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Share Name Share Symbol Market Type Share ISIN Share Description
Arden Partners Plc LSE:ARDN London Ordinary Share GB00B15CTY44 ORD 10P
  Price Change % Change Share Price Bid Price Offer Price High Price Low Price Open Price Shares Traded Last Trade
  0.00 0.0% 23.50 22.00 25.00 23.50 23.50 23.50 13,468 00:00:00
Industry Sector Turnover (m) Profit (m) EPS - Basic PE Ratio Market Cap (m)
General Financial 5.9 -1.4 -5.0 - 7

Arden Partners plc Audited Results For The Year Ended 31 October 2020

16/02/2021 7:00am

UK Regulatory (RNS & others)


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RNS Number : 1744P

Arden Partners plc

16 February 2021

Arden Partners plc

("Arden" or the "Company" or the "Group")

Audited results for the year ended 31 October 2020

Arden Partners plc (AIM: ARDN), the institutional stockbroking company, today announces audited results for the year ended 31 October 2020.

Market overview

-- Arden made a good start to the year despite the elevated political uncertainty then prevailing around Brexit and the General Election

-- Trading towards the end of the first half was negatively impacted by the Covid-19 pandemic which led to unprecedented declines in equity markets, the Company's trading operation suffering material losses and a pause on all corporate activity

-- In the second half and in reaction to the economic impact of the pandemic, equity markets improved and there was a dramatic increase in demand for capital

-- Consequently, second half deal flow was dominated by equity fund raisings for our clients relating both to re-capitalisation and growth finance

Operational highlights

-- Profitable second half trading performance across the Group following an extremely challenging first half

-- 22 transactions completed (2019: 39 transactions) including 10 equity fundraisings (2019: 9 equity fundraisings)

   --         GBP90 million raised for our listed clients (2019: GBP67 million) 

-- Second half trends continued into the current year, with four secondary fundraisings (raising GBP51

million) and three M&A transactions completed in our first quarter

Financial highlights

   --          Revenue: GBP5.9 million (2019: GBP6.6 million) 
   --          Revenues before equity trading losses increased by 7.2% on previous year 

-- Profitable second half giving a loss before tax for the year GBP1.4 million (2019: GBP2.6 million loss before tax)

   --          Recovery in equity trading position in second half and since the year end 
   --          Basic loss per share: 5.0p (2019: 8.9p loss per share) 
   --          Net asset value per share of 13.9p (2019: 18.1p) 

Commenting on the results and Arden's outlook, Mark Ansell, Chairman, said:

"The challenges faced by our industry in 2020 were unprecedented and I am very proud of our employees' efforts in ensuring that disruption to our business was minimised. Your Board continues to employ strategies to protect and enhance shareholder interests by ensuring the health and well-being of our staff and supporting our corporate and institutional clients.

The strategies adopted in recent years regarding the changes in our industry and then those adopted to cope with the challenges posed by Covid-19 are now showing positive results and our team delivered a strong result in the second half of the year and this performance level has continued into the current year.

Whilst the macro outlook remains uncertain, our second half performance and more recent trading, together with less volatile equity markets and a good M&A pipeline, gives us confidence of a return to profitability in the current financial year."

For further enquiries:

 
 Arden Partners plc 
  Donald Brown - Chief Executive Officer 
  James Reed-Daunter - Executive Director 
  Steve Douglas - Group Finance Director     020 7614 5900 
 GCA Altium Limited (NOMAD) 
  Tim Richardson                             020 7484 4040 
 Newgate Communications (Press enquiries) 
  Adam Lloyd/Tom Carnegie                    020 7653 9850 
 

Notes for editors

Arden is a dedicated corporate adviser and multi-service stockbroker to small and mid-cap companies in the UK and their investors.

The core of our business is the effective management of the needs of our significant and growing base of corporate clients, and the effective support of their relationships with existing and potential shareholders.

These relationships are enhanced by the quality of our corporate finance advice and industry research, and the strong market presence of our sales and trading teams.

Our corporate finance capabilities encompass M&A, corporate finance advisory, broking and Sponsor and NOMAD services. We represent our clients in private transactions and AIM and Main Market share issues.

Our research is designed to be sector focused, concentrating on top down thematic trends which highlight companies giving investors an exposure to the real growth areas of the small-cap and AIM markets.

It is the job of the sales team to keep institutions abreast of these themes and stock ideas. When there is a requirement for our corporate clients to raise money to fulfil their growth ambitions, the sales team is in a strong position to effect this, with its entrenched relationships with the UK institutional and non-institutional markets.

Our market making and trading teams provide liquidity in the shares of our corporate clients. We also trade the shares of non-client corporates on behalf of institutions.

The Arden Wealth Management team offers a bespoke service to our clients, with the ability to trade/invest in equities, bonds and a range of global investment funds, as well as allowing clients to participate in Primary and Secondary equity placings.

Chairman's Statement

The macro agenda during the early part of the year was dominated by the UK General Election of December 2019. The clear result of that election led to strong equity market gains and presaged a resurgence of corporate activity. However, this encouraging trading environment was rapidly curtailed by the impact of the Covid-19 pandemic which resulted in unprecedented declines in equity markets, significant volatility levels and a pause on all corporate activity, all of which significantly impacted the half year results we announced in July 2020.

During the second half, transaction volumes recovered as many listed companies sought to re-equitise in response to the impact of Covid-19. UK regulators reacted promptly to ensure that equity capital could be readily accessed and investors backed their investee companies to come through the immediate shock of the pandemic. Initially some of our clients' strategic plans were paused while balance sheet strengthening was prioritised. Relatively quickly, however, they were able to re-focus on more positive developments. As market volatility declined towards the end of the year, it became clear that the preponderance of financing would be directed towards new growth opportunities.

