REG - AssetCo PLC - Prelim Financial Statements for year ended 30/9/23
18/03/2024 07:00
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RNS Number : 1444H AssetCo PLC 18 March 2024
LEI: 213800LFMHKVNTZ7GV45
18 March 2024
For Immediate Release
AssetCo plc
Preliminary Financial Statements for the year ended 30 September 2023
AssetCo plc ("AssetCo" or the "Company"), the agile asset and wealth
management company, today announces its results for the year ended 30
September 2023.
Highlights
• Active equity assets under management as at 30
September 2023 amounted to £2.4 billion (2022: £2.3bn)
• 81% of those assets were in the 1st or 2nd
quartile for investment performance over 3 years (49% over 1 year) when
compared to competitor funds in relevant Investment Association sectors.
• Operating loss for the year £7.7m (after
adjusting for losses on discontinued operations (£14.0m) and exceptional
items (£4.4m)) or £6.7m excluding the River and Mercantile Infrastructure
business. The total loss (i.e. including other statutory items) is £26.7m.
• Definitive action taken before end September 2023
to eliminate £2.3m of costs during this financial year with a further £2-3m
in cost savings identified and currently in course of action.
• Significant value-creating corporate activity with
the acquisition of SVM Asset Management and Ocean Dial (completed immediately
after year end), and sale of loss-making businesses River and Mercantile LLC
in US, Rize ETF Limited, and River and Mercantile Infrastructure (sale
agreed in principle: expected to complete shortly)
• Ocean Dial Asset Management acquisition adds
£0.9m in net revenues from completion (at 2nd October 2023);
• Active equity businesses simplified and
consolidated with heritage asset management activities of SVM, Saracen and
Revera all now trading through River Global Investors
• The weighted average fee rate for AssetCo's
operating businesses improved from 50bp to 56bp during the year, and to 59bp
when Ocean Dial is taken into account.
Martin Gilbert, Chairman of AssetCo, said:
"The financial year ending 30 September 2023 was an exceptionally difficult
one for the asset management sector. UK investor funds under management saw
persistent net outflows across the industry amounting to £34.8bn for FY22/23,
ending the period at £1.38trn, equating to outflows of some 2.5% during the
year. Rising interest rates, inflation and the residual impact from the
pandemic have all contributed to large net retail outflows from UK equities
funds in particular, estimated at £13.6bn, accounting for 39% of total net
outflows across the industry over the period. AssetCo has not been immune from
this pressure and River Global saw outflows from a number of its investment
strategies, particularly UK equities.
The challenging backdrop has required us to take definitive action and we have
cut costs in our equities business and moved to exit other early stage or
loss-making businesses. That has, unfortunately, required us to take
significant write-downs which have impacted our results for the year. The
remaining equities business has been simplified and consolidated however, and
it is encouraging to see an improvement in our fee rates as unprofitable funds
have been merged or closed and inflows have been added at higher fee rates
than outflows. The further action we are taking on costs has enabled us to
identify between £2m and £3m per annum of additional cost savings actionable
over the coming months which, together with the addition of Ocean Dial
revenues, gives us a potential path to financial profitability, subject of
course to reasonably stable markets and assets under management.
The uncertain global economic and political backdrop continues to weigh on
financial markets, although there are tentative signs that overall market
activity may finally be picking up. The Company's main underlying businesses -
River Global and Parmenion - have the financial strength, support and agility
to weather current conditions Our management teams have a wealth of expertise
and a range of products and capabilities which enables them to capitalise on
opportunities as well as meeting the needs of our existing investors and we
continue to see the future potential."
For further details, visit the website, www.assetco.com
Ticker: AIM: ASTO.L
For further information, please contact:
AssetCo plc
Gary Marshall, CFOO
Peter McKellar, Deputy Chairman
Tel: +44 (0) 7788 338157
Deutsche Numis
Nominated adviser and joint broker
Giles Rolls / Charles Farquhar
Tel: +44 (0) 20 7260 1000
Panmure Gordon (UK) Limited
Joint broker
Atholl Tweedie
Tel: +44 (0) 20 7886 2500
H/Advisors Maitland
Neil Bennett
Rachel Cohen
Tel: +44 (0) 20 7379 55151
CHAIRMAN'S STATEMENT
Introduction
The financial year ended 30 September 2023 has been another eventful one for
AssetCo. Substantial progress was made in rationalising and transforming the
business despite considerable market headwinds. While retaining our valuable
interest in Parmenion we have focussed our attention on rationalising and
positioning our recently rebranded River Global equities business for growth.
I have provided more detail on the year's activities below.
A Turbulent Backdrop
Geopolitics continued to unsettle markets during the financial year, with the
Ukraine/Russia conflict showing no signs of abating, now exacerbated by
discord in the Middle East. In addition to the impact of these conflicts,
the ongoing effects from Brexit, inflation and sluggish economic recovery
following the pandemic resulted in a volatile environment for investment
markets. Despite this the FTSE 100 rallied by over 10%(1) during the financial
year, following the lows of the Mini Budget in September 2022. All major
economies narrowly avoided the type of deep recession that characterised
previous downturns and the UK economy defied predictions having posted
moderate growth during the period. Still, UK investor funds under management
saw persistent net outflows across the industry amounting to £34.8bn(2) for
FY22/23, ending the period at £1.38trn, equating to outflows of some 2.5%
during the year. Rising interest rates, inflation and the residual impact from
the pandemic have all contributed to large net retail outflows from UK
equities funds in particular, estimated at £13.6bn, accounting for 39% of
total net outflows across the industry over the period.
Corporate Activity
Notwithstanding the challenging landscape there are some reasons to be
optimistic as the economic uncertainty, coupled with significant discounts on
UK companies also generates opportunity. AssetCo began the financial year with
the completion of the acquisition of SVM Asset Management in October 2022
which significantly expanded the Group's Scottish footprint and facilitated
consolidation of operating facilities in Edinburgh. The Revera and Saracen
businesses moved into the larger SVM offices before the calendar year end,
making an early start to realising cost efficiencies across the Group.
More positive news followed in March, with the announcement of the acquisition
of Ocean Dial Asset Management; that deal completed immediately after the
financial year end on 2 October 2023.
River and Mercantile's loss-making US business was sold, completing in May
2023, and allowing the core business to focus equity management operations
solely in the UK, without the risk and cost of additionally operating in the
US for a very small part of its business.
Exiting Early Stage Businesses
In September 2023 we announced the disposal of our 70% equity interest in
Rize, a thematic ETF specialist, to ARK Invest LLC. That was followed, early
in the new financial year, on 6 October 2023, by the announcement of an
agreement in principle to dispose of our interest in River and Mercantile
Infrastructure LLP ("RMI"). While that transaction has yet to complete, the
business has stabilised and is no longer loss making.
Rize and RMI had suffered significant adverse effects from developments in the
market: Rize from the reversal in fortunes for thematic investment which
followed the war in Ukraine, and RMI additionally and particularly from rising
interest rates in the UK and the crisis in the Liability Driven Investment
(LDI) market sparked by the Mini Budget of September 2022.
Both were early stage businesses which proved slower and later to develop than
had originally been hoped, given the market conditions that prevailed at a
critical stage in their development. We undertook a re-evaluation of their
prospects and, in particular, the potential further investment that would be
required to bring them to profitability. Each was a negative contributor to
the Group during the financial year ending 30 September 2023 and it was
determined to be in shareholders' interests to exit the businesses, thereby
relieving the Group of on-going cash drag going forward.
Although completion of the exit from RMI has not yet taken place, management
focus has otherwise turned exclusively to the integration and management of
the various equity asset management businesses in the Group. Under the
refreshed brand, River Global, the exclusively active equity asset management
activities of the Group are simpler and more immediately coherent. An
environment of risk aversion, limited new business opportunities, and
challenging cost pressures has now persisted for several years. More recently
higher interest rates have been added to the mix and none of these factors
look set to soften imminently or quickly. It is not an environment which
typically favours early stage businesses where timelines to realise
opportunities are pushed out substantially. Your Board has acted decisively to
focus resources on its more established businesses in active equity asset
management. Here, progress is being made on cutting costs and consolidating
funds in order to weather the prevailing climate more successfully and be able
to rapidly leverage an improvement when it comes.
The relatively difficult trading conditions for asset management do create
opportunities for AssetCo in its mission to acquire, improve and grow
otherwise attractive businesses that are experiencing challenges. While we
must be particularly selective in current circumstances, such businesses could
benefit quickly from the consolidated operating model of the Group and we
continue to look actively in this area.
In the Group's equity asset management business, the process of rationalising
and simplifying the operating model has continued during the financial year.
Revera's business merged into Saracen in October 2022 and Saracen's business
subsequently merged into SVM in August 2023. All fund management activities
were consolidated into River Global Investors shortly after the financial year
end, while plans are well underway to consolidate and centralise regulated
authorised corporate director ("ACD") oversight and management activities
under SVM Asset Management which will also rebrand as part of the River Global
stable in due course.
The goal of a consolidated equity asset management business with a centralised
and simplified operating model is therefore clearly within sight and this
framework makes the subsequent integration of Ocean Dial Asset Management a
quicker and easier task.
(1) Source: www.londonstockexchange.com/indices/FTSE100
(2) Industry funds under management includes money invested in the underlying
funds in which funds of funds invest, but excludes money invested in funds of
funds themselves (other than funds of overseas funds) to avoid
double-counting. Data as at 30 Sept 2023.
www.ia.org/industry-data/fund-statistics
Operating Margin Improving
Results for the year reflect the re-structuring referenced above with some
£4.4m incurred in exceptional costs. Setting these to one side in order to
focus on the underlying continuing operations at year end, we see operating
losses of some £7.7m for the year on revenues (plus other income) of £17.3m.
The comparable figures for last year, omitting the distorting effect of the
River and Mercantile acquisition, were losses of £7.5m on revenues plus other
income of £9.0m demonstrating a substantial improvement in operating margin,
albeit still materially negative.
The infrastructure business (RMI) which we are exiting, contributed an
operating loss before exceptionals of c.£1m whereas Ocean Dial, acquired on 2
October 2023, introduced additional revenues of £1.9m together with a cost
base of c.£1m. The run rate for costs (i.e. monthly costs, adjusted for
anomalies and annualised) in the River Global business was estimated to be
c.£1m lower by year end than it had averaged during the year as certain
contractual and other obligations fell away. In addition to that, further
pro-active action was taken before end September 2023 to exit a further £2.3m
of costs thereby rendering them non-recurring from that point.
The consolidation of asset management activities and disposal of other
businesses has facilitated further initiatives on cost saving as less evident
overlaps and inefficiencies are flushed out by teams coming together. We also
plan further fund mergers to merge (or close) smaller funds delivering
operational savings while realising economies of scale for clients and more
attractive propositions for distributors. Our heritage acquisitions leave us
with unnecessary corporate structures which we now plan to rationalise in
order to take further costs out of the business. These further initiatives,
taken together, have enabled us to identify between £2m and £3m per annum of
additional cost savings actionable over the coming months, evidencing a
potential path to financial profitability, subject of course to reasonably
stable markets and assets under management.
Parmenion: a valuable asset
In September, we responded to speculation around the value of our 30% equity
interest before dilution in Parmenion (acquired, in combination with a loan
arrangement, for an initial consideration of £21.9m in October 2021). Since
acquiring our interest, Parmenion has traded strongly in terms of AUM, revenue
and profitability.
Parmenion secured a top three ranking for adviser service in each quarter of
2023 and, despite the challenging markets, delivered strong EBITDA growth in
the year. Its acquisition of EBI last year has gone well with assets under
advice materially ahead of their level at the time of acquisition.
Well Placed to Weather the Storm
The uncertain global economic and political backdrop continues to weigh on
financial markets, although there are tentative signs that overall market
activity may finally be picking up. Whilst the UK continues to languish in the
doldrums, globally inflation continues to surprise on the upside and with
predicted rate cuts ahead, the risk of recession is moderating. The Company's
underlying businesses going forward - River Global and Parmenion - have the
financial strength, support and agility to weather current conditions but it
is only fair to acknowledge the toll that persistent outflows have had on
River Global's business and the reduced resilience that results. We are
confident that the various options available to us to deal with further
adverse conditions are adequate for the foreseeable future but acknowledge the
pressure that puts on the business over the longer term. Our management teams
have a wealth of expertise and a range of products and capabilities which
enables them to capitalise on opportunities as well as meeting the needs of
our existing investors and we continue to see the future potential.
Martin Gilbert
Chairman
15 March 2024
BUSINESS REVIEW
At the end of the financial year to September 2023, the AssetCo Group
encompasses primarily an active equities asset management business, together
with a structured 30% equity interest in a digital platform business.
Active Equities
Active Equities assets under management were £2,409m at September 2023 year
end. From a starting point of £2,291m as at 30 September 2022, SVM, acquired
during October 2022, contributed assets under management of £528m. The
analysis does not include the assets managed by Ocean Dial Asset Management,
which completed immediately after year end.
Movement in assets under management from end September 2022 to end September
2023 is summarised in the following chart:
We estimate the addressable market for the enlarged equity business(3) to be
in the region of £272bn(4), being 64% of the active equities market and a
very large opportunity set. As noted earlier, UK equities have had a very
tough time over the financial year, along with European equities, while in
contrast Global equities have seen moderate inflows. This has been reflected
in our own product suite, with our flagship Saracen Global Income and Growth
Fund growing from just under £100m to £158m over the financial year.
Elsewhere, the Group saw outflows from almost all its UK and European equity
funds, in common with industry experience. The loss of a £190m institutional
mandate in New Zealand in November set a negative backdrop for that side of
the business which otherwise performed relatively well with an inflow of over
£40m to an American mandate in December and modest growth across most other
accounts.
(3)Incorporating active, third party, Indian equity and climate change
strategies
(4)Broadridge, Data as at 30 Sept 23
Performance
Investment performance of the Group's equities open end funds measured at the
end of the financial year to September 2023 was very positive over the
important 3 year period with over 80% of funds (by assets under management)
outperforming peers. Over other periods it was typically more mixed with
roughly half outperforming but, importantly, there were no periods over which
under-performance dominated the picture.
The Saracen Global Income and Growth Fund for example, which has performed
well, is focused on high quality growth investments, but with a very
disciplined approach to the valuation we will pay. It now has the most
industrial and cyclical portfolio since the fund launched in 2011. Corporates
have healthy cash balances and many are investing to reduce costs, improve
efficiencies and to automate. We expect many of these businesses to be less
cyclical in the future, due to their changing business mix and to generate
higher service revenues. This cluster of businesses should perform well once
investor sentiment improves and valuations remain attractive.
The performance picture overall is pleasing in an environment where the value
of active management of equities is constantly under challenge. It is also
testament to the fact that the on-going corporate integration activity and
coming together of the fund management teams has been achieved without
distraction from our core deliverable, being investment returns to clients.
The information above is disclosed in order to allow shareholders to assess
the current performance of our investment strategies. While historical
investment performance is not an indicator of future investment performance,
the long term track records of our strategies give shareholders an indication
of the sustainability of our investment performance across different
investment cycles. Performance data is sourced from: FE Analytics for IA
Sector Peer Group performance. B share class (net of management fees)
performance is used since share class launch for all funds. For any fund
performance prior to the launch of these share classes, performance is chain
linked with the next highest paying fee share class back to the earliest date.
Re-structuring and Integration
A key focus throughout the financial year has been integration of the active
equities businesses and the move to a lower cost operating model. At the
beginning of the year, the active equities business remained largely
fragmented into its legacy components of Saracen, Revera and River and
Mercantile, with SVM joining the Group at end October 2022. By September 2023,
Saracen and Revera had ceased active operations as they were absorbed into the
on-going operating entities and, shortly after year end, all investment
management activities and client contracts were consolidated into the legacy
River and Mercantile business. This has allowed us to eliminate overlaps and
secure economies of scale on enlarged relationships. It also presents a
clearer and stronger team message which has been well received by clients.
As we have progressed into the current financial year as a more integrated
business and with a single team structure, further opportunities for savings
have emerged as ways of working have coalesced. This is enabling us to
eliminate or consolidate some further contractual arrangements which were not
immediately evident, and to ensure that existing services are used
consistently to best effect.
Consolidation of the Group's legacy fund range is well advanced. We managed
and marketed 25 open-ended funds at the beginning of the financial year and by
year end that had been focused into 20 funds by winding up or merging smaller,
uneconomic funds. We have reviewed the fund range further in context of the
more tightly integrated business and advanced plans to reduce the fund range
further to around 16 funds during this financial year, with opportunities for
going further thereafter. The clearer focus that a narrower range of larger
funds brings us increases the effectiveness of our marketing effort, delivers
better value for clients and reduces or eliminates our need to subsidise less
economic funds.
One legacy of integration is the various corporate structures that remain from
previous activities and we have recently embarked on a focused exercise to
eliminate or consolidate a large number of these. These structures currently
absorb operational resource as well as requiring audit, regulatory filings
etc. It follows that reducing their number and scope facilitates further
business savings.
Highlights of our move to a lower cost operating model for the active equities
business include:
· Headcount for the active equities business has moved from 119 at end
September 2022 (including SVM on a pro forma basis) to 79 at end September
2023 - a 34% reduction.
· Equities trading platforms consolidated from 4 to 1
· IT platform delivered under-budget and ahead of schedule moving,
inter alia, from 118 data servers to 18, five internet service providers to
one, and delivering c.£1m in cost savings
Our simplified operating model enables greater and more effective interaction
across our various teams and significantly simplifies the support requirements
for our business - as well as delivering explicit cost savings in its own
right.
Re-branding
River and Mercantile re-branded on 4 December 2023 to "River Global" which
brings together the Group's combined active equity investment talent under a
single fresh and modernised brand. Having strengthened our business through a
series of strategic acquisitions and combined our talent under one brand
identity, we wanted a new name to signify the company's future. River Global
now reflects this unifying strength and alignment.
Alex Hoctor-Duncan, Chief Executive of River Global, commented in the press
that "We have simplified and streamlined our business and product offering to
better meet the needs of our clients. Whilst it hasn't been an easy 18 months
for our industry, we have used that time to consolidate and leverage the
capabilities our acquisitions have brought us. I am confident that River
Global will go from strength to strength, providing top-rated investment
products and excellent service to its clients, underpinned by the
complementary talents of an exceptional team of portfolio managers.".
Ocean Dial Acquisition
We announced the acquisition of Ocean Dial Asset Management in March 2023 and,
having worked to secure regulatory approvals in both UK and India, completed
the acquisition process on 2 October 2023.
Ocean Dial's current business is the management of the assets of the India
Capital Growth Fund Limited, which, as announced on acquisition at 2 October
2023, had an updated net asset value of c.£166m (at 22 September 2023)
generating an annualised run rate revenue for the Group of c.£1.92m. The
announcement of the acquisition in March (which used 28 February 2023 figures)
noted the fund had net assets of c.£127m generating an annualised run rate
revenue of £1.4m. The growth since March 2023 is illustrative of the vibrancy
of the Indian stock market and the attractions of investing in this dynamic
economy.
The acquisition brings with it an important capability for investing in India,
with a small but highly regarded team based in Mumbai. It is an attractive
potential springboard for other emerging market investment in due course. The
India Capital Growth Fund is a prestigious client which we welcome to our
Group and hope and expect to work with to build additional scale over time.
The acquisition is earnings enhancing for the Group and it is anticipated that
further synergies will be achievable as we integrate the business and
capitalise on the operating model we have established.
Corporate Rationalisation
We reached agreement to sell the Group's loss-making US business, River and
Mercantile LLC, in May 2023. The deal eliminated net losses which amounted to
£0.4m in the half year to end March 2023. It allowed us to focus equity
management operations solely in the UK, without the risk and cost of
additionally operating in the US for a very small part of our business.
On 20 September 2023 we announced the disposal of our 70% equity interest in
Rize, a thematic ETF specialist, to ARK Invest LLC. The sale agreement
delivered consideration to AssetCo of an up-front payment of £2.625m, a
deferred payment of £2.625m and an earn out provision, capped at £5.25m,
which will operate over five years and is subject to a minimum, itself
dependent upon certain conditions.
For the year ended 30 September 2023, Rize contributed an operating loss
before tax of £2.4m. The value of goodwill attributed to Rize by AssetCo was
£12m as at 31 March 2023 and we decided to write that value down, before
accounting for sale proceeds. Against this, any earn out from the sale
agreement (capped at £5.25m) will emerge as a positive cash flow in future
years.
The disposal of Rize was followed, early in the new financial year, on 6
October 2023, by the announcement of an agreement in principle to dispose of
our interest in River and Mercantile Infrastructure LLP ("RMI"). The business
generated a loss for the year to September 2023 of £1.0m before non-recurring
items.
Together, disposal of these three businesses is expected to eliminate losses
of c.£4m p.a. going forward.
It is challenging and disappointing to pull out of businesses which ultimately
have potential, and the financial consequences for the Group are evident in
the impact on carrying values which we have had to bear. These were decisions
which were not taken lightly, but market conditions for both Rize and RMI had
worsened dramatically during the financial year and their prospects
deteriorated as a result. Recognising that the operating environment had
changed during the year, to become less accommodating for the Group's initial
model of a more diverse range of businesses with upside potential, we
therefore made the decision to find more supportive homes for these
loss-making fledgling businesses and focus on a core of established, active
equities asset management business.
Digital Platform
The development of Parmenion's business (30% of which was acquired by AssetCo
in October 2021) continued apace in 2023, delivering strong financial results.
In line with overall industry experience, the year to 31 December 2023 was
challenging for Parmenion in terms of net flows with group AUA ending the year
at £11.1bn. Fund flows generally were muted as a consequence of negative
consumer confidence, rising cost of living and a flight to cash products.
However, Parmenion's acquisition of EBI, which completed towards the end of
2022, has bedded in well and ended the year with AUA materially ahead of that
at the time of the acquisition. Operationally and financially, Parmenion
remains in a strong position with adviser service ratings restored to
Parmenion's traditional industry leading position with a top three ranking in
each quarter of 2023 and, despite the challenging markets, strong EBITDA
growth in 2023.
Looking ahead, the pipeline of new business opportunities for Parmenion is the
healthiest it has been for almost two years with active engagement across a
range of existing and potential new business partners. This has undoubtedly
been helped by a number of important propositional enhancements and platform
service developments in response to customer feedback. The propositional
enhancements include expanding the external Discretionary Fund Manager range
to better support partners' centralised investment proposition and also
enhancing the Advisory Models Pro to improve the efficiency of the consent
process. In relation to platform service developments the introduction of a
Platform Switch Service in Q3 of 2023 will facilitate the movement of clients
in bulk from another provider to Parmenion and this together with number of
process efficiency initiatives has added to the attraction of Parmenion as a
business partner of choice for IFAs.
