 2,376 2,900 Finance costs (57) (39) (90) Interest income - 2 3 Net cash from financing activities 848 2,339 2,813 Net (decrease)/increase in cash and cash equivalents (389) 560 830 Cash and cash equivalents at beginning of period 830 - - Cash and cash equivalents at end of period 6 441 560 830
Hume Capital Securities plc
Notes to the Financial Statements
For the half year ended 28 February 2014
1. Basis of preparation
The interim financial information has been prepared in accordance with International Accounting Standard ("IAS") 34 - "Interim Financial Reporting". The same accounting policies, presentation and methods of computation are followed in these condensed financial statements as were applied in the preparation of the Group's financial statements for the year ended 31 August 2013.
The Group has a new revenue recognition policy in respect of larger corporate deals that are now being undertaken. This updated policy is in line with IAS 18 and reflects revenue being recognised in line with when work was actually performed. Revenue is only recognised when the amount of revenue can be measured reliably, it is probable that the economic benefits will flow to the Group, the stage of completion at the balance sheet date can be measured reliably and the costs incurred, or to be incurred, in respect of the transaction can be measured reliably. Revenue will only be recognised when there is sufficient certainty that the deal will be completed.
The information for the period ended 28 February 2014 does not constitute statutory accounts as defined in section 434 of the Companies Act 2006. A copy of the statutory accounts for the year ended 31 August 2013 has been delivered to the Registrar of Companies. The auditor's report on those accounts was not qualified, did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying the report and did not contain statements under section 498(2) or (3) of the Companies Act 2006. However, the information for the period ended 28 February 2014 has been reviewed by the Company's auditors, Deloitte LLP and their report appears above.
Going concern
The Group has made a loss in the period and has had to restructure some of its operations in order to secure its liquidity and capital positions during the financial year.
In light of the fundraisings during and following the period 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. If these forecasts are not achieved then the Group would need to rebuild its capital base, which has been impacted by the retained losses in the period, 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 secure 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 these financial statements.
2. Key risks affecting the business
There are a number of potential risks and uncertainties that could have an impact on the performance of the Group. Whilst there are others identified (and approved by the Group's Risk and Compliance Committee (comprising only non-executive directors) and subsequently the Board in terms of their management through its systems and controls) in the Group's documented risk management framework, the key risks include:
Key risks affecting the business
There are a number of potential risks and uncertainties that could have an impact on the performance of the Group. Whilst there are others identified (and approved by the Board in terms of their management through its systems and controls) in the Group's documented risk management framework, the key risks include:
Liquidity risk
The Group maintains a mixture of cash and cash equivalents that is designed to meet the Group's operational and trading activities. Having prepared detailed forecasts, the Group is confident that it has sufficient liquidity for the foreseeable future.
Solvency risk
The Directors understand the risk of not being able to meet the long term and short term obligations of the business, especially with regards to its capital requirements. In order to mitigate this risk the Group's finance team analyses cashflow on a regular basis and has implemented strong internal controls so that all outgoings are budgeted for. The business has robust plans in place that will enable it to bring in new capital and restructure the existing capital base if forecasted targets are not achieved and additional capital is required.
Market risk
As with other firms in our sector, Hume is vulnerable to adverse movements in the value of financial instruments. The Group's market making team takes long and short positions in equities. To mitigate this risk, limits apply to the overall long and short positions that the market making team are permitted to commit to. These limits are monitored in accordance with policies approved by the Board. In addition the Group has a risk framework in place that analyses concentration and correlation risk.
Credit risk
Credit risk is the risk that the Group suffers a financial loss following a client or counterparty failing to meet their contractual settlement obligations. The Group's market making business contracts with other market counterparties. Counterparties and the level of credit that they are granted are reviewed on a regular basis and the Group is never materially exposed at any time to any one particular counterparty.
The Wealth Management division look carefully at counterparty risk in the execution of client trades. Further portfolio management policy ensures portfolios are run through standard risk metrics to ensure they are in accordance with client guidelines.
Hume does not extend credit to its retail clients and these clients are expected to trade within predetermined credit and collateral limits. These limits are monitored by the Group's compliance team and any adverse findings notified to the firm's executive management for action.