Thanks to early action and our flexible operating model, we remained fully operational and therefore able to focus on our clients' needs and how we could continue to assist them. I am grateful for the efforts of all of our employees, for ensuring an immediate and seamless switch to remote working, for working to make our offices Covid-secure and for remaining flexible throughout an exceptionally challenging period.

Over the year, the Board took action to ensure the appropriateness of the Company's cost base. This was particularly evident with the actions taken to manage costs and preserve cash as Covid-19 impacted the UK market. The Board will continue to take all necessary action to minimise the impact of any further uncertainty caused by Covid-19 or any other macro-economic factors.

Overall the impact of these trading conditions resulted in revenues for the year falling by 10.5% to GBP5.9 million (2019: GBP6.6 million), a loss before tax of GBP1.4 million (2019: GBP2.6 million loss before tax) and a loss per share of 5.0p (2019: loss per share of 8.9p). Excluding the losses of the equity trading operation which were incurred during the unprecedented equity market declines in the first half of the year, we delivered year on year revenue growth of 7.2%. It is important to note the strong and profitable trading performance across the Group in the second half that returned a profit before tax of GBP0.2m for that period although continued uncertainties did see some transactions carried over to the new financial year

Our balance sheet remains strong. As at 31 October 2020 our net asset value per share was 13.9p (2019: 18.1p). We hold cash and cash equivalents in excess of our capital adequacy requirements and sufficient to protect us against short to medium term market fluctuations. We continue to believe the Group is well positioned in its markets, a position from which we can continue to execute our ongoing growth strategy.

The current year started in a promising and profitable manner as we completed four equity fundraisings and three M&A transactions in our first quarter. Whilst the macro outlook remains uncertain, with the news continuing to be dominated by the pandemic, our second half performance and more recent trading, together with less volatile equity markets and a good M&A pipeline, gives us confidence of a return to profitability in 2021.

Corporate progress is not possible without good people and this is especially true in challenging times. I would like to take the opportunity to place on record my thanks to the Board, our corporate and institutional clients and all our hard-working staff for their support during this unprecedented year.

Mark Ansell

Chairman

Chief Executive's Statement

Overview

The challenges faced in 2020 have been unprecedented. Nevertheless, our strategic focus of providing first class services to our corporate clients has remained unchanged. Our corporate clients, as our most important source of revenue, are critical to our business model and in recent years we have enhanced the service levels provided to them through sector-focused hiring, greater client interaction and by developing greater depths of expertise. In a year of such disruption, we were able to continue to serve our clients unhindered and with confidence and commitment. Despite the disruptions of the Covid-19 pandemic, we were able to continue to execute transactions and take on new clients in targeted sectors.

In March 2020, in line with most UK corporates, we rapidly prepared for the anticipated adverse impact of Covid-19 on the UK economy by managing our costs and taking action to strengthen our balance sheet. I am extremely proud of our employees' reaction to the disruption of this period. The health and well-being of our staff and our continuing support to our corporate and institutional clients will protect and enhance shareholder interests.

Cost cutting measures included salary and fee sacrifices for all staff, the furloughing of staff, utilising government support, deferring an agreed element of VAT and PAYE and the cancellation or deferral of discretionary expenditure.

As market volatility increased during the early stages of the pandemic we encouraged our teams to support their clients with increased levels of interaction. We were proactive in engaging with them to assess their funding requirements both for balance sheet strengthening and for other strategic opportunities arising from the impact of Covid-19. Our connectivity with institutional investors was pivotal in our being able to provide timely and critical advice to our corporate clients.

Our equity trading operation was significantly impacted by the exceptional market volatility in the first half, recording a substantial loss. However, this business has returned to profitability in the second half and continues to trade profitably in the current year to date.

Business review

Overall for the year under review revenues decreased by 10.5% to GBP5.9m (2019: GBP6.6m) and the operating loss was GBP1.4m (2019: operating loss of GBP2.6m). These results were materially impacted by the losses incurred by the equity trading operation in the first half. In the second half, we benefitted from a partial recovery in some of our positions and are continuing to do so in the current financial year. Excluding the losses of the equity trading operation, we would have delivered year on year revenue growth of 7.2%.

Revenue summary

 
 Division                                2020     2019   % change 
                                        GBP'm    GBP'm 
------------------------------------  -------  -------  --------- 
 
 Equities                               (0.5)      0.7    (171.7) 
 Corporate Finance (incl. corporate 
  retainers)                              6.3      5.8        8.6 
 Wealth Management                        0.1      0.1      241.8 
 
 Total Revenue                            5.9      6.6     (10.5) 
 
 

Corporate Finance

 
                                     2020   2019   % change 
----------------------------------  -----  -----  --------- 
 
 Revenue (GBP'm)                      6.3    5.8        8.6 
 
 Number of corporate transactions      22     36     (38.9) 
 Funds raised (GBP'm)                  90     67       34.3 
 Number of corporate clients 
  at year end                          47     55     (14.5) 
 
 

Corporate finance revenue growth of 8.6% resulted from higher average deal fees, rather than an increase in deal volumes. This was partly a function of the market but it also reflected our strategy of increasing our share of fees on transactions in line with our relative performance on them. Deal volumes rose towards the end of the year and continues to do so in the current year. The IPO market also reopened towards the end of the year and we expect this transaction stream to be a focus in 2021.

Retainer revenue from corporate clients was broadly flat year on year, reflecting our efforts to ensure appropriate fees for our retained advisory and broking services. The decrease in client numbers was disappointing, although this was partly the result of M&A and a number of delistings.