Annualised Revenue Breakdown by Business Type (as at 30 September 2023)
The following table shows the fee rates by business type as at financial year
end September 2023 and therefore just before the inclusion of the Ocean Dial
business within the Group, compared to that for the previous year:
Year to end September 2023 Year to end Sept 2022
Business Type (excluding ODAM) AuM (£m) Gross annualised revenue net of rebates (£'000) Weighted average fee rate, net of rebates (bp) Weighted average fee rate, net of rebates (bp)
Wholesale 1,759 10,645 60 54
Institutional 581 2,131 37 35
Investment Trust 69 470 70 73
Infrastructure 101 690 68 68
Total 2,510 13,936 56 50
It is pleasing to note an overall increase in average fee rate of over 10%
which is partly a reflection of the mix of business (typically higher margin
business being won and lower margin business being lost) and partly a result
of the rationalisation of smaller, uneconomic funds. Ocean Dial makes a
particularly noteworthy positive addition to the Group, operating as it does
at a higher margin as appropriate for its focus on investment in India. The
following table includes Ocean Dial as if it were a part of the Group at 30
September 2023.
Business Type (including ODAM) AuM (£m) Gross annualised revenue net of rebates (£000s) Weighted average fee rate, net of rebates (bp)
Wholesale 1,759 10,645 60
Institutional 581 2,131 37
Investment Trust 235 2,400 76
Infrastructure 101 690 68
Total 2,676 15,866 59
This table excludes the Group's interest in Parmenion (including its ebi
acquisition) which had assets under management or advice of £11.1bn,
generating revenues of £43.2m as at 31 December 2023 (financial year end of
Parmenion).
· Wholesale refers to the active equity assets which are
held and managed in mutual funds distributed by the Group.
· Institutional refers to the active equity assets which
are held and managed in separate accounts on behalf of institutional clients
of the Group.
· Investment Trust refers to the active equity assets which
are held and managed in investment trusts which are clients of the Group.
Gary Marshall
Chief Financial and Operating Officer
15 March 2024
STRATEGIC REPORT
Introduction
The Directors present their Strategic Report on the Group for the year ended
30 September 2023.
Review of the business
A review of the business is contained in the Chairman's statement on page 4
and in the Business Review on page 7 and is incorporated into this report by
cross-reference.
Strategy
The Group's strategy is to identify high-quality asset and wealth management
businesses which can be added to the AssetCo stable and improved by working
alongside our experienced management team to improve their capabilities,
distribution and reach.
Our key areas of focus include being a responsible company and manager,
meeting the needs of clients and investors and to expand through a combination
of selective acquisitions and organic growth.
Key performance indicators (KPIs)
The financial key performance indicators for the year ended 30 September 2023
were as follows:
As at end 30 September 2023 2022 Movement
Active equities assets under Management £2,409m £2,291m +£118m
Total assets (balance sheet) £72.3m £102.8m -£30.5m
Annualised revenue(5) £13.9m £12.9m +£1.0m
Profit/Loss for the year -£26.7m -£8.5m -£18.2m
(i.e. including exceptionals and discontinued business)
Operating profit/loss for continuing business excluding exceptionals(6)for the -£7.7m -£7.5m -£0.2m
year
Investment performance(7) (1 year) 49% 46% +3% points
Investment performance (3 year) 81% 53%(3) +28% points
Alternative Performance Measures ("APMs")
The Group uses non-GAAP APMs as detailed below to provide users of the annual
report and accounts with supplemental financial information that helps explain
its results, recognising the fact that certain acquired businesses have
contributed to the results for only part of the financial year.
The calculation of these APMs has been defined above; the reasons for their
use are as follows:
APM Reason for use
Active equities assets under Management This is a standard industry measure of the scale of our active equity
business. Revenues in that business are typically derived as a percentage of
assets under management making it key to the profitability of the business.
Annualised revenue Given that AssetCo has acquired and/or integrated businesses at different
points during the financial year, the full year's revenues as disclosed in the
statutory accounts do not give a clear picture of what "business as usual"
might look like. Annualised revenues, as defined, allow us to aggregate
revenues across all business units and present a consolidated picture on a
consistent basis. In practice, the actual outturn is dependent upon actual
business experience during the year so this is not a forecast.
Operating profit/loss for continuing business excluding exceptionals for the Much as above, exceptional costs (such as those incurred in re-structuring or
year integrating business after acquisition) obscure the "business as usual"
picture. Excluding them from operating profit/loss allows a better assessment
of the underlying business profitability.
Investment performance Investment performance relative to competitor funds is a standard industry
measure of the competitiveness of the investment funds marketed by the Group.
One and three year measurement periods are considered representative.
5Monthly revenue at date shown (which excludes Ocean Dial) annualised (i.e. x
12)
(6)Operating profit/loss here is defined as revenue plus other income for
continuing business less other administrative expenses but excluding
exceptional and other one-off costs and exceptional gains/losses - see Notes 8
& 9.
(7)% active equity mutual fund AuM in 1st or 2nd quartile when compared to
competitor funds in relevant Investment Association sectors.
Risk Management and Internal Controls
The Board is responsible for the Company's system of internal controls and for
reviewing the effectiveness of the Company's risk management framework.
During the reporting period, the Board has continued to improve the Company's
risk management framework. The Company has adopted a risk management framework
and maintains a risk register which assesses risks facing the Group. The Board
regularly reviews the risk register and obtains assurance from the Executive
Directors as to the effectiveness of the risk management framework.
The sale of loss-making businesses allows the Group to focus on its active
equities business and has helped to strengthen the risk management framework
following the integration of the Group's operating businesses in line with a
new target operating model. The Group's risk management framework is designed
to manage rather than eliminate the risk of failure to achieve business
objectives and can provide only reasonable and not absolute assurance against
material misstatement or loss.
The Directors review the internal control processes on a regular basis.
The Company has established procedures for planning and monitoring the
operational and financial performance of the Group, as well as compliance with
applicable laws and regulations. These procedures include:
• clear responsibilities for financial controls and
the production of timely financial management information;
• the control of key financial risks through clearly
laid down authorisation levels and proper segregation of accounting duties;
• the regular review of business updates, cash flows
and cash balances by management and the Board.
Principal risks and uncertainties
The Directors continuously monitor the business and markets to identify and
deal with risks and uncertainties as they arise. Set out below are the
principal risks which we believe could materially affect the Group's ability
to achieve its strategy. The risks are not listed in order of significance.
Risk Responsibility and Principal Control
Profitability and Dividends: Board/Executive Team:
Profitability remains a key focus for the Group. Delays in profitability in The exit from Rize and the planned exit from RMI, both loss making businesses,
the longer term could threaten the Group's ability to trade on a going concern will help the Group to focus its resources on its active equities business.
basis, impact the Board's ability to fund growth and acquisitions as well as The Group continues to cut costs. The Group is focused on achieving run-rate
the ability to pay dividends. profitability and the Board monitors costs and cash management carefully to
this end.
Distribution: Board/Distribution:
Corporate actions such as acquisitions and business re-structuring can disturb Distributors and markets are carefully targeted and client relationships
existing clients while discouraging new ones. The reduction in the overall monitored to identify and mitigate the risk of loss.
size of the market for active equity asset management has also made increasing
assets under management more difficult.
Performance and Product: Board/Product/Investment Team:
Sustained under-performance or investment style drift could lead to client The Group continually monitors and develops its product suite to ensure that
redemptions as could situations where a fund is considered out-of-date in its it remains competitive and attractive. The Investment Team, in conjunction
positioning or no longer fit for purpose. with Investment Risk, continually monitor fund performance against targets,
including style, taking corrective action where necessary.
Loss of Key People: Board/Remuneration Committee:
The Group has managed most departures on a planned basis but going forwards The Board reviews succession planning for all senior executives. Senior
will need to ensure continued retention of key staff if it is to manage executives are subject to extended notice periods (between six and twelve
client, consultant and regulatory expectations. months). The Group seeks to offer attractive terms as well as a flexible
working environment. The Group has introduced a new Restricted Share Plan to
help retain senior partners and key staff.
Economic Conditions: Board/Executive Team:
Adverse markets were a significant drag on performance in the last year. As an The Group seeks to manage an appropriate balance of fixed and variable costs.
equity specialist the business remains vulnerable to any material fall in In the event of sustained economic downturn, the Group would seek to take
equity markets. early action to cut fixed costs.
Systems and Controls: Board/Operations:
Operating multiple systems across multiple subsidiary and associate companies The Group has developed a detailed controls framework which is being rolled
increases the risk of control failure. Managing multiple service providers out across operating subsidiaries to create a consistent, harmonised approach.
also generates challenges. The Group has consolidated to a single operating model as well as seeking to
rationalise service providers.
ENVIRONMENTAL SOCIAL AND GOVERNANCE
In pursuing its strategy, the Company is committed to a responsible business
approach that delivers positive outcomes and sustainable long-term value to
its stakeholders. In this regard the Company has developed an Environmental
Social and Governance policy statement (the "ESG Policy").
This ESG Policy applies to AssetCo plc ("AssetCo"). AssetCo is a holding
company whose mission is to acquire, manage and operate asset and wealth
management activities and interests, together with other related services (our
"Mission").
In pursuing our Mission, we are committed to a responsible business approach
that delivers positive outcomes and sustainable long-term value to all our
stakeholders and particularly to our clients. At the heart of this is our
ESG Policy which is incorporated into all our decision-making processes.
In framing our ESG Policy we are, and will continue to be, focused on our
clients concerns and needs. We will endeavour to engage with our clients to
understand and accommodate their ESG requirements in terms of the services we
provide.
Our ESG Policy is not static, it will evolve as our business evolves and we
will continually look to improve our ESG Policy in the light of best market
practice and the expectations of our stakeholders.
Environmental
We strive to reduce the impact of our business activities on the
environment. This includes reducing our energy, carbon, water and waste
footprint. In due course we intend to implement systems to track all our major
environmental impacts so that we might assess the effectiveness of our
policies and report to our stakeholders.
Social
We expect to be a responsible member of the community and a force for positive
change. We endeavour to contribute to the community through philanthropic
partnerships, paid internships and encouraging employee volunteering.
Governance
Commensurate with the size of the AssetCo business, we embrace high standards
of integrity, transparency and corporate governance. We foster a culture of
inclusion, diversity of thought and background (including improving our gender
balance) and equal opportunity across our businesses. We treat our staff
with integrity and respect. We are a values-led business and will look to
attract, develop and retain the best talent.
Membership and Reporting
Our ESG agenda is supported by the activities of our operating businesses.
This includes the adoption of the United Nations-backed Principles for
Responsible Investment ("UNPRI") by key subsidiaries and by becoming
signatories to the UK Stewardship Code, to which both River Global Investors
and SVM Asset Management have been accepted by the Financial Reporting Council
("FRC") as signatories. A number of the investment products managed by River
Global Investors have a clear ESG focussed investment process.
We are continuing to evolve our ESG policies across the Group with the
operation of a Sustainability and Stewardship Committee under an independent
Chair to oversee progress in this area.
Acquisitions and Service Providers
Our Mission is largely predicated on an acquisition strategy. In terms of
businesses acquired we will look to ensure that they have or adopt policies
and initiatives which are consistent with our ESG Policy. Likewise, we expect
all significant service providers to AssetCo and its businesses to have in
place policies which are consistent with our ESG Policy.
OUR STAKEHOLDERS: S.172 STATEMENT
Duty to promote the success of the Company
Section 172(1) of the Companies Act 2006 requires Directors to act in the way
they consider, in good faith, would be most likely to promote the success of
the Company for the benefit of its members as a whole, and in doing so have
regard (amongst other matters) to:
• the likely consequences of any decision in the
long-term;
• the interests of the Company's employees;
• the need to foster the Company's business
relationships with suppliers, customers and others;
• the impact of the Company's operations on the
community and the environment;
• the desirability of the Company maintaining a
reputation for high standards of business conduct; and
• the need to act fairly as between members of the
Company.
This Section 172 Statement sets out how the Directors have discharged this
duty.
In order for the Company to succeed in the long-term, the Board must build and
maintain successful relationships with a wide range of stakeholders. The Board
recognises that the long-term success of the Company is dependent on how it
works with a number of important stakeholders.
The Board's decision-making process considers both risk and reward in the
pursuit of delivering the long-term success of the Company. As part of the
Board's decision-making process, the Board considers the interests of a broad
range of the Company's stakeholders. The Board considers that its primary
stakeholders are clients, employees, shareholders, suppliers and service
providers, and regulators.
The Board fulfils its duties in collaboration with the senior management team,
to which day-to-day management has been delegated. The Board seeks to
understand stakeholder groups' priorities and interests. The Board listens to
stakeholders through a combination of information provided by management and
also by direct engagement where appropriate. The following overview provides
further insight into how the Board has had regard to the interests of our
primary stakeholders, while complying with its duty to promote the success of
the Company in accordance with Section 172 of the Companies Act 2006.
Our primary stakeholders How we engage with them
Clients: Our distribution teams have a busy client engagement schedule and maintain
contact with our clients through regular meetings, reporting and written
The Company through its subsidiaries aims to provide investment products that communication. This helps us to understand our clients' needs.
meet the needs of clients and put those needs first.
Members of the senior management team meet directly with key clients to
understand the views of our clients and to ensure that we continue to meet our
clients' expectations.
Client engagement feeds into our regulated subsidiaries assessment that
products and services are fit for purpose and offer fair value in line with
the UK regulator's consumer duty obligations.
Employees: The Group's senior management team is engaged directly with its operating
subsidiaries and regularly participates in face-to-face meetings at management
The Company's employees are senior experienced professionals. It is of the level where open discussion is encouraged. Our subsidiaries have strong
utmost importance to the Board that we have a culture that attracts and leadership and management teams who engage with colleagues in a number of
retains talented employees. ways, including all employee calls and colleague network groups.
We value our diverse workforce and seek inclusion at all levels, with a
recent DEI colleague survey providing actionable insights to how we can
improve this.
The senior management team has focussed on withdrawing from loss making
businesses, the integration of newly acquired businesses into the Group and
the restructuring of certain group functions to better align with business
needs. During this process, due consideration has been given to all
stakeholders, including colleagues, shareholders and our clients.
The Group is proud to support the development of colleagues through training,
study leave and support as well as contributing to our community through the
support of charities, such as The Felix Project.
Shareholders: The Board engages with the Company's shareholders in a number of ways which
include the AGM and one-to-one meetings and telephone conversations. Our AGM
The ongoing support of our shareholders is vital in helping us deliver our allows shareholders the opportunity to engage directly with the Board.
long-term strategic objectives.
The Chairman, Deputy Chairman and CFOO regularly meet (in person and
virtually) the Company's major shareholders to discuss the financial
performance of the Company.
Matters discussed with shareholders include strategy, its execution and the
generation of returns. The views of shareholders have been considered and fed
into the implementation of the cost reduction strategy across the Group.
Suppliers and service providers: The Company is committed to the highest standards of business conduct.
The Company places reliance on external third party suppliers and service The selection process and engagement with these parties is undertaken by
providers for certain activities and services. senior management. We ensure that there is an appropriate framework of
oversight of our key third-party suppliers. Regular meetings are held with key
third-party service providers and issues escalated to senior management where
required. Material supplier selection is reported to the Board and
significant issues or risks related to suppliers will be escalated to the
Board.
As described above, a key focus has been on the integration of the newly
acquired businesses into the Group. Suppliers and service providers have been
reviewed by senior management during this period as part of this project.
Regulators
The Group operates in the UK and is subject to the oversight of the Financial
Conduct Authority. River Global Investors is also registered with the US
Securities and Exchange Commission. We have a conduct-led culture that
encourages our people to act with integrity at all times.
The Company is AIM listed and complies with the AIM Rules. We engage with our
regulators through the Group's legal and compliance function by way of regular
mandatory reporting as well as any ad hoc interactions required by our
regulators.
Community and the environment
Due regard is given to the impact of the Company's operations on the community
and environment through the activities of its subsidiaries overseen by the
senior management team.
Sustainable investing is a key focus for the Group's businesses. River Global
and SVM are signatories to UNPRI and the FRC's Stewardship Code.
The Group aims to make an impact within the communities it operates in through
supporting charitable activities undertaken by employees through a GAYE
payroll scheme, volunteering leave, and colleague-selected charity partners.
The Group have also supported The Switch, an organisation providing Work
Experience placements for students in Tower Hamlets for over 30 years to
provide real life experiences of the world of work and to broaden career
aspirations.
Pages 13 to 20 constitute the strategic report which was approved by the Board
on 15 March 2024 and signed on its behalf by;
Gary Marshall
Chief Financial and Operating Officer
15 March 2024
Company Registration Number: 04966347
BOARD OF DIRECTORS
Martin Gilbert
Chairman
Martin was appointed to the Board on 25 January 2021 as the Company's
Chairman.
Martin Gilbert has a long history in asset and wealth management. He
co-founded Aberdeen Asset Management PLC in 1983 and was chief executive
officer from 1991 to 2017. During that period Aberdeen Asset Management PLC
grew, through a combination of organic growth and strategic acquisition, to
become one of the world's leading independent asset managers with £308
billion of AUM. In 2017 Aberdeen Asset Management PLC merged with Standard
Life plc, to become Standard Life Aberdeen plc. On merging, Standard Life
Aberdeen plc was the biggest UK-based asset management company and the second
biggest in Europe. Martin was co-chief executive officer and subsequently vice
chairman until he retired from Standard Life Aberdeen plc in September 2020.
Martin is chairman of Revolut Ltd, Toscafund and an independent director of
Glencore plc, alongside a number of other directorships.
Skills and competencies:
Martin brings substantial experience and knowledge of the financial services
and asset management sector. He is an experienced leader, having been the CEO
of Aberdeen Asset Management PLC. Martin's breadth of experience in the
financial services sector, understanding of the diverse issues faced when
building an asset management group through acquisitions and his strong
leadership style allow him to lead an effective Board and are vital to the
Company's long-term sustainable success.
Peter McKellar
Deputy Chairman and executive director
Peter was appointed to the Board on 25 January 2021 and is the Company's
Deputy Chairman.
Peter McKellar has spent nearly all of his working career in private markets,
in particular private equity and infrastructure investment management and
direct operating management. He retired in September 2020 as executive
chairman and global head of private markets for Standard Life Aberdeen plc,
where he oversaw investment management activities across private equity,
infrastructure, real estate, natural resources, and certain private credit
capabilities, totalling £55 billion of AUM. Peter is Chairman of Princess
Private Equity Holding Limited, a non-executive director of 3i Group plc,
Investcorp Capital plc and a non-executive member of Scottish Enterprise.
Skills and competencies:
Peter brings significant financial services experience to the Board. Peter's
valuable experience combined with his financial acumen enables him to
effectively contribute to the delivery of the Company's strategy, advise on
cost reduction and is key to the Company's long-term sustainable success.
Gary Marshall
Chief Financial and Operating Officer
Gary was appointed to the Board on 11 October 2022 as the Company's Chief
Financial and Operating Officer.
Gary has worked in the financial services industry since 1983, initially in
life assurance but for almost 30 years in asset management. He joined Aberdeen
Asset Management PLC in 1997 following Aberdeen's acquisition of Prolific
Financial Management and held a variety of roles leading up to his being Head
of EMEA and UK Regions for Standard Life Aberdeen before retiring from that
company in 2021. In his capacity as regional head, Gary served as Chief
Executive for regulated operating subsidiaries based in UK and in Europe; he
also served as Chief Executive and Head of Americas for Aberdeen from 2010 to
2014, based in Philadelphia. Gary brought a strong finance perspective to his
previous roles and developed a deep understanding of the operational
complexities of running a multinational asset management business from years
spent managing and integrating acquired businesses. Gary is a qualified
actuary.
Skills and competencies:
Gary has extensive asset management experience having held a number of senior
roles in a large, well regarded asset management group. He has in-depth
expertise in finance, operations and regulatory compliance. Gary's operational
expertise and his experience of integrating businesses is vital to the Group's
strategy and the long-term sustainable success of the Company.
Jonathan Dawson
Senior Independent Director & Chairman of the Remuneration Committee
Jonathan joined the Board as senior independent director on 15 June 2022 on
completion of the acquisition of River and Mercantile Group PLC, where he had
been chairman for a number of years.
He is a graduate of the universities of St Andrews and Cambridge and started
his career in the Ministry of Defence before joining Lazard, the investment
bank, where he spent over 20 years. He left Lazard in 2005 and co-founded
Penfida Limited, the leading independent corporate finance adviser to pension
fund trustees which is now part of the XPS Group. Jonathan previously served
as a non-executive director and chair of the remuneration committee of
National Grid plc until July 2022. Other previous appointments include
non-executive directorships of Galliford Try plc, National Australia Group
Europe Limited and Standard Life Investments (Holdings) Limited. He also
served as senior independent director of Next plc and Jardine Lloyd Thompson
Group plc.
Skills and competencies:
Jonathan has significant financial services, pensions and non-executive
experience. He brings innovative perspective and independent oversight to the
Board. Jonathan's breadth of experience, knowledge of the business of River
and Mercantile and strong corporate governance expertise contribute to the
effective operation of the Board and long-term sustainable success of the
Company.
Tudor Davies
Non-executive director & Chairman of the Audit Committee
Tudor was appointed to the Board on 23 March 2011 and was Chair of AssetCo
until the re-admission and change in April 2022 when Martin Gilbert took over
the role. After standing down as Chair of the Board, Tudor took over the role
of Chair of the Audit Committee.
Tudor has over 20 years of experience in the repositioning of several Plc's,
as Chair, Chief Executive and Non-Executive Director, and was formerly a
partner with Arthur Young (a predecessor firm of Ernst & Young LLP)
specialising in corporate finance and recovery.
Skills and competencies:
Tudor brings substantial experience to the Board and his knowledge of the
turnaround of businesses allow him to bring a financial and strategic
perspective to a broad range of subjects in support of the Board and its
Committees.
Christopher Mills
Non-executive director
Christopher was appointed to the Board on 23 March 2011.
Christopher is chief executive officer of Harwood Capital Management Limited
and chief executive and investment manager of North Atlantic Smaller Companies
Investment Trust plc. He relinquished his role as Chairman of the Audit
Committee to Tudor Davies when the latter became non-executive.
Skills and competencies:
Christopher has significant asset management experience, having established a
successful asset management business, Harwood Capital. He is a highly regarded
investor and draws on this experience in support of the Board.
DIRECTOR'S REPORT
Introduction
The Directors present their annual report and the audited consolidated
financial statements of the Company and the Group for the year ended 30
September 2023.
Principal activities and business review
The Company's principal activity is to act as a holding company for a group of
wealth and asset management companies. AssetCo plc is a public limited company
registered and domiciled in England and Wales with registered number 04966347.
The Company is listed on AIM and is subject to the AIM Rules. The Group
operates principally in the United Kingdom. A review of the business is set
out in the Strategic Report on pages 14 to 2, which is incorporated by
reference into this report.
