TIDMINCE
RNS Number : 8513U
Ince Group PLC (The)
03 August 2020
The Ince Group plc
("Ince" or the "Group")
Audited results for the year ended 31 March 2020
Robust results driven by strong Ince brand
For the year ended 31 March (GBPm) 2020 2019 % Growth
------------------------------------------- ------ ------ ---------
Revenue 98.5 52.6 +87%
Operating profit 26.2 15.2 +72%
% margin 26.6% 28.9% (230)bps
Adjusted* profit before tax 8.0 5.9 +36%
Adjusted** diluted earnings per share (p) 14.9p 18.8p (21)%
Dividend per share (p) - 6.0p n/a
Net (debt)/cash (9.0) (2.9)
------------------------------------------- ------ ------ ---------
* Adjusted profit before tax is calculated as the profit before
tax after adding back non-recurring items (as shown in note 11 to
the financial statements) and after deducting the non-controlling
interests shown in statutory accounts
** Adjusted earnings per share is computed from adjusted profit
before tax after deducting taxation
Operational highlights
-- Compound revenue growth of almost 60% p.a. since listing in
2017 (both through acquisitions and organic growth)
-- Ince international offices now fully integrated into the
Group's operations giving wider sector and geographical
coverage
-- More than 10 top tier lateral hires successfully embedded in the business
-- Group now operates from eight jurisdictions across the UK, EMEA and Asia
-- Collaborative selling across regions and expanded base of
specialisms main driver of organic growth
-- Successful fundraising of GBP14m in February 2020
-- Completion and installation of wholly-owned multi-office,
multi-currency practice management system.
Covid-19
-- Trading performance has been impacted in first quarter of FY
2021 by Covid-19 (c. 10% reduction in revenue versus budget)
-- Pre-existing infrastructure allowed all locations to move instantly to offsite working
-- Asia practices (impacted from January 2020) have now returned
to their offices following Government guidance although in Hong
Kong for example social distancing measures have been reintroduced.
At present we are operating at pre-pandemic levels and ahead of
budget in this region
-- Cash preservation through active engagement with colleagues,
key suppliers and stakeholders to secure reductions and deferrals
where appropriate. At 31 March 2020 cash holdings were GBP5.2
million and at 30 July 2020 were GBP6.4 million after GBP1.3
million scheduled reductions in borrowings
Financial highlights
-- Revenue GBP98.5m (2019: GBP52.6m) +87%
-- Organic growth of revenue c. 5%
-- Operating profits GBP26.2m (2019: GBP15.2m) +72%
-- Adjusted* profit before tax GBP8.0m (2019: GBP5.9m) +36%
-- Non-recurring acquisition costs and related material items GBP1.7m (2019: GBP14.3m)
-- Adjusted** diluted earnings per share 14.9p (2018: 18.8p) -21%, reflecting equity issue
-- Dividend cancelled in view of uncertainty caused by Covid-19 (2019: 6.0p)
-- Net cash generated by operating activities GBP14.7m (2019: GBP5.9m)
-- Net borrowings GBP9.0m (2018: net borrowings GBP2.9m), GBP1.2
million of external debt repaid since draw down in June 2019 and
pay down continuing
-- Profit and total comprehensive income for the year GBP21.8m
(2018: GBP0.8m), diluted earnings per share 11.4p (2019: loss 28.1p
)
* Adjusted profit before tax is calculated as the profit before
tax after adding back non-recurring items (as shown in note 11 to
the financial statements) and after deducting the non-controlling
interests shown in statutory accounts
** Adjusted earnings per share is computed from adjusted profit
before tax after deducting taxation
Outlook
Our strategy continues to be to grow revenue profitably through
adding high performing partners to a single efficient
administration operation. We do this by recruiting high quality
personnel, developing new business streams, acquiring complementary
businesses and forging strategic alliances.
The underlying business has proven resilient and the Group now
has a firmly established international presence with a very strong
brand.
The Board considers that the Group has the strength, flexibility
and commitment to prosper and grow for the benefit of shareholders
and colleagues over the coming years. Given the Covid-19
uncertainties, it is too early to provide guidance on the results
for the current year.