Operational risk
This is defined as the risk of loss arising from inadequate or failed internal processes, people, systems or external events. The Group has embedded a risk management framework that identifies and assesses risks in order to manage and mitigate them in an efficient manner.
2. Key risks affecting the business (continued)
Regulatory risk
Regulatory risk is the risk that the Company fails to comply with any of the regulations set by the various regulatory bodies that the Company operates under. Regulatory risk is best achieved by managing all other risks satisfactorily. Key to this is:
1. Adopting a robust "top down" system of corporate governance headed by the non-executive Risk and Compliance committee which is Chaired by the Company's senior non-executive director. The committee meets in person every two months and on an ad-hoc basis in between. A compliance team member attends all meetings of the committee day with senior members of the firm's finance function;
2. A non-executive board of 3 (currently 2 but will be back to 3 once a full time CEO has been appointed) directors bringing significant business expertise in the financial services sector and seeking to enhance an independent and balanced decision making process, particularly around regulatory matters;
3. An effective risk and compliance team handling day to day management of regulatory risk for the Group and monitoring of its business to ensure compliance with the rules of the Financial Conduct Authority at the London Stock Exchange.
3. 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. The following is an analysis of the Group's revenue and results by reportable segment for the 6 months to 28 February 2014:
Capital Markets Wealth Management Consolidated Half year Half year Half year ended 28 ended 28 ended 28 February February February 2014 2014 2014 GBP'000 GBP'000 GBP'000 Revenue External sales 1,689 1,838 3,527 Result Segment result 928 (379) 549 Central administrative expenses (1,239) ------------- Operating loss (690) Finance costs (57) Other income 55 Loss before tax (692) Tax - Loss after tax (692) -------------
Geographical information
The Group's revenue is materially generated within the UK.
*This division includes the stockbroking division from previous reporting periods
3. Business and geographical segments (continued)
The following is an analysis of the Group's revenue and results by reportable segment for the 6 months ended 29 February 2013:
Capital Markets Wealth Management Consolidated Half year Half year Half year ended 28 ended 28 ended 28 February February February 2013 2013 2013 GBP'000 GBP'000 GBP'000 Revenue External sales 902 1,985 2,887 Result Segment result 47 (501) (454) Central administrative expenses (1,432) ------------- Operating loss (1,886) Finance costs (39) Interest income 2 Loss before tax (1,923) Tax - Loss after tax (1,923) ------------- 3. Business and geographical segments (continued)
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) ------------- 4. Earnings per share
The calculation of the basic and diluted loss per share is based on the following data:
Unaudited Unaudited Audited Year ended Half year Half year 31 August ended 28 February ended 28 February 2013 2014 GBP'000 2013 GBP'000 GBP'000 Loss for the purposes of basic loss per share being net loss attributable to owners of the Group (692) (1,923) (3,972) Number of shares '000 '000 '000 Weighted average number of ordinary shares for the purposes of basic loss per share 1,964,324 884,841 1,273,527 Effect of dilutive potential ordinary shares: Share options 64,050 66,300 49,600 Ordinary shares issued post period end - - 323,214 Weighted average number of ordinary shares for the purposes of diluted loss per share 2,028,374 951,141 1,646,341
Share options and ordinary shares issued post period end are antidilutive and therefore are disregarded in the calculation of diluted loss per share.
5. Trading Investments
Trading portfolio assets
Unaudited Unaudited Unaudited Half year Half year Year ended ended 28 ended 29 31 August February February 2013 2014 GBP'000 2013 GBP'000 GBP'000 Long positions in market making and dealing operations 312 406 298
The long trading portfolio assets are shares listed on LSE Official List and AIM market.
5. Trading Investments (continued)
Trading portfolio liabilities
Unaudited Unaudited Audited Year ended Half year ended Half year 31 August 28 February ended 29 February 2013 2014 GBP'000 2013 GBP'000 GBP'000 Short positions in market making and dealing operations 277 169 136
The short trading portfolio assets are shares listed on LSE Official List and AIM market.
Trading portfolio assets and liabilities are classified as held for trading and are repayable on demand.
Other financial instruments not disclosed in these notes are level 1 and the carrying value is considered to be an appropriate approximation for fair value. Level 1 financial instruments are based on quoted prices in active markets for identical assets or liabilities.