Directors
The Directors who were in office during the year, and up to the date of
signing the financial statements, were as follows:
Martin Gilbert (Executive Chairman)
Peter McKellar (Deputy Chairman)
Campbell Fleming (CEO)
resigned 30
June 2023
Gary Marshall (CFOO)
appointed 11 October 2022
Mark Butcher (Non-Executive)
resigned 30 March 2023
Jonathan Dawson (Senior Independent Director)
Tudor Davies (Non-Executive)
Christopher Mills (Non-Executive)
The company secretary up until 23 February 2023 was Sally Buckmaster. From
that date the company secretary has been Gordon Brough.
In accordance with best practice, all Directors will offer themselves for
re-election at the AGM.
Results
The financial statements are set out on pages 49 to 101.
Dividend
Your Board decided against the payment of a dividend this year in light of
adverse trading conditions.
Capital structure
The primary objective of the Company's capital management is to ensure that
capital is available to allocate to the business that maximises shareholder
value.
Full details of the authorised and issued capital, together with details of
the movements in the Company's issued share capital during the year, are shown
in note 32.
Financial risk management
See note 3 to the financial statements.
Research and development
No expenditure has been incurred during the year in respect of the Group's own
research and development activities.
Future developments
The outlook for the Group is set out in the Chairman's Statement.
Directors' shareholdings and interests
The beneficial interests of the Directors in the shares of the Company were as
follows:
At At
30 September 2023 30 September 2022
No. No.
Martin Gilbert 7,283,300 7,283,300
Peter McKellar 3,938,410 3,938,410
Gary Marshall(8) 414,592 -
Jonathan Dawson 347,810 347,810
Tudor Davies(9) 2,073,920 2,073,920
Christopher Mills(10) 21,638,420 20,788,920
No Director had a material interest in any significant contract (other than a
service contract) with the Company or any subsidiary company at any time
during the year.
8 Joined October 2022
9 Tudor Davis has been treated as being interested in shares held by Cadoc
Limited, a company of which he is a director, but which is controlled by other
members of his family.
(10) Christopher Mills, as chief executive and a member of Harwood Capital
LLP, is deemed to have an interest in the 21,638,420 shares owned by various
funds associated with Harwood Capital LLP.
Conflicts of interest
A director has a statutory duty to avoid a situation in which they have or
could have a conflict of interest or possible conflict with the interests of
the Company.
The Company has adopted a policy relating to the handling by the Company of
matters that represent conflicts of interest or possible conflicts of interest
involving the directors. Where a conflict of interest or potential conflict of
interest is identified, only directors that are not involved in the conflict
or potential conflict may participate in any discussions or authorisation
process.
Substantial shareholdings
At 29 February 2024 the company secretary has been notified, in accordance
with Chapter 5 of the Disclosure Guidance and Transparency Rules sourcebook as
issued by the Financial Conduct Authority, of the following interests in 3% or
more in the ordinary share capital of the Company:
No. of shares % of issued share capital
Harwood Capital LLP 20,818,420 14.5%
Psigma Investment Management Limited 12,745,800 8.8%
Hargreaves Lansdown Asset Management Limited 7,686,912 5.3%
Martin Gilbert 7,283,300 5.1%
Somers Limited 7,170,960 5.0%
Lombard Odier Asset Management (Europe) Limited 5,769,174 4.0%
Charles Stanley 5,339,873 3.7%
Richard Griffiths 4,850,402 3.4%
Share buy-back
At a general meeting on 28 September 2022, the Company was granted the
authority by its shareholders to buy back its own shares up to a maximum of
14,929,297. As at 30 September 2023 the Company had purchased 8,283,027 (2022:
72,941) shares with a nominal value of £82,830 (2022: £729) for an aggregate
consideration of £4,887,995 (2022: 50,968).
Political donations
The Group made no political donations or contributions during the year.
Business combinations and disposals
Business combinations and disposals during the year are discussed in note 23.
Post balance sheet events
As mentioned in the Chairman's statement there were two post balance sheet
events. These are set out in more detail in note 37 Post Balance Sheet Events.
Going concern
The Group is currently loss making, albeit with a trajectory that evidences
improving operational losses over time and which affords a pathway to
profitability. Against this background, the Directors have given careful
consideration to the going concern assumption on which the Group's accounts
have been prepared. Having carefully considered the Group's operational and
regulatory requirements, the Directors have concluded that the Group has
adequate financial resources to continue operating for the 12 months from the
date of signing these financial statements. On that basis the Directors have
continued to adopt the Going Concern basis of accounting in preparing the
consolidated Group and Company accounts. Further detail is set out in note 2
to the accounts.
Statement of directors' responsibilities in respect of the financial statements
• The Directors are responsible for preparing the
Annual report and the financial statements in accordance with applicable law
and regulation.
• Company law requires the Directors to prepare
financial statements for each financial year. Under that law the Directors
have prepared the Group and the Company financial statements in accordance
with UK-adopted international accounting standards.
• Under company law, directors must not approve the
financial statements unless they are satisfied that they give a true and fair
view of the state of affairs of the Group and Company and of the profit or
loss of the group for that period. In preparing the financial statements, the
Directors are required to:
o select suitable accounting policies and then apply them consistently;
o state whether applicable UK-adopted international accounting standards
have been followed, subject to any material departures disclosed and explained
in the financial statements;
o make judgements and accounting estimates that are reasonable and prudent;
and
o prepare the financial statements on the going concern basis unless it is
inappropriate to presume that the Group and Company will continue in business.
• The Directors are responsible for safeguarding the
assets of the Group and Company and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities.
• The Directors are also responsible for keeping
adequate accounting records that are sufficient to show and explain the
Group's and Company's transactions and disclose with reasonable accuracy at
any time the financial position of the Group and Company and enable them to
ensure that the financial statements comply with the Companies Act 2006.
• The Directors are responsible for ensuring the
annual report and the financial statements are made available on a website.
Financial statements are published on the company's website in accordance with
legislation in the United Kingdom governing the preparation and dissemination
of financial statements, which may vary from legislation in other
jurisdictions. The maintenance and integrity of the company's website is the
responsibility of the Directors. The Directors responsibility also extends
to the ongoing integrity of the financial statements contained therein.
Directors' confirmations
In the case of each Director in office at the date the Directors' report is
approved:
• so far as the Director is aware, there is no
relevant audit information of which the Group's and Company's auditors are
unaware; and
• they have taken all the steps that they ought to
have taken as a Director in order to make themselves aware of any relevant
audit information and to establish that the Group's and Company's auditors are
aware of that information.
Directors' liability insurance
The Company has entered into deeds of indemnity for the benefit of each
Director of the Company in respect of liabilities to which they may become
liable in their capacity as director of the Company and any company in the
Group. Those indemnities are qualifying third party indemnity provisions for
the purposes of S. 234 of Companies Act 2006 and have been in force from 15
April 2022 (or, if later, the date of the Director's appointment) up to the
date of approval of the financial statements and will continue to be in force.
Independent auditors
During the year the incumbent auditors Price Waterhouse Coopers LLP were
replaced by approval of the Board with BDO LLP. In accordance with section
489(4) of the Companies Act 2006, a resolution to reappoint BDO will be
proposed at the annual general meeting.
Corporate governance
The Company's statement of corporate governance can be found on pages 29 to 35
of these financial statements. The Corporate Governance Statement forms part
of this Report of the Directors and is incorporated by cross-reference. The
Board confirms that it has complied with the requirements of the Quoted
Companies Alliance Corporate Governance Code for small and mid- sized publicly
traded companies, save as disclosed below.
Annual General Meeting
The resolutions to be proposed at the forthcoming Annual General Meeting are
set out in the formal notice of the meeting as set out on pages 102 to 109.
Recommendation
The Board considers that the resolutions to be proposed at the Annual General
Meeting are in the best interests of Company and it is unanimously recommended
that shareholders support these proposals as the Board intends to do in
respect of their own holdings.
Approval of annual report
The Corporate Governance Report, the Strategic Report and the Directors'
Report were approved by the Board on 15 March 2024.
By order of the Board
Gary Marshall
Chief Financial and Operating Officer
15 March 2024
CORPORATE GOVERNANCE REPORT
Dear Shareholder,
The Board recognises the value of good corporate governance in ensuring the
long-term sustainable success of the Company. In accordance with AIM Rule 26,
the Company chooses to report against the Quoted Companies Alliance Corporate
Governance Code for small and mid-sized publicly traded companies (the "QCA
Code 2018"). The QCA has recently announced a number of enhancements to its
Code which will apply from next year and we expect to report on these in next
year's Accounts.
The following Report sets out the Company's governance arrangements and
describes how the ten principles of the QCA Code have been addressed and
provides the disclosures indicated by the Code. The Board has reviewed the
Corporate Governance disclosures and believes that the Group complies with the
principles and disclosures required by the QCA Code, except as otherwise
disclosed below.
Martin Gilbert
Chairman
15 March 2024
QCA Code Compliance
The Company has adopted the QCA Code. The disclosures below describe in detail
how we have applied the QCA Code and where our practices differ from the
expectations of the QCA Code. A formal statement on our compliance with the
QCA Code is set out in the Directors' Report at page 24.
1. Establish a strategy and business model which promote the long term value for Shareholders
The Business Review set out on page 7 and Strategic Report set out on page 13
describe the business model and business objectives which when read with the
Chairman's Statement describe the past year's activity and the desired future
prospects of the Group. Further detail of the strategy is included in the
Directors' Report. The principal risks and uncertainties which may impact the
Group's ability to achieve its strategy are set out on page 15.
2. Seek to understand and meet Shareholders' needs and expectations
The Company, through its Chairman, has regular contact with its institutional
Shareholders to understand their needs and expectations. Christopher Mills is
the CEO of the company's largest shareholder and where appropriate provides
feedback to the Board on that shareholder's view of the Company's
performance. The Board supports the principle that the Annual General
Meeting should be used to communicate with private Shareholders and encourages
them to participate.
Shareholders can access corporate, regulatory, news and share capital
information on the Company's website at www.assetco.com. Enquiries can be
directed to the Board using the corporate e-mail: info@assetco.com
3. Take into account wider stakeholder and social responsibilities and their implications for long term success
Details of the Board's consideration of its stakeholders is set out on pages
17 to 19 (S172 Report).
4. Embed effective risk management, considering both opportunities and threats, throughout the organisation
The Board considers regularly the risks relating to the Company's
activities.
Details of the current risks and uncertainties facing the Company are set out
in the Strategic Report on pages 15 to 16 of this document.
Details of the approach to internal controls and risk management are also set
out in the Strategic Report. The Company does not currently have an internal
assurance function and has appointed a third party to undertake this work on a
case-by-case basis. The Board will continue to review the risk management
framework and assess its effectiveness.
5. Maintain the Board as a well-functioning balanced team led by the Chair
The composition of the Board is considered to be appropriate in terms of the
current development of the Company's business strategy. There is an
appropriate balance between executive and non-executive directors, three of
which were considered by the board to be independent during the accounting
period. There are four Board Committees. The terms of reference for each is
available on the Company's website at www.assetco.com.
Details of meeting frequency and attendance are set out below. All Board
members are expected to attend the Company's quarterly board meetings and
relevant Board Committee meetings and to ensure that they have sufficient time
to allocate to their role. Each Board member has confirmed that he has
sufficient time to perform the role effectively.
6. Ensure that between them the Directors have the necessary up-to-date skills and capabilities
The Directors (biographical details in respect of which are set out on pages
21 to 23 of this document) have a wide range of qualifications and expertise
which is considered appropriate in terms of the implementation of the
Company's strategy. The Board fosters an attitude of independence of character
and judgement. The Company Secretary advises the Board on all governance
matters. All Directors have access to the Company Secretary and the General
Counsel's services and advice. While the Board is satisfied that its Directors
have the appropriate skills and expertise, no disclosure is provided detailing
the steps Directors take to keep their skills up to date. The Board values
diversity and expects to improve its gender balance once financial conditions
improve.
7. Evaluate Board performance based on clear and relevant objectives, seeking continuous improvement
The Board has been focussed on the implementation of the Company's strategy
and the completion of several corporate transactions. In the circumstances,
the Board has not undertaken a formal evaluation process of its effectiveness
during the period but expects to do so in 2024.
8. Promote a corporate culture that is based on ethical values and behaviours
The Board, in developing the Company through the implementation of its new
strategy, will promote a positive corporate culture, and desired ethical
behaviours within the Company, and communicate these across the Group.
Integrity is key to the Group's success and is fundamental to the development
of a conduct led culture across the Group. The Group has a suite of policies
which underpin the Board's expectations of ethical values and behaviours.
9. Maintain governance structures and processes that are fit for purpose and support good decision-making by the Board
The Board is responsible for the Company's system of internal controls and
reviewing its effectiveness. The procedures for planning and monitoring the
operation and performance of the Company, as well as its compliance with
applicable law and regulations, are set out below- under "Corporate
Governance". The Board has formally approved a schedule of matters reserved
for the Board and requires various matters to be escalated from its operating
subsidiaries. The role of Chairman, CEO and Senior Independent Director is
clearly understood and is operating satisfactorily, further disclosure will be
included on the Company's website in due course.
10. Communicate how the Company is governed and is performing by maintaining a dialogue with Shareholders and other relevant stakeholders
The principal method of communicating the Company's corporate governance
process and principles is the Annual Report which is being sent directly to
Shareholders and is available on the Company's website at www.assetco.com.
The Annual General Meeting also provides an opportunity for Shareholders to
address corporate governance matters. Details of the role of the Board's
committees and work undertaken is described below.
Corporate Governance
Leadership and strategy
The Board is responsible for matters of strategy, performance, budgeting and
resources as well as setting standards of conduct and accountability. The
Board has delegated authority for the day to day running of the business to
the Senior Executive Team.
The Board has provided the Group with entrepreneurial leadership and is
responsible for the long-term sustainable success of the Company for the
benefit of its shareholders. The Board has regard for its other stakeholders,
including employees, clients, shareholders, suppliers and service providers
and regulatory authorities. Further detail of this is set out in the Section
172 Statement on pages 17 to 19.
During the period, the Board has focussed on the development and execution of
the Company's strategy. A significant focus has been on the development of,
and execution of, acquisition opportunities, the integration of those
businesses and the reduction of costs in those businesses.
The Board has reviewed and challenged the annual budget during the period. The
Board receives regular reports on the progress of the implementation of cost
reduction strategies and the integration of the active equity businesses onto
a single operating model. The Board regularly reviews the resources required
for the Group's size and complexity.
Board Composition
The Board comprises three Executive Directors and three Non-Executive
Directors.
No individual or group of individuals dominate the Board or its decision
making.
The Board considers Jonathan Dawson to be an independent director for the
purposes of the QCA Code during the reporting period. Jonathan Dawson is the
Senior Independent Director.
Details of the skills and competencies brought by each Director are set out
below their respective biographies.
All Directors are required to stand for re-election on an annual basis at the
Company's annual general meeting in accordance with the Company's Articles of
Association.
The Board, through the Nomination Committee, will continue to review the
Board's composition to ensure that the skills and experience of Directors
support the growth of the Company and the achievement of its strategic
objectives. In doing so, Board diversity will be actively considered.
The Board has determined that it has the appropriate balance of skills and
experience to enable it to effectively lead the Company.
Board and Committee Attendance
During the year, the Board held seven scheduled meetings, which included
meetings to approve specific transactions as well as meetings to approve the
Company's full and half year results. Board and Committee Member attendance
at meetings is set out below:
Director Board Audit Remuneration Nomination
Martin Gilbert 7/7 n/a 2/3 0/0
Christopher Mills 7/7 6/6 3/3 0/0
Jonathan Dawson 6/7 6/6 3/3 0/0
Peter McKellar 7/7 n/a n/a n/a
Gary Marshall 7/7 6/6 n/a n/a
Tudor Davies 7/7 6/6 3/3 0/0
Commitment
The Board requires all Directors to devote sufficient time to their duties and
use their best endeavours to attend all meetings. The Directors' appointment
letters or service contracts (as applicable) set out a minimum time
commitment, which for a non-executive director includes attendance at six
board meetings per annum, attendance at the AGM and additional meetings as
required. The Board is satisfied that each Director has sufficient time to
undertake their duties effectively.
Governance Framework
The Company, consistent with the early stages of the implementation of its
business strategy, has a flat management structure.
The terms of reference of each Board Committee has been reviewed, updated and
approved.
The Board continues to review the governance arrangements across the Group
which are evolving as part of the consolidation and integration work following
the completion of acquisitions.
Operation of the Board
The Board meets regularly: typically six times a year and on an ad-hoc basis
to consider specific items of business as the need arises.
The Chairman, in conjunction with the Executive Directors and Company
Secretary, sets the agenda for each Board meeting. Management information is
delivered ahead of each Board meeting and a comprehensive set of papers is
circulated before Board meetings. The decisions of the Board are formally
minuted.
All Directors have access to the Company Secretary's services and advice.
On certain matters in the year, the Board has sought external advice.
Conflicts of interest
The Board takes action to identify and manage conflicts of interest. Where
conflicts of interest arise, the relevant Director would declare their
interest in the matter and recuse themselves from the discussion and any
related decision.
Delegation of Authority
The Board is responsible for setting strategy, purpose and the direction of
the Company. The Board has delegated to the Senior Executive Team authority
for the day to day running of the business and specific authority (as set out
in the terms of reference of each committee) to the Audit, Remuneration,
Nomination and Disclosure Committees (the "Committees"). The remit of each
Committee is described below.
Audit Committee
Committee Composition
The Audit Committee comprises all the Non-Executive Directors and is chaired
by Tudor Davies (Chair). The Committee members have a mix of financial and
sector experience. The Committee received information and support from the
Executive Directors as well as the Company Secretary in performing its duties.
The Committee's responsibilities
The Audit Committee is focused on the key areas of financial integrity,
internal controls and risk management. This includes:
• review of the financial statements and Annual
Report;
• consideration of the external audit report and
management representation letter;
• going concern review;
• review of the audit plan and audit engagement
letter;
• review of the auditor's fees and non-audit
services;
• review of the risk management and internal control
systems;
• review of the interim results; and
• meetings with the auditors with and without
management present.
The Audit Committee monitors the relationship with the auditors, BDO, to
ensure that the auditors' independence and objectivity are maintained. As part
of its review the Committee monitors the provision of non-audit services by
the external auditors.
The auditors prepare an audit plan for the full-year financial statements. The
audit plan sets out the scope of the audit, areas of special focus and audit
timetable. This plan is reviewed and agreed in advance by the Audit Committee.
Following the audit of the annual financial statements, the auditors present
their findings to the Audit Committee for discussion. Matters of material
estimates and judgement are regularly discussed and are detailed in note 4;
'Critical accounting estimates and judgements'.
Review of activities during the year
During the year ended 30 September 2023 the Audit Committee met 6 times. The
Committee considered:
• The auditor's year-end audit plan;
• The annual report and financial statements for the
year-ended 30 September 2022 and the interim results for the current period to
ensure they were fair, balanced and understandable;
• Significant accounting judgments and estimates;
• Going concern;
• Impairments of investments, goodwill and other
assets; and
• Acquisition accounting for SVM Asset Management
Limited.
Remuneration Committee
Committee Composition
The Remuneration Committee comprises all the Non-Executive Directors and is
chaired by Jonathan Dawson. As the Company is not listed on the Main Market,
it is not subject to the requirements of the Large and Medium-sized Companies
and Groups (Accounts and Reports) (Amendment) Regulations 2013.
The Committee's responsibilities
The Remuneration Committee is tasked with ensuring that Directors and senior
employees are provided with an appropriate package of incentives and rewards
that align personal reward with increased shareholder value over both the
short and longer term. This includes:
• Determining the framework or policy for
remuneration for the Company's Executive Directors and senior management;
• Setting targets for any performance related pay
schemes;
• Overseeing any long term incentive share schemes;
and
• Overseeing major changes in employee benefit
structures.
Review of activities during the year
During the year ended 30 September 2023 the Remuneration Committee met 3
times. The Committee considered matters related to the Restricted Share Plan.
Nomination Committee
Committee Composition
The Nomination Committee comprises all the Non-Executive Directors and is
chaired by Martin Gilbert.
The Committee's responsibilities
The Nomination Committee is responsible for reviewing the structure, size and
composition of the Board and identifying and nominating, for the approval of
the Board, candidates to fill vacancies on the Board as and when they arise.
This includes:
• Responsibility for identifying and nominating for
approval of the Board candidates to fill Board vacancies;
• Evaluating the balance of skills, knowledge and
experience on the Board;
• Considering succession planning for directors and
senior executives; and
• Reviewing the time requirements for Board
positions.
Review of activities during the year
The Nomination Committee did not meet during the year.
Disclosure Committee
The Disclosure Committee is responsible for determining whether information
concerning the Company or its shares constitutes inside information which
should be disclosed to the market and includes the timing of such disclosures
and the approval of the content of such disclosures. The Disclosure
Committee is comprised of Martin Gilbert, Peter McKeller, Gary Marshall and
Gordon Brough, the Company's general counsel. The Disclosure Committee meets
on an ad-hoc basis as required.
The terms of reference for each Committee is available on the Company's
website at www.assetco.com. The entity has taken the exemption from SECR
disclosures given the size, and has not reported on scope 1, 2 or 3 emissions.
The Committees are provided with sufficient resources to discharge their
duties, including access to external advisers where required.
REMUNERATION COMMITTEE REPORT
The following represents the Directors' Remuneration Report for the year to 30
September 2023. As the Company is listed on the Alternative Investment Market
('AIM') we have a number of obligations regarding disclosure which are covered
in full in this report and elsewhere. Our aim is to demonstrate that our
remuneration policy is aligned to the needs of the business and attuned to
shareholders' interests by promoting the long-term success of the firm and
delivery of its strategic plan.
Committee Composition
The Remuneration Committee comprises all the Non-Executive Directors and is
chaired by Jonathan Dawson.
The Committee's responsibilities
The Remuneration Committee is tasked with ensuring that Executive Directors
and senior employees are provided with an appropriate package of incentives
and rewards that align personal reward with increased shareholder value over
both the short and longer term. This includes:
• Determining the framework or policy for
remuneration for the Company's Executive Directors and senior management;
• Setting targets for any performance related pay
schemes;
• Overseeing any long-term incentive share schemes;
and
• Overseeing major changes in employee benefit
structures.
Compensation and Benefit Structure
The Group's main compensation and benefit arrangements are broadly common
across all employees. The components are:
Fixed pay
Basic Salary which is paid monthly in arrears.