Adrian Biles, Group Chief Executive, commented:
"I first want to thank my colleagues around the world without
whom this year's strong performance could not have been achieved.
Their fortitude, hard work and flexibility during this challenging
time has been remarkable.
"We can justifiably claim that this has been a year of great
progress. While we narrowly missed our GBP100m revenue target, the
fact that these results were achieved despite the disruption caused
by Covid-19 shows the quality of the business we are building.
"This is the first announcement to include the whole of Ince for
a full year. The power of the Ince brand continues to win clients
and attract talent.
"Throughout the year we have recruited exceptionally high
quality partners in the marine, aviation, energy and insurance
sectors, expanded the overseas offices and moved into exciting
high-growth sectors. Also we have welcomed Rampart Corporate
Advisors Ltd together with a team of senior shipping colleagues
from Bentleys, Stokes and Lowless to the Group.
"We are continuing to realise the full potential of the Ince
brand and our first class people."
Presentations
A presentation for analysts and institutional investors will be
held today, 3 August 2020, at 11am. All participants must
pre-register with Portland Communications to attend the event via:
ince@portland-communications.com.
An open presentation and Q&A for all investors will also be
held via the Investor Meet Company platform on 5 August 2020 at
4pm. Investors can register for the event via:
https://www.investormeetcompany.com/ince-group-plc-the/register-investor
FOR FURTHER INFORMATION, PLEASE CONTACT:
The Ince Group plc investorrelations@incegd.com
Adrian Biles, Group Chief Executive
Simon Oakes, Chief Financial Officer
Arden Partners plc
Nominated Advisor and Broker to the Company +44 (0) 20 7614 5900
John Llewellyn-Lloyd, Corporate Finance
Ciaran Walsh, Corporate Finance
Dan Gee-Summons, Corporate Finance
Fraser Marshall, Equity Sales
Portland Communications +44 (0) 7767 345 563
Steffan Williams ince@portland-communications.com
Simon Hamer
Riku Heikkila
About The Ince Group plc
The Ince Group is an international legal and professional
services business with 21 offices in eight countries across Europe,
the Middle East and Asia. With some 800 people, including over 100
equity partners worldwide, The Ince Group delivers legal advice,
strategic guidance and business solutions to sector leading
businesses operating across numerous industries. Through its
entrepreneurial culture and "one firm" approach, the business
offers its clients over 150 years of expertise, insight and
relationships. The Group is driven by a senior management team
whose broad expertise and deep sector specialisms provide its
clients with solutions to complex legal and strategic needs.
Please visit www.theincegroup.com for more information.
Chairman's statement
It gives me great pleasure to present my first report since
succeeding Anthony Edwards as chairman in April this year. I and
the board thank Anthony for his guidance and chairmanship through
the flotation process and since the Group's admission to AIM.
The Group's turnover increased by 87% to GBP98.5 million,
operating profit by 72% to GBP26.2 million and Adjusted* profit
before taxation to GBP8.0 million from GBP5.9 million. Adjusted*
diluted earnings per share were 14.9p, a decrease of 22% from last
year reflecting the increased shares in issue. We paid a dividend
of 4p per share in the year and had declared a further dividend of
2p per share for payment in April, however this was cancelled for
prudence as the Covid-19 pandemic struck. The Group's results are
more fully described and discussed in the following pages by our
CEO and our Group FD.
The year has been another one full of challenges and successes.
Continuing the integration of the two firms, their operations and
their cultures has been an on-going process and the CEO develops
that theme below. The results for the year were advancing well
until Covid-19 appeared and global governmental actions to limit
the spread progressively impacted all of our offices, starting in
the Far East in January. This has dampened the outcome for the year
end, however we are pleased with the substantial progress
throughout the year.
I would like to place on record my thanks to all our colleagues
across the Group around the world for their dedication to serving
our clients particularly throughout the period of unusual working
conditions.