Equities

 
              2020     2019         % 
             GBP'm    GBP'm    change 
---------  -------  -------  -------- 
 
 Revenue     (0.5)      0.7   (171.7) 
 
 

The major impact on this divisions' results for the year was the loss made by the equity trading operations in the first half. As a provider of liquidity in more volatile small and mid-cap equities we are exposed to a certain level of systemic risk. However, in the second half we benefitted from a partial recovery in some of our positions which reduced the overall trading loss. Our book is profitable in the current year to date.

Excluding the losses on equity trading, other equity and research income remained broadly flat year on year. The repercussions of MiFID II, introduced in January 2018, will continue to impact this operation for as long as they remain in force in their current guise.

Access to research is a vital part of small and mid-cap investing. Our Research Portal provides investors with the greatest possible access to our corporate client research and is available by registering on our website (www.arden-partners.com). Our research is also available via the ResearchTree portal where it has been repeatedly highly ranked for its quality.

Current trading and outlook

Trading in the current financial year to date has been very encouraging. In the first quarter of the current year we have completed four secondary equity fundraisings (raising GBP51 million) and three M&A transactions. Market sentiment has remained positive, creating a favourable environment for our equities division, notably our equities trading operation.

However, the Covid-19 pandemic continues to disrupt the UK economy and, although recent developments around vaccines are encouraging, we remain cautious. Less volatile equity markets and a strong M&A pipeline gives us confidence of returning to profitability in 2021.

I would like to thank all our clients and shareholders for their continued support and to express the appreciation of the entire Board for the considerable hard work and commitment of our staff.

Donald Brown

Chief Executive Officer

Finance Review

Revenue

Revenue for the full year totalled GBP5.9 million, a decrease of 10.5% on the prior year. Revenue was materially impacted by the losses incurred in the first half by the equity trading operation. Excluding the losses of the equity trading operation, the Company delivered revenue growth of 7.2% for the year.

 
                                   2020   2019   % change 
--------------------------------  -----  -----  --------- 
 
 Revenue (GBP'm)                    5.9    6.6     (10.5) 
 Average number of employees         43     50     (14.0) 
 Revenue per employee (GBP'000)     138    132        4.5 
 
 

Average headcount decreased by 14% in the year as the Board took measures to mitigate the impact of the Covid-19 pandemic on the Group. Through the second half of the year, we have selectively recruited for front-office roles (junior and senior) in areas where we see growth opportunities.

Average revenue per employee is materially distorted by the equity trading losses. Adjusting for these losses shows a substantial growth in this key performance indicator.

Costs

 
                                    2020     2019         % 
                                   GBP'm    GBP'm    change 
-------------------------------  -------  -------  -------- 
 
 Staff costs                         4.0      5.6    (28.1) 
 Non-staff costs                     3.1      3.7    (14.1) 
 Total administrative expenses       7.1      9.3    (22.6) 
 
 Average number of employees          43       50    (14.0) 
 
 

Staff costs include restructuring payments of GBP0.3 million (2019: GBPnil). The reduction in staff costs is the result of the reduced headcount through the year together with the salary and fee sacrifices made by all directors and employees in the year. Salary and fee levels have now been restored to normal levels.

Non-staff costs were also tightly controlled in light of market conditions, with discretionary expenditure substantially reduced. Overall, these costs were reduced by 15.2%.

Liquidity position

The Group's liquidity position (which comprises cash and cash equivalents, long market making equity positions, trade and other receivables) was GBP5.9 million at the year-end (2019: GBP6.9 million). The decrease is primarily due to funding the trading losses for the year.

This cash and cash equivalent position is stated before deducting c.GBP0.6 million of PAYE and VAT payments deferred in accordance with government guidance. Post the year end the deferred PAYE has been repaid in full and the deferred VAT will be repaid in-line with HMRC requirements.

Despite the operating loss, cash at bank as at 31 October 2020 was GBP2.4 million, a similar level to the prior year (2019: GBP2.5 million).

The Directors believe that the liquidity position, which is an alternative performance measure, provides more useful information for shareholders on the underlying liquidity of the Group than the reported net assets number, as it focuses solely on the liquid assets of the Group.

Net asset position and capital adequacy

The Group's net assets at the year-end were GBP4.6 million (2019: GBP6.1 million), the reduction being the result of the loss incurred in the year. The capital adequacy ratio as at 31 October 2020 was 249% (2019: 266%).

The Group holds surplus capital on its balance sheet and continually assesses this position throughout the year. During the year, the Group assessed the liquidity of its capital resources by realising certain assets into cash. This exercise confirmed to the Board that the Group's liquid assets could be accessed, at short notice, should market conditions remain depressed.

Steven Douglas

Group Finance Director

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the year ended 31 October 2020

 
                                              2020     2019 
                                           GBP'000  GBP'000 
----------------------------------------   -------  ------- 
Revenue                                      5,929    6,627 
Administrative expenses                    (7,105)  (9,181) 
Expected credit loss                         (210)     (98) 
-----------------------------------------  ------- 
Loss from operations                       (1,386)  (2,652) 
Finance income                                  44       94 
Finance expense                               (14)        - 
-----------------------------------------  ------- 
Loss before taxation                       (1,356)  (2,558) 
Income tax charge                              (2)      (2) 
-----------------------------------------  -------  ------- 
Loss after taxation                        (1,358)  (2,560) 
Other comprehensive income for the 
 year: 
 Items that will or may be reclassified 
 subsequently to profit or loss: 
  Deferred tax taken to equity                   -      (3) 
Total comprehensive loss for the year 
 attributable to equity shareholders       (1,358)  (2,563) 
=========================================  =======  ======= 
 