Benefits
The Group provides access to a range of core and flexible benefits. Whilst the
intention is to harmonise these across the Group we currently operate a small
number of pension arrangements: a contributory pension scheme of 5% of basic
salary with Company matching, a non-contributory scheme of 10% of basic
salary, or an equivalent allowance. Insured benefits consisting of Life
Assurance (4x basic salary) and Income Protection (66.67% of basic salary) are
also part of the core benefits offering. Employees have access to 30 days
annual leave, in addition to public holidays, and can opt in to private
medical insurance for themselves with the opportunity to add dependants at
their own cost.
Discretionary Bonus
A discretionary cash bonus is considered at financial year end for most staff.
Consideration includes the Group's overall performance along with delivery of
individual performance against objectives including contribution to team and
approach to risk management. Partners and employees of River and Mercantile
Asset Management LLP (now River Global Investors LLP), who comprise the
portfolio management team of one of the main equity asset management
subsidiaries of the Group, instead participate in a profit share arrangement
which allocates a fixed percentage of revenues from the portfolios that they
manage to a profit sharing pool from which all salaries and any discretionary
bonus is paid once certain allocated costs have been deducted. A somewhat
similar revenue sharing arrangement applies for certain other portfolio
managers.
Annual salary review
The Group has remained loss making throughout the year and, accordingly, it
was determined that there would be no universal uplift in salaries. Targeted
increases were awarded to individuals who had taken on additional
responsibilities or had fallen notably behind peer group comparators.
Recognising the challenging operating conditions, the Chief Executive of River
Global voluntarily reduced his fixed pay by 50% during the year and all of the
non-executive Board Directors similarly agreed to substantial reductions in
their compensation as part of an exercise to reduce costs across the Group.
Discretionary Bonus
Once again recognising the challenging operating conditions, discretionary
bonuses were awarded only to a targeted number of employees either in
recognition of an exceptional contribution or to motivate and retain key
individuals.
Restricted Share Plan
The Company announced the adoption of a Restricted Share Plan at the beginning
of November 2023, shortly after the end of the financial year. The Plan is
designed primarily with longer term retention of critical staff in mind and
recognises the fact that the challenging operating conditions provide limited
scope for other more immediate rewards. It is intended to be both simple and
transparent, without pre-conditions that are either complex to measure or
monitor, or capable of becoming misaligned with a developing business. The
simple incentive of alignment with a rising share price was considered to be
the most compelling performance incentive.
The Company awarded rights over up to 5,013,000 ordinary shares of 1p each
("Shares") in the Company (which would represent approximately 3.4 per cent of
the voting share capital of the Company on issue) to be satisfied out of
Shares currently held in Treasury. Vesting of Shares under the Scheme is due
on 1 October 2026 and is subject to usual provisions for malus, clawback and
for apportionment or forfeiture in respect of good and bad leavers prior to
that date at the discretion of the Remuneration Committee.
The 14 recipients are required to serve a full term of three years with the
Remuneration Committee having the power to pro rate on earlier exit where
considered appropriate. The typical award is 1 times salary with a range of
0.75 to 2 times. All shares have been allotted at a notional issue price of
50p.
Directors' remuneration for the year ended 30 September 2023
Salary Pension Bonus Total LTIP/Share Plan
£ £ £ £ £
Martin Gilbert 75,379 7,538 - 82,917 -
Peter McKellar 65,152 6,515 - 71,667 -
Campbell Fleming* 89,205 8,920 - 98,125 -
(resigned effective 30 June 2023)
Gary Marshall* 125,000 12,500 - 137,500 -
Jonathan Dawson 60,000 - - 60,000 -
Tudor Davies 55,000 - - 55,000 -
Christopher Mills 45,000 - - 45,000 -
Mark Butcher 25,000 - - 25,000 -
(resigned effective 31 March 2023)
* Full time employee.
An IFRS 2 accounting charge of £9,000 was accrued in the year ended 30
September 2023 relating to the portion of the Restricted Share Plan awarded in
November 2023 to Gary Marshall.
CONSOLIDATED INCOME STATEMENT
For the year ended 30 September 2023
Note RESTATED
2023 2022
£'000 £'000
CONTINUING OPERATIONS
Revenue 5 14,979 6,285
Cost of sales - -
Gross profit 14,979 6,285
Other income 7 2,321 2,690
Provision against doubtful debt (1,467) -
Other administrative expenses (28,069) (20,387)
Total administrative expenses 8 (29,536) (20,387)
Other gains / (losses) 9 122 (9,732)
Operating (loss) 10 (12,114) (21,144)
Gain on bargain purchase 13 - 3,227
Finance income 14 74 12,393
Finance costs 15 (510) (10)
Finance (loss) / income (436) 12,383
Share of results of associate 24 (352) 181
(Loss) before tax (12,902) (5,353)
Income tax credit 17 195 59
(Loss) for the year (12,707) (5,294)
(Loss) attributable to:
Owners of the parent (12,707) (4,479)
Non-controlling interest - -
(Loss) for the period attributable to continuing operations (12,707) (4,480)
DISCONTINUED OPERATIONS
(Loss) from discontinued operation (attributable to equity holders of the 6 (13,992) (4,062)
company)
Total (Loss) attributable to the owners of the parent during the year (26,699) (8,542)
Continuing operations (loss) per ordinary share attributable to the owners of
the parent during the year
Basic - pence (restated) 18 (9.06) (4.35)
Diluted - pence (restated) 18 (9.06) (4.35)
Discontinued operations (loss) per ordinary share attributable to the owners
of the parent during the year
Basic - pence (restated) 18 (9.98) (3.15)
Diluted - pence (restated) 18 (9.98) (3.15)
Total (Loss) per ordinary share attributable to the owners of the parent
during the year
Basic - pence (restated) 18 (19.04) (7.50)
Diluted - pence (restated) 18 (19.04) (7.50)
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 30 September 2023
Note Restated
2023 2022
£'000 £'000
(Loss) for the year 5 (26,699) (8,542)
Other comprehensive (expense)
Items that may be reclassified to profit or loss
Exchange differences on translating foreign operations - -
Other comprehensive (expense), net of tax - -
Total comprehensive (loss)/ for the year (26,699) (8,542)
Attributable to:
Owners of the parent (26,699) (7,727)
Non-controlling interests - (815)
Total comprehensive (loss) for the year (26,699) (8,542)
CONSOLIDATED AND COMPANY'S STATEMENT OF FINANCIAL POSITION
As at 30 September 2023
Note
RESTATED RESTATED
Group 2023 Group 2022 Company Company
£'000 £'000 2023 2022
£'000 £'000
Assets
Non-current assets
Property, plant and equipment 19 98 32 - -
Right-of-use assets 20 1,534 224 - -
Goodwill and intangible assets 21 13,495 24,600 - -
Investments in subsidiaries 22 - - 38,122 69,921
Investment in associates 24 24,626 22,765 24,797 22,584
Long-term receivables 25 - 1,208 - -
Total non-current assets 39,753 48,829 62,919 92,505
Current assets
Trade and other receivables 26 5,807 9,700 2,502 34
Financial assets at fair value through profit and loss 27 13 37 - -
Current income tax receivable 30 1,159 1,173 - -
Cash and cash equivalents 28 25,573 43,066 3,698 7,394
Total current assets 32,551 53,976 6,200 7,428
Total assets 72,304 102,805 69,119 99,933
Liabilities
Non-current liabilities
Lease liabilities 20 950 - - -
Deferred tax liabilities 33 905 1,070 - -
Total non-current liabilities 1,855 1,070 - -
Current liabilities
Trade and other payables 29 14,347 12,750 13,233 5,853
Lease liabilities 20 697 294 - -
Current income tax liabilities 30 1,465 1,437 1,437 1,437
Total current liabilities 16,507 14,481 14,670 7,290
Total liabilities 18,362 15,551 14,670 7,290
Shareholders' equity
Issued share capital 32 1,493 1,493 1,493 1,493
Share premium 32 209 - 209 -
Capital redemption reserve 32 653 653 653 653
Merger reserve 32 43,063 43,063 43,063 43,063
Other reserve 32 95 - 95 -
Retained earnings 8,429 43,139 8,936 47,434
53,942 88,348 54,449 92,643
Non-controlling interest - (1,094) - -
Total equity 53,942 87,254 54,449 92,643
Total equity and liabilities 72,304 102,805 69,119 99,933
The Company has elected to take the exemption under section 408 of the
Companies Act 2006 not to present the Company income statement. The loss of
the Company for the year was £31,655,000 (Restated 2022: £3,640,000). The
notes on pages 55 to 101 are an integral part of these consolidated financial
statements. The financial statements were authorised for issue by the board of
directors and were signed on its behalf by Gary Marshall.
Gary Marshall
Chief Financial and Operating Officer
15 March 2024
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 30 September 2023
Share capital Share premium Capital redemption reserve Merger reserve Other reserve Retained earnings Total Non-controlling interest Total equity
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Balance at 1 October 2021 843 27,770 653 2,762 5,496 18,892 56,416 (279) 56,137
Restated loss for the year - - - - - (7,727) (7,727) (815) (8,542)
Other comprehensive expense:
Exchange differences on translation - - - - - - - - -
Restated total comprehensive income for the year - - - - - (7,727) (7,727) (815) (8,542)
Shares issued on acquisition (note 32) - - - - -
598 41,301 41,899 41,899
Costs of share issue (note 32) - - - (1,000) - - (1,000) - (1,000)
Share-based payments - LTIP (note 32) - - -
52 4,255 (5,496) - (1,189) (1,189)
Share premium cancellation (note 32) - - -
- (32,025) - 32,025 - -
Shares bought for treasury - - - - - (51) (51) - (51)
Restated balance at 30 September 2022 1,493 - 653 43,063 - 43,139 88,348 (1,094) 87,254
Loss for the year - - - - - (26,699) (26,699) - (26,699)
Other comprehensive expense:
Exchange differences on translation - - - - - - - - -
Total comprehensive income for the year - - - - - (26,699) (26,699) - (26,699)
NCI transfer on sale of Rize ETF Limited - - - - - (1,094) (1,094) 1,094 -
IFRS2 share scheme charge - - - - 95 (95) - - -
Shares bought for treasury - - - - - (6,815) (6,815) - (6,815)
Treasury shares used to settle conversion of loan notes (note 32) - 209 - - - 1,791 2,000 - 2,000
Dividends paid - - - - - (1,798) (1,798) - (1,798)
Balance at 30 September 2023 1,493 209 653 43,063 95 8,429 53,942 - 53,942
COMPANY STATEMENT OF CHANGES IN EQUITY
For the year ended 30 September 2023
Share capital Share premium Capital redemption reserve Merger reserve Other reserve Profit and loss account Total Equity
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Balance at 1 October 2021 843 27,770 653 2,762 5,496 19,101 56,625
Restated loss for the year - - - - - (3,641) (3,641)
Other comprehensive expense:
Exchange differences on translation - - - - - - -
Restated total comprehensive income for the year - - - - - (3,641) (3,641)
Shares issued on acquisition (note 32) 598 - - 41,301 - - 41,899
Costs of share issue (note 32) - - - (1,000) - - (1,000)
Share-based payments
- LTIP (note 32) 52 4,255 - - (5,496) - (1,189)
Share premium cancellation (note 32) - (32,025) - - - 32,025 -
Shares bought for treasury - - - - - (51) (51)
Restated balance at 30 September 2022 1,493 - 653 43,063 - 47,434 92,643
Loss for the year - - - - - (31,655) (31,655)
Other comprehensive expense:
Exchange differences on translation - - - - - - -
Total comprehensive income for the year (31,655) (31,655)
- - - - -
Shares bought for treasury - - - - - (6,836) (6,836)
IFRS 2 share scheme charge - - - - 95 - 95
Treasury shares used to settle conversion of loan notes (note 32) - 209 - - - 1,791 2,000
Dividends paid - - - - - (1,798) (1,798)
Balance at 30 September 2023 1,493 209 653 43,063 95 8,936 54,449
CONSOLIDATED AND COMPANY'S STATEMENT OF CASH FLOWS
For the year ended 30 September 2023
RESTATED RESTATED
Notes Group 2023 Group Company Company
£'000 2022 2023 2022
£'000 £'000 £'000
Cash flows from operating activities
Cash (outflow) from continuing operations 34 (11,201) (15,070) (270) (9,345)
Corporation tax paid (137) (31) - -
Finance costs 15 - (10) - -
Net cash (outflow) from Continuing Operations (11,338) (15,111) (270) -
Net cash inflow / (outflow) from Discontinued Operations 266 (3,247) - -
Net cash (outflow) from total operations (11,072) (18,358) (270) (9,345)
Cash flows from investing activities
Net cash received from acquisitions 23 2,801 42,148 - (1,001)
Payments for acquisition of associates 24 - (21,871) - (21,871)
Interest on loan notes held in associate 7 - 1,977 - 1,977
Dividends received from financial assets held at fair value 14 - 11,459 5,000 11,459
Finance income 14 74 974 - -
Finance costs 15 (14) - - -
Proceeds from sale of investment at fair value through profit and loss 24 1,017
- -
Purchase of property, plant and equipment 19 (114) (15) - -
Purchase of intangibles 21 - (12) - -
Net cash (outflow)/inflow from investing activities 2,771 35,677 5,000 (9,436)
Cash flows from financing activities
Shares issued for cash 32 209 - 209 -
Costs of share issue 32 - (1,000) (1,000)
Dividends paid 32 (1,798) (1,798)
Lease payments (630) (104) - -
Loan from group company - - 5,000
Payments for treasury shares (6,837) (51) (6,837) (51)
Net cash (outflow)/inflow from financing activities (9,056) (1,155) (8,426) 3,949
Net change in cash and cash equivalents (17,357) 16,164 (3,696) (14,832)
Cash and cash equivalents at beginning of year 43,066 26,902 7,394 22,226
Exchange differences on translation (136) - - -
Cash and cash equivalents at end of year 28 25,573 43,066 3,698 7,394
NOTES TO THE PRELIMINARY FINANCIAL STATEMENTS
For the year ended 30 September 2023
General information and basis of presentation
AssetCo Plc ("AssetCo" or the "Company") is the Parent Company of a group of
companies ("the Group") which offers a range of investment services to private
and institutional investors. The Company is a public limited company,
incorporated and domiciled in the United Kingdom under the Companies Act 2006
and is listed on the Alternative Investment Market ("AIM") of the London Stock
Exchange. The address of its registered office is 30 Coleman Street, London,
EC2R 5AL.
The audited preliminary announcement has been prepared in accordance with the
Group's accounting policies as disclosed in the financial statements for the
year ended 30 September 2023 and international accounting standards ('IFRS'),
and the applicable legal requirements of the Companies Act 2006. This
preliminary announcement was approved by the Board of Directors on 15 March
2024. The preliminary announcement does not constitute statutory financial
statements within the meaning of section 434 of the Companies Act 2006.
Statutory accounts for the year to 30 September 2022 have been delivered to
the Registrar of Companies. The audit report for those accounts was
unqualified and did not contain statements under 498 (2) or (3) of the
Companies Act 2006 and did not contain any emphasis of matter.
Certain statements in this announcement constitute forward-looking statements.
Any statement in this announcement that is not a statement of historical fact
including, without limitation, those regarding the Company's future
expectations, operations, financial performance, financial condition and
business is a forward-looking statement. Such forward-looking statements are
subject to risks and uncertainties that may cause actual results to differ
materially. These risks and uncertainties include, amongst other factors,
changing economic, financial, business or other market conditions. These and
other factors could adversely affect the outcome and financial effects of the
plans and events described in this announcement and the Company undertakes no
obligation to update its view of such risks and uncertainties or to update the
forward-looking statements contained herein. Nothing in this announcement
should be construed as a profit forecast.
While the financial information included in this preliminary announcement has
been prepared in accordance with the recognition and measurement criteria of
IFRS, this announcement does not itself contain sufficient information to
comply with IFRSs.
A notice convening the annual general meeting for 24 April 2024 at 10:00 a.m.
will be posted to shareholders in due course.
This Preliminary Announcement is available on the Company's website
www.assetco.com. News updates, regulatory news and financial statements can be
viewed and downloaded from the company's website, www.assetco.com. Copies can
also be requested, in writing, from The Company Secretary, AssetCo plc, 30
Coleman Street, London EC2R 5AL. The Company is not proposing to bulk print
and distribute hard copies of the Annual Report and Financial Statements for
the year ended 30 September 2023 unless specifically requested by individual
shareholders; it will be available for download from the Company's website.
1. Legal Status and Activities
AssetCo Plc ("AssetCo" or the "Company") is the Parent Company of a group of
companies ("the Group") which offers a range of investment services to private
and institutional investors. The Company is a public limited company,
incorporated and domiciled in the United Kingdom under the Companies Act 2006
and is listed on the Alternative Investment Market ("AIM") of the London Stock
Exchange. The address of its registered office is 30 Coleman Street, London,
EC2R 5AL.
The financial statements have been presented in sterling to the nearest
thousand pounds (£000) except where otherwise indicated.
These financial statements were authorised for issue by the Board of Directors
on 15 March 2024.
2. Summary of Significant Accounting Policies
The principal accounting policies applied in the preparation of these
consolidated financial statements, which have been applied consistently with
those applied in the previous year, are set out below.
a. Basis of preparation
The financial statements comply with AIM Rules and have been prepared in
accordance with UK-adopted International Accounting Standards and with the
requirements of the Companies Act 2006 as applicable to companies reporting
under those standards. The financial statements are prepared using the
historical cost convention modified by revaluation of financial assets and
financial liabilities held at fair value through profit and loss. The
accounting policies which follow set out those policies which apply in
preparing the financial statements for the year ended 30 September 2023.
CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
The preparation of financial statements requires management to make estimates
and assumptions that affect the amounts reported for assets and liabilities as
at the balance sheet date and the amounts reported for revenue and expenses
during the year. The nature of estimation means the actual outcomes may differ
from the estimates. Further details on the critical accounting estimates used
and judgements made in preparing these financial statements can be found in
note 4.
NEW AND AMENDED STANDARDS ADOPTED BY THE COMPANY AND GROUP
There have been no new adoptions in the year.
NEW STANDARDS AND INTERPRETATIONS NOT YET ADOPTED
Certain new accounting standards and interpretations have been published that
are not mandatory for 30 September 2023 reporting periods and have not been
early adopted by the Company or the Group, including changes to IAS 1
(Classification of Liabilities as Current or Non-current) and IAS 12 (Deferred
tax related to Assets and Liabilities arising from a single transaction)These
standards are not expected to have a material impact on the Group or Company
in the current or future reporting periods and on foreseeable future
transactions.
GOING CONCERN
The Group is currently loss making, albeit with a trajectory that evidences
improving operational losses over time and which affords a pathway to
profitability. Against this background, the Directors have given careful
consideration to the going concern assumption on which the Group's accounts
have been prepared. Having carefully considered the Group's operational and
regulatory requirements, the Directors have concluded that the Group has
adequate financial resources to continue operating for the 12 months from the
date of signing these financial statements. On that basis the Directors have
continued to adopt the Going Concern basis of accounting in preparing the
consolidated Group and Company accounts.
As part of this review, the Directors have prepared projections rolling
forward more than two years from the date of signing for the Company and Group
under several scenarios from growth to stressed environments. The latter
includes a fall of 30% in assets under management over the 2024 financial
year. Those projections were subject to challenge and review to ensure that
appropriate stresses were applied to the projections with key drivers to the
stress scenarios taking account of the principal risks and uncertainties
identified in the Risk Management section of the Strategic Report on page 14.
For the purpose of this assessment, management made conservative assumptions
regarding future growth, assuming both nil growth and further reductions in
revenue. The ability to achieve cost saving measures and the reasonableness of
the stress testing applied was considered in the light of those assumptions.
Sensitivity analysis and modelling to take account of specific one-off risks
to the Group and Company was undertaken in line with the principal risks and
uncertainties.
In the event that profitability is not achieved, there will be an increased
risk to the going concern assessment in subsequent reporting periods. The risk
should be considered in the context that the Group has no external debt and
had net cash at 31 January 2024 of £12.6m. The Group is required to hold a
minimum level of regulatory capital together with a buffer of at least a 10%
at all times.
The Directors also acknowledge less resilience within the Group to one-off
shocks and macroeconomic events while losses continue. Principal risks and
uncertainties are set out in the Strategic Report on page 15. Current
initiatives, outlined in the Chairman's Statement and Business Review, will
deliver further cost savings and the Directors are committed to additional
cost saving initiatives as necessary to respond to future business
developments. Should there be a need for additional capital, the directors
have the option of seeking to raise additional capital, of considering
potential partnerships or of re-structuring the business. AssetCo also has a
structured 30% equity interest in Parmenion. An independent valuation
concluded that AssetCo's equity interest had a value of between £75 and 90m
(or 53p to 64p per share) at that time (end August 2023).
b. Principles of Consolidation and Equity Accounting
SUBSIDIARIES
Subsidiaries are all entities (including structured entities) over which the
Group has control. The Group controls an entity where the Group is exposed to,
or has rights to, variable returns from its involvement with the entity and
has the ability to affect those returns through its power to direct the
activities of the entity. Subsidiaries are fully consolidated from the date on
which control is transferred to the Group. They are deconsolidated from the
date that control ceases.
The acquisition method of accounting is used to account for business
combinations by the Group (note 23).
Inter-company transactions, balances and unrealised gains on transactions
between Group companies are eliminated. Unrealised losses are also eliminated,
unless the transaction provides evidence of an impairment of the transferred
asset. Accounting policies of subsidiaries have been changed where necessary
to ensure consistency with the policies adopted by the Group.
Non-controlling interests in the results and equity of subsidiaries are shown
separately in the consolidated statement of profit or loss, statement of
comprehensive income, statement of changes in equity and balance sheet
respectively.
CHANGES IN OWNERSHIP INTERESTS
The Group treats transactions with non-controlling interests that do not
result in a loss of control as transactions with equity owners of the Group. A
change in ownership interest results in an adjustment between the carrying
amounts of the controlling and non-controlling interests to reflect their
relative interests in the subsidiary. Any difference between the amount of the
adjustment to non-controlling interests and any consideration paid or received
is recognised in a separate reserve within equity attributable to owners of
AssetCo plc.
INVESTMENT IN ASSOCIATED COMPANIES
Associates are all entities over which the Group has significant influence but
not control or joint control. This is generally the case where the Group holds
between 20% and 50% of the voting rights. Investments in associates are
accounted for using the equity method of accounting where the investments are
initially recognised at cost and adjusted thereafter to recognise the Group's
share of post-acquisition profits or losses of the investee in profit or loss,
and the Group's share of movements in other comprehensive income of the
investee in other comprehensive income. Dividends received from associates are
recognised as a reduction in the carrying value of the investment. The Company
recognises the holding in associates at cost.
The Company and Group recognises interest received on loan instruments held in
the investee company as other income. The Group holds loan notes in the
corporate owner of its associate, Parmenion. These loan notes carry a coupon
of 10%. The accounting for this interest is set out in note 7. There are no
repayment dates for the loan notes until 2050 and the Group carries the loans
at amortised cost.