The Group's strategy continues to be the profitable growth of
income and the intellectual capital of the Group both through
lateral team hires and, where appropriate, acquisitions. To this
end, the Group has increased the number of equity partners to over
100 since 1 April 2019. This includes achieving control of the Ince
offices in Hong Kong, Singapore, Dubai, Greece, Monaco and Germany
and taking on the partners of Bentleys, Stokes and Lowless, a long
established boutique London law firm specialising in shipping.
Of particular significance have been the lateral hires of three
partners in Hong Kong who have driven substantial growth in that
office and the hires of Julian Clark as Senior Partner of the law
firm, Mark Tantam as head of consulting businesses and Alex Janes
as head of EMEA offices who are all now active across the Group.
The latter three have brought both significant client lists and
experience of managing international professional service
businesses, expanding and strengthening the Group's management
team.
In late March, the Board reluctantly concluded that the Company
should take the prudent action of cancelling the dividend which had
been declared for payment in April as there was a high level of
uncertainty about the impact of the Covid-19 pandemic. The Group
has conserved cash very effectively since then and at 30 July 2020
had cash of some GBP6.4 million in the bank compared with GBP5.2
million at 31 March and we had reduced indebtedness by GBP1.3
million by scheduled repayments. Various governmental programmes
which have been helpful to the Group will expire or be reduced over
the next few months and there will be obligations to pay back some
of this funding. Accordingly, the Board does not believe it prudent
to propose a dividend at this time. The Board continues to believe
that rewards for shareholders who have invested in the business are
very important and the position is under continuous review.
In terms of governance, we are actively looking to recruit at
least one further non-executive director and are determined to
deliver a board which is balanced, diverse and inclusive in terms
of area of relevant expertise, background and culture. It is very
important that the boardroom has a wide range of views in order to
understand, acknowledges and respond to our clients, colleagues and
shareholders.
The Group now has a firmly established global presence with a
very strong brand which we are continuing to build upon through
lateral team hires. The world will not be the same post Covid-19,
however I believe that the Group has the strength, flexibility and
commitment to prosper and grow for the benefit of our valued
shareholders and colleagues over the coming years. Given the
Covid-19 uncertainties, it is too early to provide guidance on the
results for the current year.
David Furst, Chairman
31 July 2020
* These terms are explained in the Chief Financial Officer's
report
Group Chief Executive's Report
I first want to thank my colleagues around the world without
whom this year's strong performance could not have been achieved.
Their fortitude, hard work and flexibility during this challenging
time has been remarkable.
The year has been another one of great progress for the Group,
with the completion of the Ince consolidation in April 2019 which
saw the overseas offices joining the Group and contributing to
revenues which, despite the effects of the Covid-19 pandemic,
almost reached GBP100 million.
Our strategy has been and continues to be to acquire and grow
revenue through organic growth, lateral hires and, where
appropriate, acquisition and to administer that revenue through a
single efficient administrative operation in a low-cost
environment.
Our objective at admission to AIM in August 2017 was to double
revenue in three years. As we approach the third anniversary, our
reported revenue has almost quadrupled, a compound growth rate of
almost 60% p.a.
We have the ambition to develop a highly profitable and fast
growing international legal and professional services group and
have the structure and teams in place to achieve this.
Key achievements
-- From the consolidation of the Ince overseas offices in April
2019 and the integration of all of the Ince offices into the Group,
the increasing collaboration between offices and practice areas has
been progressively driven forwards.
-- We have also focussed on forging a common culture across the
various teams and offices, aimed at embedding the Group's core
values of connection, agility, clarity and entrepreneurship.
-- In mid 2019 we completed a branding review aimed at
capitalising on the Group's established brand names. We also
implemented a new brand style for the very strong "Ince" brand
globally for most of the businesses. We have had increasing
evidence of the strength of this brand and have adjusted the
balance sheet intangible value to ascribe more value to the brand
acquired instead of the client portfolio essentially connected to
the partners of the acquired business. We recognise that the
business is "sticky" to individual partners but is stickier to the
Ince brand where clients have multiple touchpoints. This is
reflected in the balance sheet at 31 March 2020.