Loss per share 
Basic                                       (5.0p)   (8.9p) 
=========================================  =======  ======= 
Diluted                                     (4.9p)   (8.9p) 
=========================================  =======  ======= 
 

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

At 31 October 2020

 
                                             2020     2020     2019     2019 
                                          GBP'000  GBP'000  GBP'000  GBP'000 
-------------------------------  -------  -------  -------  -------  ------- 
Assets 
Non-current assets 
Property, plant and equipment                           71               111 
Right of use assets                                    164                 - 
Deferred tax asset                                       -                 2 
Total non-current assets                               235               113 
----------------------------------------  -------  -------  -------  ------- 
Current assets 
Assets held at fair value 
 through P&L                                1,955             3,043 
Trade and other receivables                 2,464             2,866 
Collateral deposits                            48                 - 
Cash and cash equivalents                   2,400             2,538 
----------------------------------------  -------  -------  -------  ------- 
Total current assets                                 6,867             8,447 
----------------------------------------  -------  -------  -------  ------- 
Total assets                                         7,102             8,560 
----------------------------------------  -------  -------  -------  ------- 
Current liabilities 
Financial liabilities held 
 at fair value 
through P&L                                 (149)             (244) 
Trade and other payables                  (2,199)           (2,258) 
Lease liabilities                            (66)                 - 
Total current liabilities                          (2,414)           (2,502) 
----------------------------------------  -------  -------  -------  ------- 
Non-current liabilities 
Lease liabilities                            (52)                 - 
----------------------------------------  -------  ------- 
Total non-current liabilities                         (52)                 - 
----------------------------------------  -------  -------  -------  ------- 
Total liabilities                                  (2,466)           (2,502) 
----------------------------------------  -------  -------  -------  ------- 
Net assets                                           4,636             6,058 
========================================  =======  =======  =======  ======= 
Shareholders' equity 
Called up share capital                              3,338               3,338 
Capital redemption reserve                             700                 700 
Share premium account                                6,691               6,691 
Employee Benefit Trust reserve                       (182)               (974) 
Retained earnings                                  (4,469)             (2,255) 
----------------------------------------  -------  -------  -------  --------- 
Total equity before deduction 
 of own shares                                       6,078               7,500 
Own shares                                         (1,442)             (1,442) 
----------------------------------------  -------  -------  -------  --------- 
Total equity                                         4,636               6,058 
========================================  =======  =======  =======  ========= 
 
 

CONSOLIDATED STATEMENT OF CASH FLOWS

For the year ended 31 October 2020

 
                                                  2020     2019 
                                               GBP'000  GBP'000 
--------------------------------------------   -------  ------- 
Operating activities before taxation 
Loss before taxation                           (1,356)  (2,558) 
Adjustments for: 
Fair value adjustments                           (252)     (98) 
Depreciation charges - Property, plant 
 and equipment                                      66       71 
Depreciation charges - Right of use 
 assets                                            337        - 
Net interest receivable                           (44)     (94) 
Net interest paid on lease liabilities              14        - 
Share based payment expense                        147       89 
---------------------------------------------  -------  ------- 
Operating cash flow before changes 
 in working capital                            (1,088)  (2,590) 
Decrease in operating assets                     1,691    1,389 
Decrease in operating liabilities                (139)    (252) 
Cash from/(used in) operations                     464  (1,453) 
Income taxes paid                                    -        - 
--------------------------------------------   -------  ------- 
Net cash flows from/(used in) operating 
 activities                                        464  (1,453) 
---------------------------------------------  -------  ------- 
Investing activities 
Purchases of property, plant and equipment        (26)     (78) 
Net interest received                               44       94 
---------------------------------------------  -------  ------- 
Net cash flows from investing activities            18       16 
---------------------------------------------  -------  ------- 
Financing activities 
Payment of lease liability                       (395)        - 
Net interest paid on lease liabilities            (14)        - 
Purchase of own shares                           (211)    (399) 
Dividends paid to equity shareholders                -    (293) 
---------------------------------------------  -------  ------- 
Net cash flows used in financing activities      (620)    (692) 
---------------------------------------------  -------  ------- 
Decrease in cash and cash equivalents            (138)  (2,129) 
Cash and cash equivalents at the beginning 
 of the year                                     2,538    4,667 
---------------------------------------------  -------  ------- 
Cash and cash equivalents at the end 
 of the year                                     2,400    2,538 
=============================================  =======  ======= 
 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the year ended 31 October 2020

 
 