ACCOUNTING POLICY CHOICE FOR NON-CONTROLLING INTERESTS
The Group recognises non-controlling interests in an acquired entity either at
fair value or at the non-controlling interest's proportionate share of the
acquired entity's net identifiable assets. This decision is made on an
acquisition-by-acquisition basis. For the non-controlling interests in Rize
ETF Limited, the Group elected to recognise the non-controlling interests at
the proportionate basis of the acquired net identifiable assets. See note 2
for the Group's accounting policies for business combinations.
c. Revenue Recognition
IFRS 15 specifies the requirements that an entity must apply in order to
measure and recognise revenue and its related cash flows. The core principle
of the standard is that an entity should recognise revenue at an amount that
reflects the consideration to which the entity expects to be entitled in
exchange for transferring promised goods or services to a customer.
The standard includes a five-step model for recognising revenue as follows:
Identifying the contract with the customer; identifying the relevant
performance obligations of the contract; determining the amount of
consideration to be received under the contract; allocating the consideration
to the relevant performance obligation; and accounting for the revenue as the
performance obligations are satisfied.
The Group's primary source of income is made up as follows:
MANAGEMENT FEES
Gross management fees from investment management activities. These fees are
generally based on an agreed percentage, as per the management contract, of
the AuM and are recognised in the same period in which it is provided. Under
the requirements of IFRS 15 revenue is presented net of rebates.
MARKETING FEES
Marketing fees are from marketing thematic ETFs. These marketing fees are
generally based on an agreed percentage, as per the contract, of the AuM and
are recognised in the same period in which it is provided. Services are
provided to the Manager of the ETF funds as a Marketing Agent for the funds
and as such recognised at the time that services are provided.
For all revenue streams, the Group acts as principal and therefore recognises
revenue gross with any related expenses presented in Administrative expenses.
The Group had four segments for the year ended 30 September 2023; Active
Equities, Infrastructure Asset Management, Exchange Traded Funds and Digital
Platform. Whilst revenue is generated in each of the first three segments,
with regard to AuM in the Active Equities and Infrastructure Asset Management
segments, the assets are managed by the Group. In Exchange Traded Funds, the
Group does not take part in the management as our focus is on providing
clients with access to the funds in particular themed sectors. The Digital
Platform is operated via an associated company.
d. Other Items in the Income Statement Cost of Sales
Cost of sales in the prior year income statement included those costs directly
related to creating and maintaining Exchange Traded Funds which were
principally staff costs and marketing costs. In the current year income
statement these costs have been included within administrative expenses to
align with the classification of similar costs within the Group.
Other income
Other income consists primarily of interest on loan notes held in associate.
Other gains or losses
The Group includes in this heading those items such as movement on fair value
investments.
Exceptional Items
Exceptional items are those items which are outside the normal course of
business, whether income or cost, which are material by nature or amount and
which are not expected to recur. Specific costs included are; one-off
redundancy costs relating to the Group's restructuring plans, specific one-off
retention bonuses issued by River and Mercantile Group PLC prior to its
acquisition and a one-off provision with regards to the infrastructure
business.
e. Foreign Currency Translation
Functional and presentation currency
Items included in the financial statements of each of the Company's businesses
are measured using the currency of the primary economic environment in which
the entity operates ("the functional currency"). The financial statements are
presented in sterling (£), which is the Company's and the Group's functional
and presentation currency. There has been no change in the Company's
functional or presentation currency during the year under review.
Foreign operations translation
The financial statements are prepared in sterling. Income statements of
foreign operations are translated into sterling at the average exchange rates
for the year and balance sheets are translated into sterling at the exchange
rate ruling on the balance sheet date. Foreign exchange gains or losses
resulting from such translation are recognised through other comprehensive
income.
Other transactions and balances
Other foreign currency transactions are translated into the functional
currency using the exchange rates prevailing at the dates of the transactions.
Foreign exchange gains and losses resulting from the settlement of such
transactions and from the translation at year-end exchange rates of monetary
assets and liabilities denominated in foreign currencies, other than those
held in foreign operations, are recognised in the income statement.
f. Segment Reporting
Operating segments are reported in a manner consistent with the internal
reporting provided to the chief operating decision-maker. The chief operating
decision-maker, who is responsible for allocating resources and assessing
performance of the operating segments, has been identified as the board of
directors.
g. Intangible Assets
Goodwill
Goodwill is measured as described in note 23 Business Combinations. Goodwill
arising on acquisition of subsidiaries is not amortised but it is tested for
impairment annually, or more frequently if events or changes in circumstances
indicate that it might be impaired and is carried at cost less accumulated
impairment losses. Gains on the bargain purchase of an entity, where the
purchase consideration is less than the fair value of net assets acquired, is
taken to the income statement at the time of acquisition. Gains and losses on
the disposal of an entity include the carrying amount of goodwill relating to
the entity sold.
Goodwill is allocated to cash-generating units for the purpose of impairment
testing. The allocation is made to those cash-generating units or groups of
cash-generating units that are expected to benefit from the business
combination in which the goodwill arose. The units or groups of units are
identified at the lowest level at which goodwill is monitored for internal
management purposes, being the legal entity (note 21).
Brands
Separately acquired brands are shown at historical cost. Brands acquired in a
business combination are recognised at fair value at the acquisition date.
They have a finite useful life and are subsequently carried at cost less
accumulated amortisation and impairment losses.
Amortisation on assets is calculated using the straight-line method to write
down their cost to their residual values over their estimated useful lives
over 5 - 10 years.
Software
Costs incurred on internally developed computer software are initially
recognised at cost, and when the software is available for use, the costs are
amortised on a straight-line basis over an estimated useful life of between
two and five years. Initial research costs and planning prior to a decision to
proceed with development of software are recognised in the Consolidated
statement of comprehensive income when incurred on acquisition.
Customer relationships
Intangible assets are recognised where client relationship contracts are
either separately acquired or acquired with investment managers who are
employed by the Group. These are initially recognised at cost and are
subsequently amortised on a straight-line basis over their estimated useful
economic life. Separately acquired client relationship contracts are amortised
over 11 years.
Website development
Development costs payable to third parties that are directly attributable to
the design and testing of new features of websites used by Group companies are
capitalised. No internal costs in relation to website development are
capitalised. Capitalised development costs are recorded as intangible assets
and amortised from the point at which the asset is ready for use.
Amortisation on website development costs is calculated using the
straight-line method to write down their cost to their residual values over
their estimated useful lives over a maximum of 10 years.
Costs associated with maintaining software programmes are recognised as an
expense as incurred.
h. Financial Instruments
Financial assets
Investments and other financial assets
Classification
The Group classifies its financial assets in the following measurement
categories:
• those to be measured subsequently at fair value
(either through other comprehensive income or through profit or loss); and
• those to be measured at amortised cost.
The classification depends on the Company's business model for managing the
financial assets and the contractual terms of the cash flows. For assets
measured at fair value, gains and losses will be recorded either in profit or
loss or in other comprehensive income.
For investments in equity instruments that are not held for trading, this will
depend on whether the Group has made an irrevocable election at the time of
initial recognition to account for the equity investment at fair value through
other comprehensive income (FVOCI).
Recognition and de-recognition
Regular way purchases and sales of financial assets are recognised on trade
date being the date on which the Group commits to purchase or sell the asset).
Financial assets are derecognised when the rights to receive cash flows from
the financial assets have expired or have been transferred and the Group has
transferred substantially all the risks and rewards of ownership.
Measurement
At initial recognition, the Group measures a financial asset at its fair value
plus, in the case of a financial asset not at fair value through profit or
loss (FVPL), transaction costs that are directly attributable to the
acquisition of the financial asset. Transaction costs of financial assets
carried at FVPL are expensed in profit or loss.
Equity instruments
The Group subsequently measures all equity investments at fair value. Where
the group's management has elected to present fair value gains and losses on
equity investments in OCI, there is no subsequent reclassification of
fair value gains and losses to profit or loss following the de-recognition of
the investment. Dividends from such investments continue to be recognised in
profit or loss as investment income when the group's right to receive payments
is established.
Changes in the fair value of financial assets at FVPL are recognised in
investment income in the statement of profit or loss as applicable. Impairment
losses (and reversal of impairment losses) on equity investments measured at
FVOCI are not reported separately from other changes in fair value.
Trade receivables
Trade receivables are recognised initially at fair value and subsequently
measured at amortised cost using the effective interest method.
The Group has applied the IFRS 9 simplified approach to measuring expected
credit losses for trade receivables. Under this approach a provision is made
for lifetime expected credit losses for the trade receivable. For calculation
of expected credit losses the trade receivables are grouped based on the
number of days past due. Expected credit losses on trade receivables that are
not past due are primarily based on actual credit losses from recent years.
Cash and cash equivalents
Cash and cash equivalents include cash in hand and deposits held on call with
banks..
Financial liabilities
A financial liability is any liability that is a contractual obligation to
deliver cash or another financial asset to another entity or to exchange
financial assets or financial liabilities with another entity under conditions
that are potentially unfavourable to the Company.
An equity instrument is a contract that evidences a residual interest in the
assets of an entity after deducting all of its liabilities. Financial
liabilities and equity instruments are classified according to the substance
of the contractual arrangements entered into. Financial liabilities are
classified as such in the balance sheet.
Finance costs and gains or losses relating to financial liabilities are
included in the income statement. Finance costs are calculated so as to
produce a constant rate of return on the outstanding liability. Where the
contractual terms of share capital do not have any terms meeting the
definition of a financial liability then this is classed as an equity
instrument. Dividends and distributions relating to equity instruments are
debited direct to equity.
Trade payables
Trade payables are recognised initially at fair value and subsequently
measured at amortised cost using the effective interest method. Trade payables
represent amounts owed to suppliers for professional services, utilities,
office supplies and any other goods provided to the Group.
i. Equity
Issued share capital
Ordinary shares are classified as equity. Costs directly attributable to the
issue of new shares or options are shown in equity as a deduction, net of tax,
from the proceeds.
Share premium
The share premium account represents the excess over nominal value of the fair
value of consideration received for equity shares, net of expenses of the
share issue.
Purchase of own shares
Where the Company purchases the Company's equity instruments (for example, as
the result of a share buy- back), and the shares are cancelled, the
consideration paid, including any directly attributable incremental costs (net
of income taxes), is deducted from equity attributable to the owners of
AssetCo plc and the relevant amount transferred to a capital redemption
reserve.
Where the Company purchases the Company's equity instruments for the purpose
of holding them as treasury shares then the amount is transferred to retained
earnings. Any incidental costs arising on purchase of Treasury shares are
recognised in the profit and loss account immediately.
On 28 September 2022 the Company was granted authority by shareholders to
purchase up to 10% of the outstanding ordinary shares in the Company. By 30
September 2023 the Company has held 8,283,027 (2022: 72,941) shares with a
nominal value of £82,830 (2022: £729) for an aggregate consideration of
£4,887,995 (2022: 50,968).
Merger Reserve
A merger reserve arises when the Company issues equity in respect of acquiring
substantially all the equity in another entity. As required by the Companies
Act 2006 the excess over the par value of the shares is credited to Merger
Reserve rather than Share Premium.
Other Reserves
Other reserves represent the amount of share capital which may become issuable
when shares vest under the Company's LTIP (see note 36). This reserve is no
longer required now that the LTIP has been discontinued.
j. Dividends
Dividends payable are recognised as a liability in the year in which they are
authorised. An interim dividend is recognised when it is approved and paid and
a final dividend is recognised when it has been approved by shareholders at
the annual general meeting. Dividends receivable are recognised on the date
given by the investee company as the ex- dividend date.
k. Earnings Per Share
Basic earnings per share
Basic earnings per share is calculated by dividing:
• the profit attributable to owners of the Company,
excluding any costs of servicing equity other than ordinary shares;
• by the weighted average number of ordinary shares
outstanding during the financial year, adjusted for bonus elements in ordinary
shares issued during the year and excluding treasury shares
Diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of
basic earnings per share to take into account:
• the after-income tax effect of interest and other
financing costs associated with dilutive potential ordinary shares; and
• the weighted average number of additional ordinary
shares that would have been outstanding, assuming the conversion of all
dilutive potential ordinary shares.
l. Leases
Assets and liabilities arising from a lease are initially measured on a
present value basis. Lease liabilities include the net present value of the
following lease payments:
• Fixed payments (including in-substance fixed
payments), less any lease incentives receivable;
• Variable lease payments that are based on an index
or a rate, initially measured using the index or rate as at the commencement
date;
• Amounts expected to be payable by the Company
under residual value guarantees;
• The exercise price of a purchase option if the
Company is reasonably certain to exercise that option; and
• Payments of penalties for terminating the lease,
if the lease term reflects the Company exercising that option.
Lease payments to be made under reasonably certain extension options are also
included in the measurement of the liability.
The lease payments are discounted using the interest rate implicit in the
lease. If that rate cannot be readily determined, the lessee's incremental
borrowing rate is used, being the rate that the individual lessee 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.
Right-of-use assets are measured at cost comprising the following:
• The amount of the initial measurement of lease
liability;
• Any lease payments made at or before the
commencement date less any lease incentives received;
• Any initial direct costs; and
• Restoration costs.
Right-of-use assets are generally depreciated over the shorter of the asset's
useful life and the lease term on a straight-line basis. If the Company is
reasonably certain to exercise a purchase option, the right-of-use asset is
depreciated over the underlying asset's useful life.
Payments associated with short-term leases of equipment and vehicles and all
leases of low-value assets are recognised on a straight-line basis as an
expense in profit or loss. Short-term leases are leases with a lease term of
12 months or less.
The main leasing activities undertaken by the Company are rental of office
buildings in the UK.
m. Business Combinations
The acquisition method of accounting is used to account for all business
combinations, regardless of whether equity instruments or other assets are
acquired. The consideration transferred for the acquisition of a subsidiary
comprises the:
• fair values of the assets transferred;
• liabilities incurred to the former owners of the
acquired business;
• equity interests issued by the Group;
• fair value of any asset or liability resulting
from a contingent consideration arrangement; and
• fair value of any pre-existing equity interest in
the subsidiary.
Identifiable assets acquired and liabilities and contingent liabilities
assumed in a business combination are, with limited exceptions, measured
initially at their fair values at the acquisition date. The Group recognises
any non-controlling interest in the acquired entity, on an
acquisition-by-acquisition basis, either at fair value or at the
non-controlling interest's proportionate share of the acquired entity's net
identifiable assets.
Acquisition-related costs are expensed as incurred. The excess of the:
• consideration transferred;
• amount of any non-controlling interest in the
acquired entity; and
• acquisition date fair value of any previous equity
interest in the acquired entity over the fair value of the net identifiable
assets acquired is recorded as goodwill. If those amounts are less than the
fair value of the net identifiable assets of the business acquired, the
difference is recognised directly in profit or loss as a bargain purchase.
Where settlement of any part of cash consideration is deferred, the amounts
payable in the future are discounted to their present value as at the date of
exchange. The discount rate used is the entity's incremental borrowing rate,
being the rate at which a similar borrowing could be obtained from an
independent financier under comparable terms and conditions.
Contingent consideration is classified either as equity or as a financial
liability. Amounts classified as a financial liability are subsequently
re-measured to fair value, with changes in fair value recognised in profit or
loss.
If the business combination is achieved in stages, the acquisition date
carrying value of the acquirer's previously held equity interest in the
acquiree is re-measured to fair value at the acquisition date. Any gains or
losses arising from such re-measurement are recognised in profit or loss.
n. Property, Plant and Equipment
All property, plant and equipment is stated at historical cost less
depreciation. Historical cost includes expenditure that is directly
attributable to the acquisition of the items.
Subsequent costs are included in the asset's carrying amount or recognised as
a separate asset, as appropriate, only when it is probable that future
economic benefits associated with the item will flow to the company and the
cost of the item can be measured reliably. The carrying amount of any replaced
parts is derecognised. All other repairs and maintenance are charged to the
income statement during the financial year in which they are incurred.
Depreciation on assets is calculated using the straight-line method to write
down their cost to their residual values over their estimated useful lives as
follows:
Leasehold improvements Remaining life of the lease
Fixtures and fittings 3 - 5
years
Computer equipment 5 years
The residual values and useful lives of assets are reviewed, and adjusted if
appropriate, at each balance sheet date.
An asset's carrying amount is written down immediately to its recoverable
amount if the asset's carrying amount is greater than its estimated
recoverable amount.
Gains and losses on disposals are determined by comparing the proceeds with
the carrying amount and are recognised within operating profit in the income
statement.
o. Income Taxes
The income tax expense or credit for the period is the tax payable on the
current period's taxable income, based on the applicable income tax rate for
each jurisdiction, adjusted by changes in deferred tax assets and liabilities
attributable to temporary differences and to unused tax losses.
The current income tax charge is calculated on the basis of the tax laws
enacted or substantively enacted at the end of the reporting period in the
countries where the Company and its subsidiaries and associates operate and
generate taxable income. Management periodically evaluates positions taken in
tax returns with respect to situations in which applicable tax regulation is
subject to interpretation and considers whether it is probable that a taxation
authority will accept an uncertain tax treatment. The Group measures its tax
balances either based on the most likely amount or the expected value,
depending on which method provides a better prediction of the resolution of
the uncertainty. As mentioned in note 4a Critical accounting estimates the
position in respect of the Company's 2022 tax liability is uncertain and
whilst a range of outcomes is possible, the maximum possible tax payable would
be £3,437,000 being £2,000,000 more than currently recognised. At a minimum
tax payable could be £nil resulting in a reduction in liabilities of up to
£1,437,000.
Deferred income tax is provided in full, using the liability method, on
temporary differences arising between the tax bases of assets and liabilities
and their carrying amounts in the consolidated financial statements. However,
deferred tax liabilities are not recognised if they arise from the initial
recognition of goodwill. Deferred income tax is also not accounted for if it
arises from initial recognition of an asset or liability in a transaction
other than a business combination that, at the time of the transaction,
affects neither accounting nor taxable profit nor loss. Deferred income tax is
determined using tax rates (and laws) that have been enacted or substantially
enacted by the end of the reporting period and are expected to apply when the
related deferred income tax asset is realised or the deferred income tax
liability is settled.
Deferred tax assets are recognised only if it is probable that future taxable
amounts will be available to utilise those temporary differences and losses.
Deferred tax assets and liabilities are offset where there is a legally
enforceable right to offset current tax assets and liabilities and where the
deferred tax balances relate to the same taxation authority.
Current and deferred tax is recognised in profit or loss, except to the extent
that it relates to items recognised in other comprehensive income or directly
in equity. In this case, the tax is also recognised in other comprehensive
income or directly in equity respectively, that future taxable profit will be
available against which the temporary differences can be utilised.
p. Employee Benefits
Long Term Incentive Plan ("LTIP")
The Group operated an LTIP until 5 July 2022 at which date it was cancelled,
full details of which are set out in Note 36.
RESTRICTED SHARE PLAN ("RSP")
After the balance sheet date on 7 November 2023 certain employees were granted
an award that vests over 3 years. Due to conditions that existed in the year,
the charge for the RSP has commenced in the current financial year and will be
spread over the life of the award.
Pension contributions - defined contribution scheme
For defined contribution schemes, the Group pays contributions to publicly or
privately administered pension insurance plans on a mandatory, contractual or
voluntary basis. The Group has no further payment obligations once the
contributions have been paid. Contributions to defined contribution schemes
are recognised in the income statement during the year in which they become
payable.
q. Termination benefits
Termination benefits are payable when an employment is terminated by the Group
before the normal retirement date, or whenever an employee accepts voluntary
redundancy in exchange for these benefits. The Group recognises termination
benefits when it is demonstrably committed to either terminating the
employment of current employees according to a detailed formal plan without
possibility of withdrawal or providing termination benefits as a result of
acceptance of an offer of voluntary redundancy. Benefits falling due more than
twelve months after the balance sheet date are discounted to their present
value.
r. Accrued Income
Material income earned from, but not yet invoiced to, customers in the
financial year is included within prepayments and accrued income where receipt
of such income is virtually certain.
s. Deffered Income
Deferred income arises when cash from customers is received in advance of the
year in which the Company is contractually obliged to provide its service.
Such income is held within accruals and deferred income and only released to
the income statement when the Company has met its related obligations.
3. Financial Risk Management
a. Financial Risk Factors
The risks of the business are measured and monitored continuously by the Board
which has in place procedures and policies covering specific areas namely
credit, market and liquidity risk. We set out below how we approach each area.
Credit risk
Credit risk is the risk that a counterparty defaults on their contractual
obligations which may result in financial loss to the Group. The Group holds
no collateral as security against any financial asset. Credit risk arises
principally from the Group's fee receivables, other receivables, loan notes
and cash balances.
The banks with whom the Group deposits cash and cash equivalent balances are
monitored, including their credit ratings. The credit risk is limited as
balances are held with reputable banks with credit ratings of triple B and
above, as disclosed in note 28.
The Group manages its credit risk through monitoring the aging of receivables
and the credit quality of the counterparties with which it does business. The
ageing of these is provided in note 31.
The Group has two main types of receivables: revenue related and loan notes in
respect of its investment in associate. For revenue receivables, the Group
proactively manages the invoicing process to ensure that invoices are sent out
on a timely basis and has procedures in place to chase for payment at
pre-determined times after the dispatch of the invoice to ensure timely
settlement. For receivables due from loan notes in respect of its investment
in associate, the Group has rigorous procedures for monitoring its investment
which included regular review of monthly management accounts from the
associated entity and regular dialogue with that entity's management.
There is no schedule of repayment in place. In all cases, detailed escalation
procedures are in place to ensure that senior management are aware of any
problems at an early stage.
Market risk Pricing risk
Pricing risk arises where the fair value or future cash flows of financial
instruments will fluctuate because of changes in market prices other than
those from interest rate risk or currency risk. The Group is at an early stage
in its development of an Asset and Wealth Management business and the current
exposure to pricing risk is immaterial.
Currency risk
The Company and Group transacts principally in sterling. The Company's and
Group's exposure to currency risk is detailed in note 31.
In relation to translation risk, the Group's current policy is not to hedge
the net asset values of the overseas investments although, where appropriate
and cost-effective facilities are available, local borrowings are utilised to
reduce the translation risk.
Cash flow interest rate risk
The Group's policy on managing interest rate risk is subject to regular
monitoring of the effect of potential changes in interest rates on its
interest cost and income with a view to taking suitable actions should
exposure reach certain levels. The Group may seek to limit its exposure to
fluctuating interest rates by keeping a significant proportion of the Group's
cash or borrowings at fixed interest rates.
The Group's only external borrowing is the lease on its properties where the
interest rate is fixed for the life of the agreement so there is no
sensitivity to interest rate rises. As regards interest income the Group is
able to invest surplus funds and any interest rate increase will be
beneficial.