There have been no movements between Level 1 and Level 2 between the periods.
6. Cash, cash equivalent Half year Half year Year ended ended 28 ended 29 31 August February February 2013 2014 GBP'000 2013 GBP'000 GBP'000 Cash at bank and in hand 441 560 830 441 560 830
Client Money
Client money, held in segregated accounts not included in the balance sheet, was GBP3.21 million (28 February 2013 - GBP2.53 million, 31 August 2013 - GBP2.37 million).
7. Share capital Share capital GBP'000 Authorised, allotted, issued and fully paid: As at 29 February 2013 1,589.324 million ordinary shares of 0.1 pence each 1,589 Issue of shares 175 As at 31 August 2013: 1,764.324 million ordinary shares of 0.1 pence each 1,764 Issue of shares 324 As at 28 February 2014: 2,087.538 million ordinary shares of 0.1 pence each 2,088
The Company has one class of ordinary shares which carries no right to fixed income.
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.
Post period end on 3 April 2014 the Company raised a total of GBP250,000 via the issue of 111,111,111 new ordinary shares of 0.1p each in the Company at 0.225p per share
8. Share premium account Share premium GBP'000 Balance at 31 August 2012 7,632 Premium arising on issue of equity shares 2,821 Balance at 29 February 2013 10,453 Premium arising on issue of equity shares 130 Balance at 31 August 2013 10,583 Premium arising on issue of equity shares 581 Balance at 28 February 2014 11,164 --------- 9. Tax Half year Half year Year ended ended 28 ended 28 31 August February February 2013 2013 GBP'000 2013 GBP'000 GBP'000 Current tax: UK Corporation tax - - - - - - Deferred tax: Current period - - 312
The deferred tax asset recognised in the balance sheet of GBP480,000 (28 February 2013: GBP792,000) is consistent with the balance as at 31 August 2013. This is due to the bases and forecasts on which the asset is calculated remaining consistent with the year-end calculation.
10. Notes to the cash flow statement
Half year Half year Year ended ended 28 ended 28 31 August February February 2012 2014 GBP'000 2013 GBP'000 GBP'000 Loss for the period (692) (1,923) (3,972) Adjustments for: Finance costs 57 39 90 Interest income - (2) (3) Deferred tax asset - - 312 Depreciation of fixtures and equipment 103 103 211 Share-based payment expense - 28 (116) Shares issued for non-cash consideration - 366 1,650 Share premium write off - (275) Gain on disposal of fixtures and equipment - 23 Operating cash flows before movements in working capital (532) (1,389) (2,080) Net assets acquired on acquisition of Hume - (154) - Decrease/(increase) in receivables 7,018 (7,995) (16,195) Decrease in net long and short positions 127 9 84 Increase in investments - (51) (51) (Decrease)/increase in payables (7,844) 7,883 17,479 Net cash from operating activities (1,231) (1,697) (763) 11. Acquisition, intangible assets and goodwill
On 14 December 2012, Hume acquired 100% of the issued share capital of EPIC Investment Partners Limited and 100% of the issued share capital of Hume Capital Guernsey Limited, obtaining control of both companies. EPIC Investment Partners Limited owns 100% 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.
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 and 28 February 2014 932 Impairment At 31 August 2012 - Charge for the year - At 31 August 2013 - Charge for the period - At 28 February 2014 - Net book values At 31 August 2013 and 28 February 2014 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.
11. Acquisition, intangible assets and goodwill (continued)
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 and 28 February 2014 451 Amortisation At 31 August 2012 - Charge for the year - At 31 August 2013 - Charge for the year - At 28 February 2014 - Net book values At 31 August 2013 and 28 February 2014 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.
12. Related party transactions
Hume Capital Securities plc charges Hume Capital Management Limited a monthly management fee. During the period under review these fees totalled GBP245,000 (H1 2013: 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 (28 February 2013: GBPnil) in relation to these fees.
Hume Capital Management Limited charges Hume Capital Guernsey Limited a monthly management fee in relation to investment management services. During the period under review these fees totalled GBP113,513 (H1 2013: GBP56,755 (post acquisition only)). The monthly fees are based on value of assets under management.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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