                                                                          Employee 
                                        Share        Capital               Benefit     Available 
                             Share    Premium     Redemption        Own      Trust      for sale    Retained 
                           Capital    Account        Reserve     Shares    Reserve       Reserve    Earnings     Total 
                           GBP'000    GBP'000        GBP'000    GBP'000    GBP'000       GBP'000     GBP'000   GBP'000 
-----------------------  ---------  ---------  -------------  ---------  ---------  ------------  ----------  -------- 
 Balance at 
  31 October 
  2018                       3,338      6,691            700    (1,168)      (849)           (7)         519     9,224 
 Transition 
  adjustment                     -          -              -          -          -             7         (7)         - 
 At 1 November 
  2018 (as restated)         3,338      6,691            700    (1,168)      (849)             -         512     9,224 
 Loss for year                   -          -              -          -          -             -     (2,560)   (2,560) 
 Deferred tax 
  taken to equity                -          -              -          -          -             -         (3)       (3) 
 Total comprehensive 
  income for 
  the year                       -          -              -          -          -             -     (2,563)   (2,563) 
 Contributions by 
  and distributions 
  to owners 
 Dividends                       -          -              -          -          -             -       (293)     (293) 
 Purchase of 
  own shares                     -          -              -      (274)          -             -           -     (274) 
 Purchase of 
  EBT shares                     -          -              -          -      (125)             -           -     (125) 
 Share based 
  payments                       -          -              -          -          -             -          89        89 
 Balance at 
  31 October 
  2019                       3,338      6,691            700    (1,442)      (974)             -     (2,255)     6,058 
 Loss for year                   -          -              -          -          -             -     (1,358)   (1,358) 
                         ---------  ---------  -------------  ---------  ---------  ------------  ----------  -------- 
 Total comprehensive 
  income for 
  the year                       -          -              -          -          -             -     (1,358)   (1,358) 
 Contributions 
  by and distributions 
  to owners 
 Purchase of 
  EBT shares                     -          -              -          -      (211)             -           -     (211) 
 Distribution 
  of EBT shares                  -          -              -          -      1,003             -     (1,003)         - 
 Share based 
  payments                       -          -              -          -          -             -         147       147 
 Balance at 
  31 October 
  2020                       3,338      6,691            700    (1,442)      (182)             -     (4,469)     4,636 
=======================  =========  =========  =============  =========  =========  ============  ==========  ======== 
 

Notes

1. The capital redemption reserve represents the nominal value of shares that have been cancelled that were previously held as Own Shares.

   2.     Own Shares represents shares purchased to be held as treasury shares at historical cost. 

3. The Employee Benefit Trust reserve represents shares held in the parent Company by the Arden Partners Employee Benefit Trust which is consolidated in these financial statements in accordance with the accounting policy in note 1.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the year ended 31 October 2020

   1)        Accounting policies 

Arden Partners plc is a public limited company incorporated in the United Kingdom under the Companies Act 2006.

Basis of preparation

The principal accounting policies applied in the preparation of the financial statements are set out below. The policies have been consistently applied to the Group and Company to all the years presented.

The financial reporting framework that has been applied in their preparation is applicable law and international accounting standards in conformity with the requirements of the Companies Act 2006 and, as regards the parent company financial statements, as applied in accordance with the provisions of the Companies Act 2006.

The Consolidated and Company Financial Statements have been prepared under the historical cost convention as modified by the revaluation of certain financial assets, financial liabilities and derivative instruments to fair value.

The Group continues to adopt the going concern basis in preparing the financial statements.

New standards effective during the year

The Group applies, for the first time, IFRS 16 Leases. The impact of which is set out below.

IFRS 16 Leases

IFRS 16 has been adopted from 1 November 2019 and applied on a modified retrospective basis which recognises a right of use asset at an equal amount to the lease liability, using the Group's current incremental borrowing rate. Comparative figures have not been restated.

The Group made the following additional choices, as permitted by IFRS 16, for existing operating leases:

-- to apply a single discount rate to a portfolio of leases with reasonably similar characteristics.

-- not to bring leases with 12 months or fewer remaining to run as at 1 November 2019 on balance sheet. Costs for these items continue to be expensed directly to the income statement.

-- for all leases, the lease liability was measured at 1 November 2019 as the present value of any future lease payments discounted using the incremental borrowing rate. The Group also excluded any initial direct costs (e.g. legal fees) from the measurement of the right of use assets at transition.

-- to apply the use of hindsight when reviewing the lease arrangements for determination of the measurement or term of the lease under the retrospective option.

The weighted average incremental borrowing rate applied to lease liabilities on 1 November 2019 was 5%.

Right of use assets are initially measured at the amount of the lease liabilities and adjusted by the amount of any prepaid or accrued lease prepayments as at 31 October 2019.

The aggregate lease liability recognised in the Statement of Financial Position at 1 November 2019 and the Group's operating lease commitment at 31 October 2019 is set out below:

 
 
                                                       GBP'000 
 ------------------------------------------------------------- 
   Operating lease commitment at 1 November 2019           538 
   Effect of discounting lease commitments at a rate 
   of 5%                                                  (20) 
   Lease liability at 1 November 2019                      518 
======================================================  ====== 
 
 

Lease liabilities are measured at the present value of the contractual payments due to the lessor over the lease term, with the discount rate determined by 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 assess that option; and

-- Any penalties payable for terminating the lease, if the term of the lease has been estimated on the basis of termination option being exercised.

As permitted under IFRS 16, all leases are accounted for by recognising a right of use asset and a lease liability except for:

   --       Leases with a term of twelve months or less remaining at 1 November 2019 
   --       Lease of low value assets 

Subsequent to initial measurement lease liabilities increase as a result of interest charged at a constant rate on the balance outstanding and are reduced for lease payments made. Right-of-use assets are amortised on a straight-line basis over the remaining term of the lease or over the remaining economic life of the asset if, rarely, this is judged to be shorter than the lease term. When the group revises its estimate of the term of any lease (because, for example, it re-assesses the probability of a lessee extension or termination option being exercised), it adjusts the carrying amount of the lease liability to reflect the payments to make over the revised term, which are discounted at the same discount rate that applied on lease commencement. The carrying value of lease liabilities is similarly revised when the variable element of future lease payments dependent on a rate or index is revised. In both cases 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.

IFRIC 23 Uncertainty Over Income Tax Positions

IFRIC 23 clarifies how to recognise and measure current and deferred income tax assets and liabilities when there is uncertainty over income tax treatments. IFRIC 23 did not have a material impact on the Group.

Standards that have been issued, but are not yet effective for the year ended 31 October 2020 include:

Amendment to IAS 1 and IAS 8: Definition of Material

In October 2018, the International Accounting Standards Board (Board) issued 'Definition of Material (Amendments to IAS 1 and IAS 8)' to clarify the definition of 'material' and to align the definition used in the Conceptual Framework and the standards themselves.