Financial assets
The Company holds its surplus funds in short-term bank deposits.
Financial liabilities
The Group has no material cash flow interest rate risk as it has no material
financial liabilities that attract interest. Should this situation change then
the Group may manage the risk by using floating or fixed interest rate swaps.
Liquidity risk
Prudent liquidity management implies maintaining sufficient cash and the
availability of funding through an adequate amount of committed credit
facilities. The Group maintains adequate bank balances to fund its operations.
See note 31 for analysis of the Group's financial liabilities into relevant
maturity groupings based on the remaining period at the year-end date to the
contractual maturity date.
b. Capital Risk Management
The Group considers its capital to comprise:
2023 RESTATED
£'000 2022
£'000
Issued share capital 1,493 1,493
Share premium account 209 -
Capital redemption reserve 653 653
Merger reserve 43,063 43,063
Other reserve 95 -
Retained earnings 8,430 43,139
53,943 88,348
Non-controlling interest - (1,094)
Total equity 53,943 87,254
Cash and cash equivalents (25,573) (43,066)
Total equity less Cash and cash equivalents 28,370 44,188
The Group's objectives when managing capital are to safeguard the Group's
ability to continue as a going concern in order to provide returns for
shareholders and benefits for other stakeholders and to maintain an optimal
capital structure to reduce the cost of capital. The Group is not subject to
externally impaired capital requirements.
The Group owns subsidiary companies which are regulated by the Financial
Conduct Authority ("FCA") and these businesses are subject to regulatory
capital thresholds. The Group's internal compliance and finance departments in
these businesses regularly monitor and report to FCA to ensure the business
complies with the capital thresholds which apply to them.
In order to maintain or adjust the capital structure, the Group may adjust the
amount of dividends paid to shareholders, return capital to shareholders,
issue new shares or sell assets to reduce debt.
4. Critical Accounting Estimates and Judgements
Estimates and judgements are continually evaluated and are based on historical
experience and other factors, including expectations of future events that are
believed to be reasonable under the circumstances. This note provides an
overview of the areas that involved a higher degree of judgement or
complexity, and of items which are more likely to be materially adjusted due
to estimates and assumptions turning out to be wrong.
a. Significant estimates
Valuation of goodwill and other intangible assets
Determining the valuation of goodwill and intangible assets arising from a
business combination under IFRS 3 contains elements of judgement The Group has
acquired customer relationships, acquired brands and computer software
included within intangible assets as part of the business combinations. The
valuation methodology and key assumptions in respect of the valuation of these
intangible assets can be found in Note 21.
Impairment of goodwill and other intangible assets and recoverability of Company's investment in subsidiaries
The recognition of goodwill and other intangible assets arising on
acquisitions and the impairment assessments contain significant accounting
estimates. Goodwill is carried at cost less provision for impairment, the
carrying value is tested annually for impairment, or more frequently if any
indicators arise. Other intangible assets are amortised over their useful
economic life and are assessed for impairment when there is an indication that
the asset might be impaired. The impairment test of goodwill and other
intangible assets includes key assumptions underlying the recoverable amounts,
the growth rates applied to the future cash flows and the Group's discount
rate. Note 21 sets out the estimates used and the sensitivity changes in the
key assumptions.
Estimation of current tax payable and current tax expense in relation to an uncertain tax position
The Group's corporation tax provision for the prior year of £1,442,000
relates to management's assessment of the amount of tax payable on open
positions where the liabilities remain to be agreed with relevant tax
authorities - principally due to the Grant Thornton litigation which concluded
in 2021. Uncertain tax items for which a provision of £1,437,000 is made
relates principally to the interpretation applicable to arrangements entered
into by the Group including the application of carried forward losses before 1
April 2017 driven from HMRC guidance on this matter. Due to uncertainty
associated with such tax items, it is possible that, on conclusion of open tax
matters at a future date, the final outcome may differ significantly. Whilst a
range of outcomes is possible, the maximum possible tax payable would be
£3,437,000 being £2,000,000 more than currently recognised. At a minimum tax
payable could be £nil resulting in a reduction in liabilities of up to
£1,437,000.
b. Significant judgements
Accounting for subsidiaries
During the year AssetCo sold its shareholding in Rize ETF Limited.
AssetCo held 68% of the equity of Rize ETF Limited. Whilst the founders of the
business had a material stake (which could be increased by 5% percentage
points in the event of a sales "trigger" being met) there was in place a
comprehensive shareholder agreement which conferred considerable control to
the Group via the appointment of Board representation and the way in which key
matters had to be agreed, including the ability to block resolutions as well
as voting patterns and economic dependency. Accordingly we believe it was
appropriate to account for Rize as a subsidiary entity.
At the year-end Rize ETF Limited was considered sold and no longer owned by
the Group.
Recoverability of receivables
Advanced drawings and specific other balances in relation to members of a
partnership within the Group are held on the balance sheet as receivables
until there are accumulated profits to distribute to the members. Judgement is
required to assess the likelihood of recoverability of these receivables. At
30 September 2023 the Group has taken a provision of £1,467,000 against these
receivables.
The Board do not consider that any other critical judgements have been made in
preparing the financial statements which have a significant risk of causing a
material adjustment to be made to the carrying amounts of assets and
liabilities within the next financial year.
Going concern assumptions
Inputs, including stresses, management actions and forecasting all require
significant judgement in concluding on going concern. These have been set out
in more detail in the basis of preparation note on page 56.
Discontinued Operations
During the year the Group sold two separate operations classified as
Discontinued Operations under IFRS 5. These were for the sale of River and
Mercantile Asset Management LLC and Rize ETF Limited. River and Mercantile
Asset Management LLC represented a specific geographic area of business for
the Group (being the USA) and Rize ETF Limited represented a major line of
business for the Group. Both sales completed within the year ended 30
September 2023 and so qualify as discontinued operations under the standard.
HELD FOR SALE ASSETS
No assets were classified as held for sale by the Group as at 30 September
2023. As noted in the post balance sheet subsequent events note 37; as at 30
September 2023 the Group held two businesses which were identified as
potential targets for disposal; The Infrastructure business (under entities;
River and Mercantile Infrastructure LLP and River and Mercantile
Infrastructure GP S.a r.l.) and Saracen Asset Managers Limited.
An analysis of these operations under IFRS 5 was conducted, in both cases that
at 30 September 2023 there was not enough certainty about the proposed
transactions to classify them as held for sale under IFRS 5. In addition, for
Saracen Asset Managers Limited, the operating activity of the entity was
expected to be retained by the Group meaning that its identification as a
discontinued operation and subsequent removal from the face of the Financial
Statements would not be representative of the continuing operations of the
Group.
5. Segmental Reporting
The core principle of IFRS 8 'Operating segments' is to require an entity to
disclose information that enables users of the financial statements to
evaluate the nature and financial effects of the business activities in which
the entity engages and the economic environments in which it operates.
Segment information has historically been presented in respect of the Group's
commercial competencies, Active equities, Infrastructure asset management,
Exchange Traded Funds and its investment in Digital Platforms.
Active equities comprise RMG, Saracen and Revera; Infrastructure Asset
Management is the non-equities investment arm of RMG; Exchange Traded Funds is
Rize ETF and Digital Platforms represents the Group's investment in the
associated company, Parmenion.
The Directors consider that the chief operating decision maker is the Board.
Head Office segment comprises the Group Board's management and associated
costs and consolidation adjustments and for 2022 includes the UAE business.
Intra-segment transactions are disclosed on the face of the segmental report.
The amounts provided to the Board with respect to net assets are measured in a
manner consistent with that of the financial statements. The Company is
domiciled in the UK.
Changes to segmental reporting
By 30 September 2023 the US business has been sold alongside Rize ETF Limited.
During the 2023 financial year the UAE did not generate any revenue and only
incurred administrative costs.
Consequently the US business is now presented as a Discontinued Operation for
the purposes of Segmental reporting. Additionally the Exchange Traded Funds
segment (fully encompassed by the now sold Rize ETF Limited) has also been
moved to Discontinued Operations. Additionally, depreciation and amortisation
have been removed from the segmental reporting for the year ended 30 September
2023 as management no longer places reliance on its analysis at segmental
level.
Further detail of these Discontinued Operations can be found in note 6.
Geographical analysis of Revenue for Consolidated Group
For the year ended 30 September 2023
2023 2022
£'000 £'000
UK 16,536 6,905
US 186 1,270
16,722 8,175
ANALYSIS OF REVENUE AND RESULTS BY COMMERCIAL ACTIVITY
For the year ended 30 September 2023
Active equities Infrastructure asset management Digital platform Head office Discontinued Operations Total
£'000 £'000 £'000 £'000 £'000 £'000
Revenue
Management fees 14,419 560 - - 186 15,165
Marketing fees - - - - 1,557 1,557
Total revenue to external customers 14,419 560 - - 1,743 16,722
Segment result
Operating (loss)/profit (9,415) (2,413) - (2,500) (2,832) (17,160)
Finance income 75 - - 2,213 (6) 2,282
Finance costs (450) - - (60) 6 (504)
(Loss) on sale of subsidiary - (11,160) (11,160)
Share of result of associate - - (352) - - (352)
(Loss)/profit before tax (9,790) (2,413) (352) (347) (13,992) (26,894)
Income tax 19 (11) - 187 - 195
(Loss)/profit for the year (9,771) (2,424) (352) (160) (13,992) (26,699)
Segment assets and liabilities
Total assets 40,456 173 - 31,675 - 72,304
Total liabilities (8,039) (1,013) - (9,310) - (18,362)
Total net assets 32,417 (840) - 22,365 - 53,942
ANALYSIS OF REVENUE AND RESULTS BY COMMERCIAL ACTIVITY
For the year ended 30 September 2022
Active equities Infrastructure asset management Exchange traded funds Digital platform Head office Total
£'000 £'000 £'000 £'000 £'000 £'000
Revenue
Management fees 6,372 79 - - - 6,451
Marketing fees - - 1,724 - - 1,724
Total revenue to external customers 6,372 79 1,724 - - 8,175
Segment result
Operating profit/(loss) (7,124) (151) (2,794) - (15,076) (25,145)
Gain on bargain purchase - - - - 3,940 3,940
Finance income 974 - - - 11,459 12,433
Finance costs (10) - - - - (10)
Share of result of associate - - - 181 - 181
(Loss)/profit before tax (6,160) (151) (2,794) 181 323 (8,601)
Income tax 59 - - - - 59
(Loss)/profit for the year (6,101) (151) (2,794) 181 323 (8,542)
Segment assets and liabilities
Total assets 56,826 1,706 19,324 - 24,949 102,805
Total liabilities (12,157) (678) (461) - (2,255) (15,551)
Total net assets 44,669 1,028 18,863 - 22,694 87,254
6. Discontinued Operations
Within the year ended 30 September 2023 two businesses were sold and have been
classified as Discontinued Operations under IFRS 5. These are River and
Mercantile Asset Management LLC and Rize ETF Limited.
Under these standards the Discontinued Operations have been separately
identified on the face of the Financial Statements and have instead been
disclosed below to help the users of the accounts better understand the
continuing operations of the Group.
2023 2022
£'000 £'000
River and Mercantile Asset Management LLC (470) (453)
Rize ETF Limited (2,362) (2,794)
Loss on disposal (11,160) -
(Loss) from discontinued operation (attributable to equity holders of the (13,992) (3,247)
company)
Non-controlling interest - (815)
Operating cashflows
2023 2022
£'000 £'000
River and Mercantile Asset Management LLC (1,149) (453)
Rize ETF Limited (2,286) (2,794)
Operating cash (outflow) from Discontinued Operations (3,435) (3,247)
River and Mercantile Asset Management LLC
2023 2022
£'000 £'000
Revenue
Management fees 186 166
Total revenue to external customers 186 166
Operating expenses (656) (659)
Operating profit/(loss) (470) (493)
Finance income - 40
(Loss)/profit before tax (470) (453)
Income tax - -
(Loss)/profit for the year (470) (453)
Rize ETF Limited
2023 2022
£'000 £'000
Revenue
Marketing fees 1,635 1,724
Total revenue to external customers 1,635 1,724
Operating expenses (3,997) (4,518)
Operating profit/(loss) (2,362) (2,794)
(Loss)/profit before tax (2,362) (2,794)
Income tax - -
(Loss)/profit for the year (2,362) (2,794)
Disposal costs
The disposal of River and Mercantile Asset Management LLC ("LLC") and Rize ETF
Limited ("Rize") resulted in a net loss totalling £11,160,000. This is broken
down as follows:
LLC Rize Total
£'000 £'000 £'000
Fair value of consideration received 440 4,779 5,219
Impairment of existing intangible assets - (16,924) (16,924)
Disposal of net assets/(liabilities) on sale (99) 644 545
Total gain / (loss) on disposal 341 (11,501) (11,160)
The deferred consideration for the LLC constitutes an agreed percentage of
future revenues up to 30 June 2025 estimated at $139,000 before discount.
The deferred consideration for Rize includes both a cash and earn-out element.
Given the uncertainty and lack of Group control over the ability to earn a
consideration on the earn-out element, no value has been ascribed to this. In
addition, there was a deferred cash element of £2,650,000 payable 18 months
from completion. This has been discounted present value using a rate of
14.65%.
7. Other Income
2023 RESTATED
£'000 2022
£'000
Interest on loan notes held in associate 2,214 2,690
Other income 107 -
Total other income 2,321 2,690
Interest on loan notes held in associate
As set out in note 24 the Group has acquired a 30% equity interest in
Parmenion Capital Partners LLP via a corporate entity, Shillay TopCo Limited.
A large part of the Group's total investment is held by way of loan notes.
During the financial year the Group recognised £2,214,000 of interest on
those loan notes and this is reflected in other income.
Prior Year Restatement
Interest on loan notes held for the year ended 30 September 2022 has been
restated. The income previously presented was £1,977,000. This was equal to
the interest earned and received in cash by Shillay TopCo Limited in the year.
The Directors have restated this figure to reflect accrued interest earned but
not received.
The impact of this restatement is an additional £713,000 which has been
recognised in the prior year relating to interest accrued for, but which had
not yet been received in either cash or payment in kind loan notes. This has
had the effect of increasing profit and investments in associates by £713,000
for the 2022 year.
As at 30 September 2023 interest is fully accrued up to that date. The
restatement has not affected the 2023 figures.
8. Administrative expenses and exceptional items
Included with administrative expenses are exceptional items as shown below:
2023 2022
£'000 £'000
Restructuring costs 2,967 3,196
Provision against doubtful debt 1,467 -
Costs of re-admission to AIM - 671
Exceptional items 4,434 3,867
Acquisition costs 152 1,116
Disposal Costs Rize and LLC 201 -
Share-based payment expense and social security 104 3,250
Other administrative expenses 24,645 12,154
Total administrative expenses 29,536 20,387
Restructuring costs include, salaries of employees being made redundant from
the point of notice of redundancy, severance costs, costs associated with the
implementation of the new target operating model and guaranteed bonuses
awarded by River and Mercantile Group PLC ("RMG") prior to its acquisition
(the final tranche of these bonuses will vest in January 2024). The provision
against doubtful debt is against the receivables due from the Partners of the
Infrastructure business, repayable through future profits. As noted in the
Chairmans Statement and note 37 the Group has entered talks to transfer its
interest in the Infrastructure business to the partners.
The Group has twice had to apply for re-admission to AIM; once in April 2021
when shareholders were asked to approve the change in strategy to asset and
wealth management, and again in June 2022 given the nature and scale of the
acquisition of RMG. These significant costs are in relation to those exercises
and were required because of the unusual nature of the change in strategy and
the relative size of AssetCo compared to the acquisition target. Our strategy
is now settled and, with the completion of the acquisition of RMG, AssetCo is
at a scale where re-admission in order to complete an acquisition is less
likely so the Directors consider that costs such as this are not likely to
recur.
A further breakdown of administrative costs has been provided below to show
staff costs, amortisation and depreciation:
2023 2022
£'000 £'000
Staff costs (note 12) 15,429 15,160
Amortisation and depreciation 684 238
Other administrative costs 13,423 4,989
Total administrative expenses 29,536 20,387
Reconciliation of 'Operating loss for continuing business excluding exceptionals'.
The table below reconciles statutory losses to the Strategic Report's KPI for
Operating loss for continuing business excluding exceptionals:
2023 2022
£'000 £'000
Continuing operations: Operating loss (12,114) (21,145)
Adjusted for:
(Reduction) in fair value of asset held for resale (note 9) - 9,750
Exceptional items 4,434 3,867
Operating profit/loss for continuing business excluding exceptionals for the (7,680) (7,528)
year
9. Other Gains and Losses
2023 2022
£'000 £'000
(Reduction) in fair value of asset held for resale - (9,750)
Gain on disposal of fair value investments 122 18
122 (9,732)
2023
During the year the Group made a small gain on certain assets held at fair
value through profit or loss of £122,000.
2022
On 15 June 2022 the Group acquired the entire share capital of RMG. However,
the Group had in 2021 bought 5,000,000 shares in RMG representing 5.85% and
this investment was taken on the 2021 balance sheet at a fair value of
£12,000,000. When calculating the overall consideration for the whole of RMG
the Group must assess the fair value of the existing investment at the time of
completion of the deal. Given the effect on the RMG share price of normal
market pricing and the significant return to shareholders arising from the
sale of the RMG Solutions business the fair value was assessed at £2,250,000
leading to a reduction in fair value of £9,750,000.
The Group acquired a small number of seed investments with the acquisition of
RMG in June 2022. One of those investments was sold before 30 September 2022
for sale proceeds of £1,017,000 realising a gain on disposal of £18,000.
10. Operating Loss and Profit
Operating (loss)/profit is stated after charging the following:
2023 2022
£'000 £'000
Depreciation of property plant and equipment (note 19) 28 14
Depreciation of right-of-use assets (note 20) 865 187
Amortisation of intangible assets (note 21) 661 227
Loss on foreign exchange differences 212 25
Fees payable to the Company's auditors:
- For the audit of the parent Company and the consolidated financial 295 262
statements
- audit fees re: subsidiaries 260 90
- audit-related assurance services 10 10
- tax advisory services - 86
- other non-audit services - 471
Staff costs (note 12) 15,429 15,160
Expense relating to short-term and low-value leases - 66
11. Directors' Emoluments
Salary and fees Long term incentive plan Total
2023 2022 2023 2022 2023 2022
Director £'000 £'000 £'000 £'000 £'000 £'000
Martin Gilbert 83 138 - 784 83 922
Peter McKellar 72 110 - 653 72 763
Campbell Fleming 98 165 - 313 98 478
Gary Marshall 138 - 9 - 147 -
Jonathan Dawson 60 23 - - 60 23
Tudor Davies 55 70 - - 55 70
Christopher Mills 45 39 - - 45 39
Mark Butcher 25 39 - - 25 39
Aggregate fees and emoluments 576 584 9 1,750 585 2,334
As referred to in note 36 the LTIP Scheme was discontinued on 5 July 2022 and
all shares due under the scheme have been released immediately subject to
adjustments for the settlement of PAYE liabilities and subject to lock-in
restrictions as set out in the note.
Three directors have received awards under the Company's LTIP during the
financial year 2022. The amounts in respect of the LTIP in the table above
include the fair value of shares awarded and the national insurance
contribution and Pay as you Earn obligations which the Company has paid on
behalf of the Participants. The awards have now been fully vested and expensed
in the income statement, with a charge of £1,750,000 recognised in the prior
year. As the Scheme has closed no further charges will come through the income
statement. An IFRS 2 accounting charge of £9,000 was accrued in the year
ended 30 September 2023 relating to the portion of the Restricted Share Plan
awarded in November 2023 to Gary Marshall.
Pension allowances paid to current directors were £24,000 (2022: none). The
highest paid director received aggregate emoluments, including awards under
the share- based payments charge, of £138,000 (2022: £922,000).
12. Staff Costs
The monthly average number of staff employed by the Group and Company
(including executive directors) was:
Group 2023 Group 2022 Company Company
No. No. 2023 2022
No. No.
Active equities 92 36 - -
Infrastructure asset management 6 5 - -
Exchange Traded Funds (discontinued operation) 14 13 - -
Head office 13 14 13 14
125 68 13 14
The costs incurred in respect of these employees were:
Continuing operations: Group 2023 Group 2022 Company 2023 Company 2022
£'000 £'000 £'000 £'000
Wages and salaries 13,473 11,251 1,306 1,073
Social security costs 1,408 965 159 171
Share-based payments 113 2,749 26 2,749
Other pension costs 435 195 13 12
15,429 15,160 1,506 4,005
Wages and salaries include termination payments of £1,095,000 (2022:
£1,140,000). These amounts are reflected in the total exceptional
restructuring costs set out in Note 8.
Employee benefit obligations
The Group's subsidiaries have defined contribution pension schemes in place.
The pension contribution charge in 2023 amounted to £435,000 (2022:
£195,000).
13. Gain on bargain purchase
2023 2022
£'000 £'000
Arising on acquisition of RMG - 3,227
In the prior year the calculation of the difference arising on acquisition of
River and Mercantile between the purchase consideration and the value of net
assets acquired gave rise to a negative amount of goodwill as the value of net
assets acquired was larger than the consideration. In accordance with
accounting standards the amount of £3,227,000 was treated as a credit to the
income statement.
14. Finance income
Finance income from continuing operations was: 2023 2022
£'000 £'000
Dividend income - 11,459
Gain on foreign exchange - 927
Interest income 74 7
74 12,393
15. Finance Costs
Finance costs from continuing operations were: 2023 2022
£'000 £'000
Lease liability finance charge (90) (10)
Finance costs on bonds and letters of credit (208) -
Loss on foreign exchange (212) -
(510) (10)
16. Group and Company Dividends
The Group has not declared any interim or final dividends with respect to the
financial year to September 2023.
In respect of the financial year to 30 September 2022 an interim dividend of
1.3p per share was paid in December 2022 and amounted to £1,798,000 (2021:
£nil). The dividend was not recognised as a liability at 30 September 2022 as
it was not approved and paid until after the period end.
17. Income Tax
2023 2022
£'000 £'000
Current tax
Current tax on (loss)/profits for the year 11 (13)
Total current tax expense/(credit) 11 (13)
Deferred tax
Continuing operations (199) (46)
Discontinued operations (7) -
Total deferred tax (credit)/expense (206) (46)
Income tax (credit)/expense (195) (59)
The tax on the Group's (loss)/profit before tax differs from the theoretical
amount that would arise using the standard tax rate applicable to the profits
of the consolidated entities as follows:
Restated 2022
2023 £'000
£'000
(Loss) before tax continuing operations (12,902) (4,538)
(Loss) before tax discontinued operations (13,992) (4,062)
Total (loss) before tax (26,894) (8,600)
Tax credit at a standard rate of 22% (2022: 19%) (5,917) (1,634)
Factors affecting tax charge for the year:
Expenses not deductible for tax purposes 4,416 404
Income not taxable for tax purposes (3,491) (3,003)
Difference between depreciation and capital allowances - (5)
Other short-term timing differences (184) 752
Tax losses used - -
Movement in unrecognised deferred tax on losses 4,981 3,427
(195) (59)
The rate applicable from 1 April 2023 increased to 25%, resulting in a
pro-rata rate for the period of 22%. The rate applicable from 1 April 2022 to
31 March 2023 was 19%. Deferred taxes at the reporting date have been measured
using these enacted tax rates and reflected in these financial statements.