-- We have begun the process of strengthening the Ince overseas
offices where partner attrition had left them sub-scale. In doing
this we have deliberately sought to expand the service lines
offered by those offices beyond the world leading marine services
which they have always provided: this has included the three Hong
Kong partners taken on (as reported last year) who have been
effective in developing their non-marine business in the Group very
rapidly. A further four partners have joined our offices in Dubai,
Gibraltar and Singapore in the second half of the year
strengthening our service offering in those regions.
-- Through very senior lateral hires in the UK we have also
expanded and strengthened the management team and then created an
executive committee which is responsible to the Chief Executive and
the board for delivering successful day-to-day operations.
-- In addition to those very senior lateral hires and the
overseas lateral hires a number of focussed lateral hires in the UK
have also been achieved. We have made more than 10 top tier lateral
hires in the year
-- We raised GBP14.0 million of further equity capital early in
2020 and we were pleased to welcome a number of new shareholders as
well as further investment by many of our existing institutional
investors, private investors, partners and colleagues.
-- Perhaps the most gratifying achievement has been the way the
Group has reacted to the Covid-19 pandemic: it first struck in the
Far East and we closed our offices there in late January to protect
personnel while continuing to operate to support our clients
seamlessly. We then progressively closed each of the other offices
as required. Our infrastructure and administrative services enabled
all our colleagues to provide the usual high quality service our
clients expect at all times. The Greater China offices were the
first to re-open and they have, so far in the current financial
year, performed ahead of our expectations. The EMEA and UK offices
started re-opening later and are showing encouraging signs of a
return to normality. That said, we continue to encourage agile
working and have plans to ensure continuity of client service
through any future potential lock downs across our
jurisdictions.
Financial performance
We are pleased with our results, which are detailed in the Group
Finance report below, with the Ince businesses delivering a full
year's contribution for the first time.
The Group's revenues have grown by 87% over the year and much of
this is due to the inclusion of the whole of Ince for a complete
year. Within this, we estimate that organic growth was 5%
The split of the Group's revenue by business area has changed
significantly over the year, with the contribution from marine,
aviation and transport activities growing to represent half of the
Group's revenue for the year. We are also pleased to see that the
revenues generated by real estate (as a proportion of the global
revenues) has dropped significantly and was significantly less than
10% in the year. These revenues, while important to the business as
an adjunct to other service lines, are volatile, high risk and high
maintenance and we are much more comfortable for the future of the
business with such revenues at or under 10% of the whole Group.
An analyses of the revenues for the year ended 31 March 2020 by
service line is set out below.
Years to 31 March 2020 2019 2018
GBPm GBPm GBPm
Shipping & trade 55.7 8.8 -
Dispute resolution 17.0 10.0 9.5
Corporate & tax 11.6 13.4 9.1
Real estate 5.8 7.3 6.6
Family & private client 3.9 4.9 3.4
Other 4.5 8.2 2.7
98.5 52.6 31.3
------ ------ ------
Geographically, the revenue for the year ended 31 March 2020 was
as below.
Year to 31 March 2020
GBPm
UK 63.9
Greater China 19.6
Dubai 4.9
Germany 3.6
Greece 3.5
Singapore 1.7
Gibraltar 1.3
------
98.5
------
Operational performance
We have continued to integrate all aspects of our operations
onto a single administrative platform which can serve all our
offices on a basis which enables appropriate regional and
departmental management control. Operations are managed across all
service lines to enable sensible operational decisions at global
and local levels as appropriate.
As reported previously, the Group now owns a copy of the basic
source code for the Group's practice management system. Over the
last twelve months this has continued to be developed and is
expected in the next month to deal with all London transactions
regardless of origin of the transaction or execution or currency.
It will then be installed in all overseas offices over coming
months, becoming one of, if not the only, independent multi-office,
multi-currency practice management systems available to UK based
businesses which is not associated with a major data supplier and
therefore subject to that supplier's own commercial imperatives. We
believe that this is a significant competitive advantage.