The amendment is effective for periods beginning on or after 1 January 2020.

Amendment to IFRS 3

In October 2018, the International Accounting Standards Board (Board) issued Definition of a Business (Amendments to IFRS 3) to make it easier for companies to decide whether activities and assets they acquire are a business or merely a group of assets.

The amendment is effective for periods beginning on or after 1 January 2020.

Significant accounting policies

Basis of consolidation

Where the Company has control over an investee, it is classified as a subsidiary. The Company controls an investee if all three of the following elements are present: power over the investee, exposure to variable returns from the investee and the ability of the investor to use its power to affect those variable returns. Control is reassessed whenever facts and circumstances indicate that there may be a change in any of these elements of control.

The consolidated financial statements present the results of the Company and its subsidiaries ("the Group") as if they formed a single entity. Intercompany transactions and balances between group companies are therefore eliminated in full.

The Company has taken advantage of Section 408 of the Companies Act 2006, and the Statement of Comprehensive Income of the parent Company is not presented. The parent Company's loss after taxation for the financial year amounted to GBP1,358,000 (2019: loss GBP2,565,000).

Revenue

In accordance with IFRS 15, revenue is recognised to the extent that it is probable that the economic benefits associated with the transaction will flow into the Group. Where consideration includes financial instruments or other non--cash items, revenue is measured at fair value using an appropriate valuation method.

Revenue comprises commission earned on primary, secondary and private capital raising (Corporate placing commission), Corporate Finance advisory fees, Corporate Finance annual retainer fees, the net realised and unrealised trading gains or losses of shares traded on a principal basis, commissions and fees earned from trading shares on an agency basis and Research retainer fees.

Corporate Finance Division

-- Corporate placing commissions are variable fees agreed on a deal by deal basis based on a percentage of the funds raised as part of a transaction. Given that fees related to this work are success based, there is a significant risk of reversal of the variable revenue and therefore the performance obligation is satisfied at a point in time when the transaction is completed. Where there are arrangements in place for an element of revenue to be paid away the cost is recognised in administrative expenses.

-- Corporate Finance advisory fees are only recognised once all performance obligations have been met and there is a contractual entitlement for the Group to receive them for advisory fees this is typically only when a deal completes.

-- Corporate Finance retainer fees are accrued over the period for which the service is provided and are based on a contract between the Group and the client. The negotiated contract price varies by contract and is documented in the contract.

Equities Division

-- Net trading gains or losses are the realised and unrealised profits and losses from market-making long and short positions on a trade date basis and comprise all gains and losses from changes in the fair value of financial assets and liabilities held for trading, together with any related dividend on positions held. Net trading gains or losses also include gains and losses arising on equity options and warrants received in lieu of corporate finance fees.

-- Commission is recognised when receivable in accordance with the date of the underlying transaction. It is variable fee based on a percentage of the transaction and therefore performance obligation is satisfied at the date of the underlying transaction to which the brokerage relates.

-- Research retainer fees are recorded in the period to which they relate and the contract price can be variable from period to period based on the level or standard of research provided. Contracts are in place between the Group and each of its research clients and amounts recorded are either over a period for which the service is provided, or where discretionary based on variable considerations derived from the most recent level of research provided in the previous period updated for recent events or communications with the client.

Interest receivable

Finance income, which comprises principally interest received, is recognised using the effective interest rate method.

Property, plant and equipment

Property, plant and equipment is stated at cost, net of depreciation and impairment in value.

Depreciation is provided to write off the cost, less estimated residual values, of all property, plant and equipment evenly over their expected useful lives on a straight line basis. It is calculated at the following rates:

 
 Improvements to leasehold 
  buildings                                *    33.33% per annum 
 
  Fixtures, fittings and computer 
  equipment 
                                           *    33.33% per annum 
 

Investments in subsidiaries

Investments in subsidiaries are stated at cost less, where appropriate, provision for impairment.

Financial instruments

Financial assets and financial liabilities are recognised in the Group's balance sheet when the Group becomes a party to the contractual provisions of the instrument.

Financial assets

The Company's financial assets comprise trading investments, trade and other receivables, collateral deposits and cash and cash equivalents. The classification of financial assets at initial recognition depends upon the purpose for which they are acquired and their characteristic. Financial assets are measured initially at their fair value.

Financial assets held at fair value through profit or loss are held for trading and are acquired principally for selling. These include market making positions valued at the closing market bid price at the balance sheet date and presented within current asset investments. The change in the value of investments held for trading is recognised in the profit and loss account. Purchases and sales of investments are recognised on trade date with the associated financial assets and liabilities presented as market making counterparty debtors and creditors up to settlement date.

Also included within financial assets held at fair value through profit or loss are derivative assets comprising options and warrants that are initially accounted for and measured at fair value on the date the Group becomes a party to the contractual provisions of the derivative contract and subsequently measured at fair value. The gain or loss on re-measurement is taken to the income statement within revenue, as part of net trading gains or losses. Fair values are obtained from quoted prices prevailing in active markets, including recent market transactions and valuation techniques including discounted cash flow models and option pricing models as appropriate. The fair values of the warrants are determined using the Black Scholes model. These valuation techniques maximise the use of observable market data, such as the quoted share price. The variables used in the valuation includes exercise price, expected life, share price at the date of grant, price volatility and risk-free interest rate.

Gains and losses from the financial assets held at fair value through profit and loss are presented within revenue as equities division income.