18. Loss & earnings per share
In August 2023 the Company effected a 10 for 1 share split (see Note 32). The
prior year share numbers and EPS have been adjusted for this.
Basic
Basic earnings per share is calculated by dividing the (loss)/profit
attributable to owners of the parent by the weighted average number of
Ordinary Shares in issue during the year. The weighted average number of
shares is calculated by reference to the length of time shares are in issue
taking into account the issue date of new shares and any buybacks (see note
32). The prior year has been restated to split out continuing and discontinued
operations.
RESTATED
2023 2022
(Loss)/profit from continuing operations - £000 (12,707) (4,480)
(Loss)/profit from discontinued operations - £000 (13,992) (3,247)
Total (loss) attributable to owners of the parent (26,699) (7,727)
Weighted average number of ordinary shares in issue post share split - no. 140,364,398 103,017,624
Basic earnings per share from continuing operations - pence (9.06) (4.35)
Basic earnings per share from discontinued operations - pence (9.98) (3.15)
Total basic earnings per share (19.04) (7.50)
Diluted
Diluted earnings per share is calculated by adjusting the weighted average
number of Ordinary Shares in issue assuming conversion of all dilutive
potential Ordinary Shares. As at 30 September 2022, the LTIP was discontinued
therefore there were no dilutive potential ordinary shares.
RESTATED
2023 2022
(Loss)/profit from continuing operations - £000 (12,707) (4,480)
(Loss)/profit from discontinued operations - £000 (13,992) (3,247)
Total (loss) attributable to owners of the parent (26,699) (7,727)
Weighted average number of ordinary shares in issue post share split - no. 140,364,398 103,017,624
Diluted earnings per share from continuing operations - pence (9.06) (4.35)
Diluted earnings per share from discontinued operations - pence (9.98) (3.15)
Total diluted earnings per share (19.04) (7.50)
19. Property, Plant & Equipment
Consolidated Group
Leasehold improvements Fixtures and fittings Computer equipment Total
£'000 £'000 £'000 £'000
Cost
At 1 October 2021 - 34 40 74
Acquisition of subsidiary 2 - 13 15
Additions - - 15 15
Disposals - (26) - (26)
At 30 September 2022 2 8 68 78
Acquisition of subsidiary 68 38 137 243
Additions 17 - - 17
Disposals (1) - - (1)
At 30 September 2023 86 46 205 337
Accumulated depreciation
At 1 October 2021 - 34 24 58
Charge for the year 1 - 13 14
Disposals - (26) - (26)
At 30 September 2022 1 8 37 46
Acquisition of subsidiary 17 36 127 180
Charge for the year 4 - 24 28
Disposals - - (15) (15)
At 30 September 2023 22 44 173 239
Net book value at 30 September 2023 64 2 32 98
Net book value at 30 September 2022 1 - 31 32
Company
Fixtures and fittings Total
£'000 £'000
Cost
At 1 October 2021 and 30 September 2022 26 26
Disposals (26) (26)
At 30 September 2023 - -
Accumulated depreciation
At 1 October 2020 and 30 September 2022 26 26
Disposals (26) (26)
At 30 September 2023 - -
Net book value at 30 September 2023 - -
Net book value at 30 September 2022 - -
20. Right of use assets and lease liability
Consolidated Group
Right of use asset
£'000
Cost:
At 1 October 2021 -
Acquisition of subsidiary 411
At 30 September 2022 411
Additions 2,175
Write offs (411)
At 30 September 2023 2,175
Accumulated depreciation:
At 1 October 2021 -
Charge for the year 187
At 30 September 2022 187
Charge for the year 865
Write offs (411)
At 30 September 2023 641
Net book value at 30 September 2023 1,534
Net book value at 30 September 2022 224
Lease liability
£'000
Lease liability:
At 1 October 2021 -
Acquisition of subsidiary 398
Payments made (114)
Interest charge 10
At 30 September 2022 294
Additions 2,160
Write offs (254)
Payments made (630)
Interest charge 76
At 30 September 2023 1,646
Of which:
Current lease liabilities 696
Non-current liabilities 950
At 30 September 2023 1,646
The Group's leases relating to office accommodation with terms of more than
one year are recognised as a right of use asset and a corresponding liability
at the date at which the leased asset is available for use by the Group. The
weighted average incremental borrowing rate applied to the leases was 4 %. The
Company has no leases. On 20(th) October 2022 the Coleman Street lease
agreements were renegotiated and extended, leading to a full write down of the
existing lease balances held and recognition of the new lease agreements
effective from 14(th) January 2023.
21. Goodwill & Intangible Assets
Customer relationships Website development
Group Goodwill £'000 Software Brand £'000 Total
£'000 £'000 £'000 £'000
Cost
At 1 October 2021 19,787 - - 200 100 20,087
Acquisition of business 648 2,400 1,250 450 - 4,748
Additions - - - - 12 12
Cost at 30 September 2022 20,435 2,400 1,250 650 112 24,847
Acquisition of business 6,340 200 - 50 - 6,590
Additions - - - - 12 12
Disposal of business (16,860) - - (150) (124) (17,134)
Cost at 30 September 2023 9,915 2,600 1,250 550 - 14,315
Accumulated amortisation
At 1 October 2021 - - - 6 14 20
Acquisition of business - - - - - -
Charge for the year - 64 98 54 11 227
Amortisation at 30 September 2022 - 64 98 60 25 247
Acquisition of business - - - - - -
Impairment 11,860 - - - - 11,860
Charge for the year - 232 340 89 12 673
Disposal of business (11,860) - - (64) (37) (11,961)
Amortisation at 30 September 2023 - 296 438 85 - 819
Net book value at 30 September 2023
9,915 2,304 812 465 - 13,496
Net book value at 30 September 2022
20,435 2,336 1,152 590 87 24,600
Software and website development are internally generated and have finite
lives as set out in Note 2. Amortisation of all intangible assets is included
in administrative expenses in the income statement. Customer relationships
principally relates to the customer relationships recognised on acquisition of
the River and Mercantile Group, with a carrying amount of £2,118,000 (2022:
£2,336,000) and a remaining amortisation period of 10 years. Software
principally relates to the software acquired through the purchase of the River
and Mercantile Group, with a carrying amount of £705,000 (2022: £895,000)
and a remaining amortisation period of 4 years.
Goodwill is allocated to the Group's cash-generating units (CGU's) identified
according to corporate entity and an analysis is presented below:
2023 2022
£'000 £'000
Rize ETF Limited - 16,860
Saracen Fund Managers Limited and Revera Asset Management Limited 3,575 3,575
SVM 6,340 -
Total 9,915 20,435
Impairment review
Goodwill is reviewed annually for impairment and its recoverability has been
assessed at 30 September 2023 by comparing the carrying amount of the CGUs to
their expected recoverable amount, estimated on a value-in-use basis. The
value-in-use of each CGU has been calculated using discounted cash flow
projections based on the most recent budgets and forecasts maintained by the
Group. The most recent budgets prepared are part of the annual planning
process for the year ending 30 September 2024 and are then extrapolated over
the next four years so that the budgets and forecasts cover a period of five
years. Cash flows are then extrapolated beyond the five-year budget and
forecast period using an expected long-term growth rate, with the long-term
growth rate considered reasonable compared with budget and any forecasted
growth.
Consolidated assessment: As at 30 September 2023 headroom exists in the
calculations in respective recoverable amounts of these CGUs over the carrying
amounts of the goodwill allocated to them. On this basis the Directors have
concluded that there is no impairment required to the goodwill balances as at
30 September 2023 with the exception of Rize ETF Limited as detailed below
Company assessment: As at 30 September 2023 the Company was deemed to require
an impairment in some of its investments in subsidiaries as set out in note
22.
Rize ETF Limited
The Rize ETF balance was written down in the year before being sold. Full
details of the sale can be found within note 6.
Saracen Fund Managers Limited
Following the 2022 year end the businesses of Saracen Fund Managers and Revera
Asset Management were combined to provide synergies and enhance growth
prospects. Accordingly, the Directors view the CGU as the combined businesses
and have approached the review of impairment on the same basis.
Key inputs
Modelling was performed to support both discounted cash flow (DCF) and net
present value (NPV) methodologies. The overall approach to impairment reviews
for 2023 represents a more conservative approach with a reduction in expected
revenue growth in all cases vs. prior year modelling.
Key DCF inputs included: Forecasting revenue driven by AuM. Previously
modelling was based on new business targets, expected net funds flows and
estimated impact of market performance. Modelling for the year ended 30
September 2023 took the 2024 budget as its starting point which is more
conservative in its approach to modelling revenue growth. Revenue growth was
modelled to be broadly flat for the financial years ending 2024 and 2025 with
a subsequent annual growth rate of 2%. Costs were grown at 2% p.a. where
applicable, notably below current inflation rates, primarily due to expected
future cost saving measures and a strategy throughout the business to manage
costs. The discount rate applied for the analysis was 14.65% (2022: 14.5%)
based on the risk-free rate of interest and specific risks relating to the
Group.
Key NPV inputs included; A broad spectrum of third party transaction and
trading data was analysed (both current and historical). It is noted that
industry trading multiples have fallen in the period based on peer group share
price analysis and this was incorporated into the relevant modelling. This
data was compared with the relevant cash generating units and businesses in
the Group to select an appropriate and conservative valuation multiples after
taking into account any identified free cash and estimated costs to realise
these prices.
22. Investments in Subsidiaries
Company shares in group undertakings:
2023 2022
£'000 £'000
At 1 October 69,921 25,194
Additions in the year 9,073 45,249
Impairment & Disposal (40,872) (522)
At 30 September 38,122 69,921
Investments in Group undertakings are recorded at cost, which is the fair
value of the consideration paid, less any impairment. In the year the
additions relate to the issue of loan note with respect of the acquisition of
SVM, an additional £2,216,000 in cash was paid by the Company's subsidiary
River Global Holdings Limited, and £73,000 with respect to the share award
detailed in note 32. The disposal and impairment in the year of £16,750,000
and £5,000,000 respectively relate to Rize.
An additional impairment was recognised in relation to the Company's
investment in River and Mercantile Group Limited for £18,880,000, and in
relation to Revera Asset Management for £241,000. As noted in note 21 a
review of goodwill and intangible assets was conducted for the year ended 30
September 2023 and as a result of this testing it was considered appropriate
to impair the values of these investments to the higher of their net
realisable value or value in use. The methodology for this modelling has been
set out in note 21.
The impairment charged in 2022 relates to management's view that the carrying
value of the investment in Revera Asset Management Limited should be written
down to its underlying net asset value following its combination with Saracen
Fund Managers Limited.
The subsidiaries of AssetCo plc as at 30 September 2023 are as follows:
Proportion Class of shareholding
Name of Company Note held Nature of business
River and Mercantile Group Limited 1 100% Ordinary Investment management
River Global Holdings Limited 1 100% Ordinary Holding company
River Global Group Services Limited 1 100% Ordinary Service company
River and Mercantile Group Trustees Limited 1 100% Ordinary Dormant service company
River and Mercantile US Holdings Limited 1 100% Ordinary Holding company for the US business
River Global Investors LLP 1 100% Ordinary Investment management company
River and Mercantile Infrastructure LLP 1 100% Ordinary Investment advisor company
River and Mercantile Infrastructure GP S.a.r.l. 1 100% Ordinary General partner company
Revera Asset Management Limited 2 100% Ordinary Investment management
Saracen Fund Managers Limited 2 100% Ordinary Investment management
SVM Asset Management Holdings Limited 2 100% Ordinary Investment management
SVM Asset Management Limited 2 100% Ordinary Investment management
SVM Investment Management Limited 2 100% Ordinary Dormant
SVM Investment Managers Limited 2 100% Ordinary Dormant
AAMCO Limited 1 100% Ordinary Dormant
AssetCo Asset Management Limited 1 100% Ordinary Dormant
AssetCo Asset Managers Limited 1 100% Ordinary Dormant
AssetCo Investment Management Limited 1 100% Ordinary Dormant
Notes:
1. Incorporated, registered and having their principal
places of business in the United Kingdom with their registered offices being
30 Coleman Street, London, EC2R 5AL.
2. Incorporated, registered and having their principal
place of business in the United Kingdom with their registered office being 7
Castle Street, Edinburgh EH2 3AH.
All subsidiary undertakings are included in the consolidation of the Group.
23. Business Combination
Summary of acquisitions
On 31 October 2022 AssetCo plc announced the completion of the acquisition of
the entire share capital and 100% voting rights of SVM Asset Management
Holdings Limited ("SVM"). SVM is an active equities fund management Group
based in Edinburgh.
Details of the purchase consideration are as follows:
SVM
£'000
Cash paid 2,216
Convertible loan notes issued 9,000
Fair value adjustment to loan notes (173)
Total consideration 11,043
The fair value of assets and liabilities recognised as a result of the
acquisition are as follows:
SVM
£'000
Cash 5,017
Trade and other receivables 444
Plant and equipment 2
Right-of-use assets -
Trade payables (238)
Other payables (565)
Lease liability -
Corporation tax liability (145)
Total net assets recognised on acquisition 4,515
Fair value adjustments
Intangible assets: brand 50
Intangible assets: customer relationships 200
Deferred tax liability (62)
Net identifiable assets/(liabilities) acquired 4,703
Goodwill 6,340
Net assets acquired 11,043
Acquired receivables
The fair value of acquired trade receivables was £444,000 and no loss
allowance has been recognised on acquisition.
Acquired brands
The brands are recognised on acquisition at their fair values at the date of
acquisition and subsequently amortised on a straight-line basis, over their
estimated useful lives. The estimated useful lives for the Saracen and RMG
brands are 10 years and for the Rize ETF brand was 5 years, however this has
been disposed of in the year. The valuation methodology adopted by the Group
for brands is the "relief-from-royalty" approach. A royalty rate of 0.4% was
adopted and applied to forecast cashflows assuming a 10-year life for RMG
brands and a weighted average cost of capital of 16%.
Computer software
In the prior year, RMG had two internally developed computer programs which
were recognised at fair value at the date of acquisition. They are being
amortised on a straight-line basis over their estimated useful lives of
between 2 and 5 years. The valuation approach for computer software was
replacement-cost. We estimated the total development costs which needed to be
incurred in developing the software from the date of acquisition. This
involved estimating the number of developers required for each system, their
salary costs and time input. We added estimates for overhead costs to support
this development team and then applied a mark-up on total costs of 17.9% to
reflect the margin required to incentivise a third-party developer. No
opportunity cost was applied.
Customer relationships
In the prior year, RMG's relationships with Institutional Investors was
recognised at cost, being the fair value at the date of acquisition. Following
initial recognition, this was carried at cost less any accumulated
amortisation and accumulated impairment losses, with the related charge
recognised in the consolidated income statement. Amortisation is charged on a
straight-line basis over an estimated useful life of 11 years. The valuation
approach applied to Customer Relationships was the Multi-period Excess
Earnings Method ("MEEM"). Management developed a cash flow forecast based on
expectations for the year from acquisition as tempered by historical analysis
of sales and then extrapolated to give revenue growth of 2% in perpetuity.
Other assumptions key to establishing the valuation were the attrition rate of
clients, estimated at a rate of 8%, and the operating margin of 26.2% for
institutional relationships which has been historically achieved. We assumed a
weighted average cost of capital of 17%, which was a 1% premium to the overall
WACC in the Group's businesses and this is a reflection of the limited control
and marketability of relationship assets.
Intangible asset in relation to non-contracted relationships
If customer relationships are to be recognised IFRS 3 requires that they must
stem from contractual or legal rights or are capable of being separable.
Despite being an important driver of value, customer relationships with end
investors and intermediaries are neither contractual nor separable.
Revenue and profit contribution
The business was accounted for from the date of acquisition (31 October 2023).
Had the business been consolidated from the start of the period, this would
have increased the Group's consolidated revenue by £249,000 and operating
losses by £101,000 for the year. The revenues of the business for the 12
months to 30 September 2023 were £3,058,000 and the operating losses for the
12 months to 30 September 2023 was £1,108,000.
Purchase consideration - cash outflow
Outflow of cash to acquire subsidiaries, net of cash acquired
2023 2022
£'000 £'000
Cash consideration 2,216 1,001
Less: balances acquired (5,017) (43,149)
Net (inflow)/outflow of cash - investing activities (2,801) (42,148)
Acquisition-related costs
Acquisition-related costs of £205,000 (2022: £1,116,000) that were not
directly attributable to the issue of shares are included in administrative
expenses in the statement of profit or loss.
Convertible loan
The terms of the £9,000,000 loan were for loan notes with a nominal value of
£9 million, unsecured and carrying a coupon of 1%. The reduction in nominal
value of the loan notes represents a fair value adjustment to reflect the
difference in the 1% coupon and a market interest rate. The first £2 million
of loan notes were convertible into AssetCo ordinary shares in certain
circumstances, at market value, up to 31 December 2022 with the remainder
convertible into AssetCo ordinary shares, at £1.45 per share, up to 31
December 2023. If not converted the loan notes were repayable at nominal value
on 31 December 2023. As announced on 20 March 2023 the SVM vendors, following
an extension of their conversion option date to 28 February 2023, duly
exercised their option to convert the first £2 million of loan notes into
AssetCo ordinary shares. The market price agreed was 68.7p per share and led
to the issue to the SVM vendors of 2,911,208 AssetCo ordinary shares which
were satisfied by the transfer of shares from those held in treasury. As set
out in Companies Act 2006 the difference between the average purchase price of
these shares and the agreed issue price is taken to share premium.
The final settlement of the loan occurred after year end and has been
described in note 37.
24. Group Interest in Associates
Restated
Total Equity Loan notes
£'000 £'000 £'000
Purchase of interest in Parmenion 21,871 171 21,700
Share of operating results for 2022 181 181 -
Interest earned in the year (restated) 2,690 - 2,690
Payment of interest (restated) (1,977) - (1,977)
Restated balance at 30 September 2022 22,765 352 22,413
Share of operating results for 2023 (352) (352) -
Interest earned in the year 2,213 - 2,213
Closing balance at 30 September 2023 24,626 - 24,626
During the period, £2,333,000 interest accrued were settled via the issue of
an additional loan note. Further details on the restatement of prior year
interest can be found on note 7.
On 1 October 2021 AssetCo acquired an effective 30% interest in the equity of
Parmenion Capital Partners LLP, via a Guernsey-registered corporate structure.
AssetCo is a shareholder in the holding company for this group, Shillay TopCo
Limited. Further details on Parmenion are set out in the Business Review.
The tables below provide summarised information of the associate. The
information disclosed reflects the amounts presented in the unaudited
financial statements of the relevant associate and not the AssetCo plc share
of those amounts. They have been amended to reflect adjustments made by the
Company when using the equity method, including fair value adjustments and
modifications for differences in accounting policy.
Unaudited summarised balance sheet
Shillay TopCo Limited Shillay TopCo Limited
30 September 2023 30 September 2022
£'000 £'000
Total current assets 31,657 36,203
Non-current assets 107,752 87,241
Total current liabilities (18,772) (17,330)
Total non-current liabilities (128,216) (105,219)
Net assets (7,579) 895
Unaudited summarised statement of comprehensive income
Shillay TopCo Limited Shillay TopCo Limited
30 September 2023 30 September 2022
£'000 £'000
Revenue 40,761 40,800
Profit for the period 921 602
Net Asset Adjustment (9,095) -
Total comprehensive income (8,174) 602
Equity interest (%) 30% 30%
Equity interest (2,452) 181
Share of operating results for 2023 (352) 181
Shillay TopCo Limited movement in net assets for the year ended 30 September
2022
The Shillay TopCo Limited (Shillay) accounts for the year ended 31 December
2022 were the first set of consolidated accounts for the entity. These
accounts were approved and signed 28(th) June 2023. This accounting period was
also the first accounting period in which the purchase price allocation and
any resulting tax positions were calculated in respect of its acquisitions of
Parmenion Capital Partners LLP and EBI Portfolios Limited. As a result of
finalising these positions for the 2022 consolidated accounts for the Shillay
group net assets were reduced by £9.1m relative to the presented figures as
at September 2022 primarily as a result of adjustments for uplifts in goodwill
recognised on acquisition and the recognition of additional deferred tax
liabilities.
Share of operating results
The AssetCo Group has recognised this adjustment in its accounts for the year
ended September 2023, reducing the value of its equity investment by its share
of these losses down to a value of £nil.
It is important to note that this adjustment reflects a finalisation of
accounting positions for the December 2022 year end for Shillay TopCo Limited
and has no bearing on the underlying performance of its investment in
Parmenion.
25. Long Term Receivables
Group Group Company Company
2023 2022 2023 2022
£'000 £'000 £'000 £'000
Drawings in advance of profits - 1,208 - -
In the period, members of a partnership in the Group have received drawings
and special drawings in advance of future profits of £380,000 (2022:
1,208,000). However due to the expected recoverability of these drawings a
provision has been made against the balance of drawings on the balance sheet
in addition to a receivable in relation to the fund managed by the partners.
The total provision at 30 September 2023 was £1,467,000 this has been further
described in note 8.
26. Trade and other receivables
Group Restated Group Company Company
2023 2022 2023 2022
£'000 £'000 £'000 £'000
Trade receivables 377 1,441 - -
Other receivables 2,767 2,364 2,174 -
Amounts due from Group undertakings - - 258 -
Consideration receivable on sale of US and UK Solutions businesses
- 3,018 - -
Prepayments and accrued income 2,662 2,877 70 34
5,806 9,700 2,502 34
Due to their short-term nature, the carrying value of trade and other
receivables is considered to be substantially equal to its fair value.
Trade and other receivables, including accrued income and the consideration
due on the sale of the US Solutions business, held in other currencies
amounted to £503,000 (2022: £2,639,000).
The carrying value of trade receivables and accrued income forms part of the
Group's overall exposure to credit risk. The Group does not hold any
collateral as security.
As of 30 September 2023, trade and other receivables of £nil (2022: £nil)
were impaired, and all trade receivables were aged less than 30 days. The
amount of the provision was immaterial (2022: immaterial). No trade
receivables were written off during the year (2022: £nil).
Allocation Restatement
The 2022 allocations of trade and other receivables have been restated. No
adjustment has been made to the total of trade and other receivables. The
impact of these changes is to reallocate £1,629,000 from Other Receivables to
Prepayments and Accrued Income.