Financial assets also include trade and other receivables, collateral deposits and cash and cash equivalents. Trade and other receivables are amounts due from customers for services performed in the ordinary course of business. If collection is expected in one year or less, they are classified as current assets. If not, they are presented as non-current assets.

Trade and other receivables are initially recorded at fair value and thereafter are measured at amortised cost using the effective interest rate.

Impairment provisions for trade receivables are recognised based on the simplified approach within IFRS 9 using the lifetime expected credit losses. During this process the probability of the non-payment of trade receivables is assessed. This probability is then multiplied by the amount of the expected loss arising from default to determine the lifetime expected credit loss for the trade receivables. For trade receivables, which are reported net, such provisions are recorded in a separate provision account with the loss being recognised within administrative expenses in the consolidated statement of comprehensive income. On confirmation that the trade receivable will not be collectable, the gross carrying value of the asset is written off against the associated provision.

Financial liabilities

The Group's financial liabilities comprise trading liabilities and trade and other payables including market making counterparty creditors and provisions. The classification of financial liabilities at initial recognition depends upon the purpose for which they are acquired and their characteristic.

Financial liabilities held at fair value through profit or loss are held for trading and are acquired principally for repurchasing. These include market making positions valued at the closing market offer price at the balance sheet date and presented within current liability investments. The change in the value of investments held for trading is recognised in the profit and loss account.

Non-derivative financial liabilities are initially recognised at fair value less any directly attributable transaction costs. After initial recognition, these liabilities are measured at amortised cost using the effective interest method. The entities' borrowings, trade and most other payables fall into this category of financial instruments. The Group derecognises a financial liability when its contractual obligations are discharged, cancelled, or expire.

Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers and are initially recorded at fair value and thereafter at amortised cost using the effective interest rate method.

Stock borrowing collateral

The Group may enter into stock borrowing arrangements with certain institutions. These are entered into on a collateralised basis with securities or cash advances received as collateral.

Under such arrangements a security is purchased with a commitment to return it at a future date at a future agreed price. The securities purchased are not recognised on the Statement of Financial Position and the transaction is treated as a secured loan made for the purchase price.

Where cash has been used to effect the purchase, the cash collateral amount is recorded as a pledged asset on the Statement of Financial Position.

Foreign currency transactions

Transactions in foreign currencies are translated into sterling at the exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the reporting date are translated into sterling at the exchange rate ruling at the reporting date. Foreign exchange differences arising on translation are recognised in the Statement of Comprehensive Income within administrative expenses.

Taxation

Income tax on the profit or loss for the periods presented comprises current and deferred tax. Income tax is recognised in the Statement of Comprehensive Income except to the extent that it relates to items recognised directly in equity, in which case it is recognised in other comprehensive income.

Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years.

Deferred tax is provided based upon temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the reporting date.

A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised. Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefit will be realised.

Dividends

Dividends are recognised when they become legally payable. Interim dividends are recognised when paid. Final dividends are recognised when approved by shareholders at an Annual General Meeting. Dividends unpaid at the reporting date are only recognised as a liability at that date to the extent that they are appropriately authorised and are no longer at the discretion of the Company.

Own Shares

The cost of purchasing Treasury Shares held by the Company are shown as a deduction against equity and are declared as Own Shares.

Leases

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 twelve months or less. 

Lease liabilities are measured at the present value of the unpaid lease payments discounted using an incremental borrowing rate.

Right of use asset are initially measured at the amount of the lease liabilities plus initial direct costs, costs associated with removal and restoration and payments previously made. Right of use assets are amortised on a straight line basis over the term of the lease.

Lease liabilities are subsequently increased by the interest charge using the incremental borrowing rate and reduced by the contractual payments.

Pension costs

Contributions to defined contribution pension schemes are charged to the Statement of Comprehensive Income in the period in which they become payable.

Government Grants

During the year the Group has received grants from the UK Government in relation to Coronavirus Job Retention Scheme. The income from these grants has been offset against the expense to which it relates.

Employee Benefit Trust

Arden Partners Employee Benefit Trust is a trust established by Trust deed in 2006 and the assets and liabilities are held separately from the Company. Its assets and liabilities are fully consolidated in the consolidated and Company Statements of Financial Position, and holdings of Arden Partners plc shares by the Arden Partners Employee Benefit Trust are shown as a deduction from Company and consolidated equity under the heading "Employee Benefit Trust reserve".

Share based payments - equity settled

All options granted are recognised as an employee expense with a corresponding increase in equity. The fair value is measured at grant date and spread over the period during which the employees become unconditionally entitled to the options. The fair value is measured using the Black-Scholes model, taking into account the terms and conditions upon which the options were granted.

Non-market vesting conditions are taken into account by adjusting the number of equity instruments expected to vest at each reporting date so that, ultimately, the cumulative amount recognised over the vesting period is based on the number of options that eventually vest. Market vesting conditions are factored into the fair value of the options granted. Vesting conditions for all the share option schemes relate to service conditions and profit, which are non market conditions the features of which are not incorporated not the fair value of the option. As long as all other vesting conditions are satisfied, a charge is made irrespective of whether the market conditions are satisfied. The cumulative expense is not adjusted for failure to achieve a market vesting condition.

Where the terms of an equity settled award are modified, an incremental value is calculated as the difference between the fair value of the repriced option and the fair value of the original option at the date of re-pricing. This incremental value is then recognised as an expenses over the remaining vesting period in addition to the amount recognised in respect of the original option grant.

Critical accounting estimates

The preparation of financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts of assets, liabilities, income and expense. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable in the circumstances, the results of which form the basis of judgements about carrying amounts of assets and liabilities. Actual results may differ from those amounts.

Estimates and judgements that may have an effect on the next financial year are discussed below:

Derivative Financial Assets

The equity options are initially accounted for and measured at fair value on the date the Group becomes a party to the contractual provisions of the option contract and subsequently measured at fair value. The gain or loss on re-measurement is taken to the income statement within revenue, as part of net trading gains or losses. The fair value of equity options are estimated by using valuation models such as Black-Scholes.

Expected Credit Losses

The Group has internal processes designed to assess the credit risk profile of its financial instruments, and to determine the relevant stage for calculating the expected credit losses.

For Trade and other receivables, the group has established a provision matrix that incorporates the Groups historical credit loss experience and whether a receivable is overdue or not.

Factors considered in determining whether a default has taken place include how many days past due date a payment is, deterioration in the credit worthiness of a client, and knowledge of specific events that could influence a client's ability to pay.

Incremental borrowing rate

When discounting lease payments if the interest rate is not implicit in the lease the Group uses the incremental borrowing rate, being an estimate of the rate that the Group would have to pay to borrow the funds necessary to obtain an asset of similar value to the right of use asset in a similar economic environment with similar terms, security and conditions.

Share Based Payments

Employee services received, and the corresponding increase in equity, are measured by reference to the fair value of the equity instruments at the date of grant. The fair value of share options is estimated by using valuation models, such as Black-Scholes, on the date of grant based on certain assumptions.

   2)       Revenue 

Revenue is wholly attributable to the principal activity of the Group and arises solely within the United Kingdom.

 
                                                        2020            2019 
                                                     GBP'000         GBP'000 
-------------------------------------------   --------------  -------------- 
           Equities Division                           (538)             751 
           Corporate Finance Division                  6,341           5,839 
           Wealth Management Division                    126              37 
Total revenue                                          5,929           6,627 
--------------------------------------------  --------------  -------------- 
 
Services transferred at a point in time                3,590           4,164 
Services transferred over a period of time             2,339           2,463 
--------------------------------------------  --------------  -------------- 
Total revenue                                          5,929           6,627 
============================================  ==============  ============== 
 

Included within revenue of the Equities Division is a loss of GBP1,296,000 (2019: GBP113,000) derived from the equity trading operation.

Included within revenue of the Equities Division is a profit of GBP252,000 (2019: GBP97,000) relating to the fair value adjustment of warrants held within assets that are fair valued through profit or loss.

Included within revenue of the Equities Division is a profit of GBP300,000 (2019: GBP63,000) relating to the fair value of a warrant over securities which was received as consideration for Corporate Finance services rendered.

The Directors are of the opinion that there are three operating segments and while segment revenues are reviewed internally business resources are not allocated to segments for the purposes of deriving either profit or assets. In 2020, two of the Group's customers contributed revenue of GBP1,525,000, being more than 10% of the Group's total revenue. In 2019, none of the Group's customers contributed revenue of more than 10% of the Group's total revenue.

   3)       Earnings per share 

In addition to the basic earnings per share, underlying earnings per share has been shown because the Directors consider that this gives a more meaningful indication of the underlying performance of the Group. Where applicable, all adjustments are stated after taking into consideration current tax treatment ignoring deferred tax.

 
                                                      Year ended                         Year ended 
                                                    31 October 2020                    31 October 2019 
                                           Pence per       Numerator         Pence per        Numerator 
                                               Share         GBP'000             Share          GBP'000 
-----------------------------------  ---------------  --------------  ----------------  --------------- 
           Loss per share                      (5.0)         (1,358)             (8.9)          (2,560) 
           Add: IFRS2 share-based 
            payments                             0.5             147               0.3               89 
-----------------------------------  ---------------  --------------  ----------------  --------------- 
           Underlying basic loss 
            per share                          (4.5)         (1,211)             (8.6)          (2,471) 
===================================  ===============  ==============  ================  =============== 
 
           Diluted loss per share              (4.9)         (1,358)             (8.9)          (2,560) 
           Add: IFRS2 share-based 
            payments                             0.5             147               0.3               89 
-----------------------------------  ---------------  --------------  ----------------  --------------- 
           Underlying diluted loss 
            per share                          (4.4)         (1,211)             (8.6)          (2,471) 
===================================  ===============  ==============  ================  =============== 
 
 
 
                                          Year ended        Year ended 
                                     31 October 2020   31 October 2019 
                                              Number            Number 
----------------------------------  ----------------  ---------------- 
Denominator 
Weighted average number 
 of shares in issue for 
 basic earnings calculation               27,308,302        28,794,079 
Weighted average dilution 
 for outstanding share 
 options                                     599,862            52,235 
----------------------------------  ----------------  ---------------- 
Weighted average number 
 for diluted earnings calculation         27,908,164        28,846,314 
==================================  ================  ================ 
 

The 1,995,000 (2019: 2,310,700) shares held by the Arden Partners Employee Benefit Trust and 4,304,724 (2019: 4,304,724) shares held in Treasury, being the weighted average number of treasury shares in issue during the year, have been excluded from the denominator.

No adjustment has been made to the diluted loss per share of 4.9p as the dilution effect of the weighted average number of outstanding share options of 599,862 would be to decrease the loss per share.

   4)        Annual Report and Accounts 

Copies of the 2020 Report and Accounts will be posted to shareholders shortly. Copies will also be available from the Company's registered office and from the Company's website www.arden-partners.com

The statutory accounts for the year ended 31 October 2020 will be delivered to the Registrar of Companies in due course.

Statutory accounts for the year ended 31 October 2019 have been delivered to the Registrar of Companies. The auditors' report on those accounts was unqualified, did not draw attention to any matters by way of emphasis, and did not contain a statement under 498(2) or 498(3) of the Companies Act 2006.

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