27. Financial Assets at Fair Value Through Profit and Loss
Group Group Company Company
2023 2022 2023 2022
£'000 £'000 £'000 £'000
Seeded funds 13 37 - -
13 37 - -
The Group uses capital to invest in its own products as seed investments and
they are recognised under the existing accounting policy as assets held at
fair value through profit and loss. The fair value of the Group's investment
in its funds is derived from the fair value of the underlying investments some
of which are not traded in an active market and therefore the investment is
classified as Level 2 under IFRS 13 Fair Value Measurement.
Amounts recognised in profit or loss
Group Group Company Company
2023 2022 2023 2022
£'000 £'000 £'000 £'000
Fair value (losses)/gains on equity investments - (9,750) - (9,750)
Dividends received recognised in finance income - 11,459 - 11,459
Risk exposure and fair value measurement
The financial instruments are exposed to equity market price risk. Fair value
for the investments were determined by reference to their published price
quotation in an active market (classified as level 1 in the fair value
hierarchy under IFRS 13). As mentioned in note 27 the Group has a financial
instrument classified at level 2 which is an immaterial investment in a seed
fund.
28. Cash and cash equivalents
Group Group 2022 Company Company
2023 £'000 2023 2022
£'000 £'000 £'000
Cash at bank and in hand 25,573 43,066 3,698 7,394
Cash and cash equivalents 25,573 43,066 3,698 7,394
Cash and cash equivalents
UK sterling 24,971 41,270 3,698 7,394
US dollars 302 1,576 - -
Euros 297 12 - -
Australian dollars 3 13 - -
New Zealand dollars - 195 - -
25,573 43,066 3,698 7,394
Cash and cash equivalents receive interest at the floating rate and are
carried on the balance sheet at a value approximate to their fair values.
Balances are held with reputable banks with credit ratings of triple B and
above.
29. Trade and other payables
Restated
Group Group 2022 Company Company
2023 £'000 2023 2022
£'000 £'000 £'000
Trade payables 655 1,135 - 84
Other payables 1,046 1,802 712 2
Other taxation and social security 242 441 26 68
Amounts due to Group undertakings - - 5,495 5,100
Deferred consideration 7,000 100 7,000 100
Accruals and deferred income 5,403 9,272 - 499
14,346 12,750 13,233 5,853
Due to their short-term nature, the carrying value of trade and other payables
approximates to their fair value. Trade and other payables held in other
currencies amounted to £152,000 (2022: £810,000).
Deferred consideration outstanding at 30 September 2023 represents loan notes
payable with respect to the acquisition of SVM. In the prior year deferred
consideration is in respect of the acquisition of Revera Asset Management
Limited and was paid in August 2023.
The amount due to Group undertakings recognised in the Company's trade and
other payables is due to River and Mercantile Holdings Limited and is for the
purpose of providing working capital. It is interest-free, unsecured and
repayable on demand.
Allocation Restatement
The 2022 allocations of trade and other payables have been restated. No
adjustment has been made to the total of trade and other payables. The impact
of these changes is to reallocate £10,212,000 from Trade Payables to Other
Payables (£1,710,000), Other taxation and social security (£336,000) and
Accruals (£8,166,000). Other creditors now includes balances due to Partners
in the LLP subsidiary of the Group and the Accruals balance for 2022 is
principally made up of accrued bonus and other compensation accruals.
30. Current taxation
Group Group Company Company
2023 2022 2023 2022
£'000 £'000 £'000 £'000
Tax receivable 1,159 1,173 - -
Tax (payable) (1,465) (1,437) (1,437) (1,437)
Corporation tax (payable) (304) (264) (1,437) (1,437)
In the current year, corporation tax payable made up of a payable balance of
£1,465,000 and a receivable balance of £1,159,000. The receivable is
expected to be received by end of the calendar year 2023 and relates to tax
payments made by a Group subsidiary in prior years..
There is no corporation tax charge arising in the current year so the balance
above is in respect of AssetCo plc's prior year charge only. As referred to in
note 4 there is some uncertainty around the treatment of certain items in the
tax return and the matter remains open.
31. Financial assets and liabilities
The following tables illustrate the categorisation and carrying value of
financial assets and liabilities as at 30 September 2023. Credit risk is also
discussed in note 3. It should be noted that Loans to associates has been
included in the financial assets table in 2023 to reflect the nature of the
loan as a financial asset. The prior year other receivables balance has been
restated to remove tax assets which are not classified as financial
liabilities within the 2023 year end and to include all relevant accruals
balances.
Financial assets
Group Restated Company Company
2023 Group 2022 2023 2022
£'000 £'000 £'000 £'000
Trade receivables 377 1,441 - -
Other receivables 5,429 5,396 2,174 -
Amounts due to Group undertakings - - 258
Consideration for US Solutions business - 1,807 - -
Cash and cash equivalents 25,573 43,066 3,698 7,394
Financial assets at amortised cost 31,379 51,710 6,130 7,394
Financial assets held as investments in associates 24,626 22,765 24,797 22,584
Financial assets at fair value through profit and loss 13 37 - -
56,018 74,512 30,927 29,978
Financial liabilities at amortised cost
Group Restated Company Company
2023 Group 2022 2023 2022
£'000 £'000 £'000 £'000
Trade payables 655 1,134 - 84
Other payables 1,047 1,902 93 501
Accruals 5,403 9,217
Intercompany payables - - 5,492 -
Lease liability 1,646 294 - -
8,751 12,547 5,585 585
Maturity analysis of financial liabilities
The following disclosures show the maturity profile of contractual
undiscounted cash flows of financial liabilities as at 30 September 2023:
Trade payables Other payables Lease liability Deferred Considerations Total
£'000 and accruals and accruals £'000
£'000 £'000 £'000
2023
Due in one year or less 655 6,450 697 7,000 14,802
Due in more than one year - - 1,091 - 1,091
RESTATED 2022
In one year or less 1,134 11,074 294 - 12,503
Currency risk
The Company and Group has performed sensitivity testing on the fair value of
the Group and Company's financial instruments of a 10% movement in sterling
against all other currencies from the closing rates as at 30 September 2023,
with all other variables remaining constant. A 10% variation would have had an
impact on the post-tax profit balance sheet of £52,000 (2022: £328,000).
Financial assets Financial liabilities
£'000 £'000 Net
£'000
2023
US dollar 407 (22) 385
Euro 135 (4) 131
Australian dollar 3 - 3
545 (26) 519
2022
US dollar 3,901 (495) 3,406
Euro 142 (44) 98
Australian dollar 13 (237) (224)
New Zealand dollar 379 - 379
Swiss franc - (41) (41)
4,435 (817) 3,618
Exposures to foreign exchange rates vary during the year depending on the
volume of overseas transactions. Nonetheless the analysis above is considered
to be materially representative of the Group's exposure to currency risk
during the year.
32. Equity
Share capital and share premium
2023 2022 2023 2022
Shares Shares £000 £000
Ordinary shares of £0.01 each (2022: £0.01)
Fully paid 149,292,970 149,292,970 1,493 1,493
The ordinary shares entitle the holder to participate in dividends, and to
share in the proceeds of winding up the Company in proportion to the number of
and amounts paid on the shares held.
Movement in ordinary shares
Number of shares Share capital £000 Share premium £000 Total
No. £000
Opening balance at 1 October 2021 8,424,847 843 27,770 28,613
Consideration shares re: RMG (1) 5,985,541 598 - 598
Shares arising from LTIP (2) 518,909 52 4,255 4,307
Share premium cancellation (3) - - (32,025) (32,025)
14,929,297 1,493 - 1,493
Effect of 10 for 1 share split (3) 134,363,673 - - -
Balance at 30 September 2022 149,292,970 1,493 - 1,493
Share premium arising on treasury shares used in loan note conversion (note - - 209 209
23)
Balance at 30 September 2023 149,292,970 1,493 209 1,702
Notes:
1. Consideration re: River and Mercantile
On 15 June 2022 the Company completed the acquisition of River and Mercantile
Group Plc, the consideration for which, amounting to £41,899,000, was wholly
settled by the issue of new ordinary shares in AssetCo plc. Under section 612
of the Companies Act 2006 the excess over the par value of these shares is
accounted for as a Merger Reserve rather than as share premium.
Where a company issues equity shares in consideration for securing a holding
of at least 90% of the nominal value of each class of equity in another
company, the application of merger relief is compulsory. Merger relief is a
statutory relief from recognising any share premium on shares issued. Instead,
a merger reserve is recorded equal to the value of share premium which would
have been recorded if the provisions of section 612 of the Companies Act 2006
had not be applicable. As the consideration for the acquisition of River and
Mercantile met this criterion merger relief has been applied.
2. Shares arising from LTIP
As referred to in Note 36 on 5 July 2022 the Company discontinued its LTIP
scheme which resulted in the issue of 518,909 new ordinary shares at a price
of £8.30.
3. 10 for 1 share split
On 10 August 2022 the Court sanctioned the sub-division of the Company's
shares such that one share of 10p became 10 shares of 1p. Accordingly the
number of shares in issue at that date was increased by 134,363,673 so that
the total number of shares in issue became 149,292,970. There was no change to
the nominal value of shares in issue. On the same date the Court also
sanctioned the cancellation of the amount standing to the credit of the
Company's share premium account. Accordingly, an amount of £32,025,000 was
transferred to distributable reserves.
Other reserves
Capital redemption reserve Merger reserve Other reserve Total
£'000 £'000 £'000 £'000
Opening balance at 1 October 2021 653 2,762 5,496 8,911
Arising on acquisition of RMG - 41,301 - 41,301
Costs of RMG acquisition - (1,000) - (1,000)
Share-based payments in relation to LTIP (see note 36) - - (5,496) (5,496)
Balance at 30 September 2022 and 2023 653 43,063 - 43,716
The Company bought back and cancelled 6,532,942 ordinary shares in December
2020. These shares have been credited to the Capital Redemption Reserve in the
amount of £653,000.
A Merger Reserve arose on the issue of shares to vendors of Saracen Fund
Managers Limited rather than share premium.
The share scheme charge in the year, relates to the RSP awarded after the
balance sheet date, however due to circumstances that existed in the year the
charge for the award has commenced in the current year and will be spread over
the life of the award (note 37)
An Other Reserve movement arose during the prior year when the Company
terminated its Long-Term Incentive Plan ("LTIP"). The original balance of
£5,496,000 was recognised in the year ended 2021 fully in respect of the
equity settled LTIP award. Any shares due to the participants under the terms
of the LTIP have been issued although sale by participants is restricted by
certain "lock-in" arrangements.
Retained earnings
RESTATED
2023 2022
£'000 £'000
Opening balance as at 1 October 43,139 18,892
Net (loss)/profit for period (26,699) (7,727)
Share based payment charge (95) -
Cancellation of share premium - 32,025
Dividends paid (1,798) -
Treasury shares used to settle conversion of loan notes 1,791 -
Shares purchased for Treasury (6,815) (51)
Non-controlling interest on sale of Rize (1,094) -
Exchange movement - -
Balance as at 30 September 8,429 43,139
As at 30 September 2023 the Group held 8,283,027 of treasury shares (2022:
72,941) further described in note 2.
33. Deferred taxation
Deferred tax liabilities
Group Group 2022 Company Company
2023 £'000 2023 2022
£'000 £'000 £'000
Deferred tax liabilities to be settled after more than one year 745 861 - -
Deferred tax liabilities to be settled within one year 160 209 - -
Total deferred tax liabilities 905 1,070 - -
The balance comprised temporary differences attributable to:
Deferred tax liability
Group Group 2022 Company Company
2023 £'000 2023 2022
£'000 £'000 £'000
Financial assets at fair value through profit and loss - 28 - -
Right-of-use assets 31 45 - -
Intangible assets 874 997 - -
Deferred tax liability 905 1,070 - -
Deferred tax movements:
Group Financial assets at fair value through profit and Right-of-use Intangible Total
Loss assets assets £'000
£'000 £'000 £'000
At 1 October 2021 - - 49 49
Acquisition of subsidiary 28 45 1,011 1,084
Credited/(charged) to profit and loss - - (63) (63)
At 30 September 2022 28 45 997 1,070
Acquisition of subsidiaries (21) (21)
Disposal of subsidiaries 63 63
Credited/(charged) to profit and loss (28) (13) (165) (206)
At 30 September 2023 - 32 874 905
The recognition of deferred tax assets is based upon whether it is more likely
than not that sufficient and suitable taxable profits will be available in the
future against which the reversal of temporary differences can be deducted.
Where the temporary differences relate to losses, the availability of the
losses to offset against future profitability is also considered. The
directors consider that there is no basis on which to recognise deferred tax
assets at 30 September 2023 or 30 September 2022. The unrecognised asset in
respect of tax losses is set out below.
Tax Losses
2023 2022
£'000 £'000
Unused tax losses for which no deferred tax benefit has been recognised 55,075 36,600
Potential tax benefit at 25% (2022: 25%) 13,769 9,150
The unused tax losses were incurred by AssetCo plc, Revera Asset Management
Limited, River and Mercantile US Holdings Limited and Mercantile Group
Limited. Of these tax losses £7,477,000 relate to US tax losses from the
Group's former US business and are only utilisable against US generated
profits.
34. Reconcilliation of losses and profits before tax to net cash
inflow from operations
Group RESTATED Company RESTATED
2023 Group 2022 2023 Company
£'000 £'000 £'000 2022
£'000
(Loss)/profit for the year before taxation (12,902) (5,354) (31,655) (3,642)
Share-based payments
- in respect of LTIP - 2,749 23 2,749
Cash effect of LTIP - (3,938) - (3,938)
Share of (loss) / profits of associate 352 (181) - -
Interest received from associate (2,213) (2,690) (2,213) (2,690)
Increase in investments - - (4,000) -
Reduction in fair value of investments - 9,750 - 9,750
Gain on disposal of fair value investments - (18) - -
Impairment of investments - - 35,871 522
Proceeds of asset held for resale - 5,462 - -
Bargain purchase - (3,227) - -
Depreciation 28 14 - -
Amortisation of intangible assets 665 227 - -
Amortisation of right-of-use assets 860 187 - -
Finance costs (note 15) 510 10 - -
Movement in foreign exchange (76) - - -
Finance income (note 14) (74) (974) - -
Provision against doubtful debt (note 8) 1,467 - - -
Dividends from investment held at fair value - (11,459) (5,000) (11,459)
Decrease in receivables 3,841 928 (2,468) (638)
(Decrease)/increase in payables (3,659) (6,556) 9,171 (712)
Cash (outflow)/inflow from continuing operations (11,201) (15,070) (271) (10,058)
35. Related Party Transactions
Related parties comprise the Company's shareholders, subsidiaries, associated
companies, joint ventures and other entities over which the shareholders of
the Company have the ability to control or exercise significant influence over
financial and operating decisions and key management personnel.
During the year, the Company entered into the following significant
transactions with related parties at prices and on terms agreed between the
related parties:
Intercompany balances
2023 2022
£'000 £'000
Amounts receivable from Rize ETF Ltd. - -
Amounts payable to River & Mercantile Holdings Ltd. (5,000) -
Amounts payable to Revera Asset Management Limited (492)
Amounts payable from River Global Investors LLP 156
Amounts payable from River Global Services Limited. 102 -
(5,234) (-)
The balance with River & Mercantile Holdings is a current loan, payable on
demand within the next year. Subsequent to year end, the amount was repaid.
During the year loans were made by the Company to Rize ETF Limited totalling
£490,000 accruing interest at a rate of 15% p.a. from the date of
utilisation. On completion of the sale of Rize ETF Limited the loan balance
was settled and accrued interest totalling £15,000 was written off as part of
the sale agreement. Further details on the sale can be found in note 6.
Key management compensation
2023 2022
£'000 £'000
Salaries, fees and other employee benefits 575 584
Share-based payments 95 1,750
670 2,334
Further details on directors' emoluments can be found in note 11.
On 15 June 2022 AssetCo completed the acquisition of River and Mercantile
Group Plc. At the time of completion the AssetCo chairman, Martin Gilbert, was
also a director and shareholder in RMG. Also upon completion the chairman of
RMG, Jonathan Dawson, became a non-executive director of AssetCo.
Details of the Directors' shareholdings in the Company can be found in the
Directors' Report.
36. Long term incentive plan cancellation
On 29 September 2021 the Company announced that the Remuneration Committee was
conducting an ongoing review of the quantum, terms and form of the LTIP in
respect of periods beyond the first performance period (being the period from
8 January 2021 to 30 September 2021) (the "First Performance Period").
After concluding its review and after consultation with advisers and
Shareholders, the Remuneration Committee recommended, and the Board was in
agreement, that the LTIP would be cancelled in respect of periods beyond the
First Performance Period. The Company will take time to consult with its
advisers and Shareholders in terms of appropriate schemes/arrangements to
replace the LTIP and will make an announcement in due course.
The number of ordinary shares of 10p each in the Company ("Ordinary Shares"),
the subject of awards granted to participants under the LTIP ("Participants")
in respect of the First Performance Period was determined to be 993,315
Ordinary Shares being released over a five year deferral period subject to the
terms of the LTIP (the "Deferral Period"). As a consequence of the
cancellation of the LTIP, the Remuneration Committee has accelerated the
release to Participants of the Ordinary Shares which were due to be released
to them over the Deferral Period subject to the lock-in arrangements detailed
below. Further, the Remuneration Committee has determined that the
Participants' entitlements will be settled net of their National Insurance
Contributions and Pay as you Earn obligations which will be paid by the
Company, on behalf of the Participants, with a commensurate reduction in the
number of Deferred Ordinary Shares issued to Participants. The value of the
Deferred Ordinary Shares was determined at £8.30, the closing share price
subsequent to 5 July 2022, the effective date of cancellation of the LTIP. As
a result, the net total of Deferred Ordinary Shares issued to Participants on
5 July 2022 was 518,909 Ordinary Shares. This represents a significant
reduction in the dilution to Shareholders which would have resulted in the
event that the total of 993,315 Ordinary Shares had been issued to
Participants.
The details of how the shares issuable under the LTIP were settled are set out
below:
Shares 2022
No £000
Shares issued on 5 July 2022 at £8.30 each 518,909 4,307
Shares "retained" to fund cash payment of employees' PAYE and NI liability 474,406 3,938
Shares issuable under the LTIP 993,315 8,245
The details of the charges reflected in the income statement over the life of
the LTIP until cancellation in the current year are set out below:
Total 2022 2021
£'000 £'000 £'000
Shares issuable under LTIP 8,245 2,749 5,496
Employers' national insurance 1,278 501 777
Total share-based payment charge 9,523 3,250 6,273
Of the 518,909 shares issued on 5 July 2022 under the LTIP the following were
issued to Directors:
Shares 2022 2021
No £'000 £'000
Martin Gilbert 160,920 784 1,649
Peter McKellar 126,029 653 1,374
Campbell Fleming 61,685 313 -
348,634 1,750 3,023
The Participants have entered into lock-in arrangements with the Company
whereby they are restricted from disposing of Deferred Ordinary Shares for the
period up to 30 September 2026.
37. Post Balance Sheet Events
a) Completion of acquisition of Ocean Dial Asset
Management Limited ("ODAM")
On 2 October 2023 the Group completed the acquisition of ODAM. The purchase
was for 100% of the shares and voting rights of the Company.
The acquisition is earnings enhancing for the Group and it is anticipated that
further synergies will be achievable due to further integration of the
business in order to capitalise on the existing operating model of the Group.
The consideration was satisfied by the delivery of 1,464,129 ordinary shares
of £0.01 each in the capital of the Company satisfied from shares held in
treasury and £2.46m in cash (£1.82m net of cash within the business). A
final 1,464,129 Ordinary Shares of the Company, again satisfied from shares
held in treasury, were delivered on 30 January 2024. The total paid for the
ODAM business was therefore 2,928,258 Ordinary Shares, funded from treasury,
and £2.46m in cash (£1.82m net of cash within the business). Using a share
price of 38p (price as at 29 September 2023) this would indicate a fair value
paid of £3,573,000.
In the year to September 2023, the Group incurred some professional fee costs
in relation to the purchase however the transaction has not had a material
impact on the results for the year.
It should be noted that management has not yet fully concluded its assessment
of purchase price allocation however the Net Assets of ODAM on acquisition
were £669,000 with cash of £642,000. It is expected that the majority of the
net cost of acquisition will be accounted for as Goodwill once finalised.
b) Sale of Interest in River and Mercantile
Infrastructure LLP ("RMI")
On 6 October 2023 the Group announced it had reached an agreement in principle
to transfer its interest in RMI to the partners of RMI, which would then
continue to operate outside of the Group. Subsequent dialogue with the
partners of RMI and investors in the fund advised by RMI has identified a
different route forward whereby AssetCo and River Group exit the
Infrastructure business, the fund continues to be appropriately advised and
the partners of RMI establish a business outside of the AssetCo Group. The
transaction to effect this has yet to be completed but was at an advanced
stage of discussion at the date of publication of AssetCo results. In the
meantime, measures were taken to move the current RMI business to break even
from January 2024 and it is anticipated that a clean break will be achieved in
the near future which is satisfactory to both the current clients and the
current RMI Team.
c) Award of Restricted Share Plan ("the Plan")
On 6 November 2023 the Group announced that it has put in place a Restricted
Share Plan for a limited number of executives, partners and staff. The Plan
has awarded rights over up to 5,013,000 ordinary shares in the Company, which
it is expected would be satisfied from shares currently held in treasury.
Vesting of Shares under the Scheme is due on 1 October 2026 and is subject to
usual provisions for malus, clawback and for apportionment or forfeiture in
respect of good and bad leavers prior to that date at the discretion of the
Board's Remuneration Committee.
Due to conditions that existed in the year, the charge for the RSP has
commenced in the current financial year and will be spread over the life of
the award.
d) Rebrand of Equities business
On 4 December 2023 the Group rebranded its Equities business to River Global,
reflecting the bringing together of all of the River and Mercantile, Saracen
and SVM brands under one brand and operating model.
e) Settlement of SVM loan notes
On 27 December 2023, the Group settled the loan notes due to the previous
owners of SVM. This represented an outflow of cash of £7m from the business.
GLOSSARY
AGM Annual General Meeting
Board The board of directors of the Company
CEO Chief Executive Officer
Company AssetCo plc
Covid Coronavirus
Director A director of the Company
ETF Exchange Traded Fund
Group AssetCo plc and its subsidiaries
Revera or Revera Asset Management Revera Asset Management Limited
River and Mercantile or River and Mercantile Group Limited and its subsidiaries
River and Mercantile Group or RMG
Rize Rize ETF Limited
Saracen Saracen Fund Managers Limited
SVM or SVM Asset Management SVM Asset Management Limited or its holding company SVM Asset Management
Holdings Limited
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