Our core remuneration model (as well as the valuable brand
"Ince" which is being enhanced and developed) continues to be a
magnet for partners in other firms to join us - our results in this
regard over the last twelve months evidence the powers of our brand
and our remuneration structure. Our remuneration model focuses on
professional practitioners being rewarded both for the billable
work they do and for the income generated from their clients. Our
basic model for partners continues to be refined to promote our
core values and the behaviours we want to see which will drive
Group profitability. We continue to focus partners financially on
generating fees from their clients, on the recovery of the full
value of the work undertaken and the generation of gross margin
from which to cover overheads and to generate profits for
shareholders.
We have placed a lot of emphasis since the Ince acquisition on
the development of a culture for the Group. This culture aims to
provide an environment of trust for partners and colleagues which
is open and transparent and in which everyone can perform to the
best of their abilities. In the context of an integration on the
scale of the Ince merger, the turnover in partners and other
colleagues over the period has been little different to the Group's
history. The stability of partners and other colleagues is, we
believe, vital in delivering the continuing satisfaction of clients
and we are, therefore, unsurprised by our clients being open to
using the other strengths of the Group where appropriate.
The future
We can and will do even better as the partners in the Group come
to trust each other with each other's clients to develop
performance. We are determined to grow our client base and
intellectual capabilities and believe we have the platform to
achieve this. We have built a platform which supports a substantial
international business which is being incrementally grown by
lateral hires and modest acquisitions - for both of which there
continues to be a ready supply of opportunities.
We continue to develop the collaborative growth of the business
from adding service lines supplied by new recruits in an office and
from the ability to service additional needs of existing clients.
This requires significant trust to be built up between partners and
other colleagues across service lines and geographies.
We have made progress in our diversity and inclusion strategy,
but we must continue to improve this further. The value created
through diverse experiences and contributions at all levels in our
business are important to our growth. We have re-established a new
diversity and inclusion steering committee made up of colleagues
from across the Group, who I and the board will work closely with
to drive our strategy over the coming years.
Our clients are, along with its people, the Group's most
valuable assets. It is because of the value we add for our clients
that we can continue to do what we do best: advise them in relation
to their most crucial and important business and personal needs. We
need to look after our clients, make sure we are communicating with
them in the right way and at the right time, and continue to
deliver the high-quality legal service they have come to expect
from Ince. Clear and accurate communication is key to success. The
Ince Key Account Management Programme (KAM) has recently been
launched for a number of clients with whom we believe we can
further develop and strengthen relationships, resulting in better
service for those clients and increased revenue for the Group.
Our existing client base is our most valuable marketing and
business development audience so by implementing and investing in a
KAM programme we will:
-- Develop and broaden relationships with existing clients
-- Create greater client loyalty
-- Through listening to clients, better understand our clients'
current business along with future needs
-- Generate greater revenue growth from clients who are managed and developed
There are a number of active examples of this, for example,
where we achieved a successful small transaction for a client in
the last three years and where we are now billing that client a
substantial multiple of the initial fee on an annual basis - the
key as we see it is to be a trusted partner of our client,
providing a range of services which enable the clients to realise
increased value from their businesses.
Notwithstanding the global Covid-19 pandemic, the current year
is generating opportunities to grow the business and we are seizing
those opportunities.
One of our key differentiators as a listed professional services
entity is the quality of our work and the quality of our people who
look after our clients. While we enjoyed the benefit of a number of
market leading practice areas prior to the Ince merger, without a
doubt that merger brought with it a substantial body of first class
business and professional partners and colleagues. We have
consolidated the marketing of our client services under the Ince
brand and our clients include a wide range of world leaders in
shipping, energy and aviation among other sectors.
We will continue to succeed further and drive value for our
shareholders by continuing to provide relevant and expert advice to
our clients from understanding their business as a whole or their
individual circumstances (rather than the particular legal issue
they might expect to consult us on) therefore providing value to
our client. This will enable us further to succeed and drive value
for our shareholders.
Adrian Biles
31 July 2020
Chief Financial Officer's Report
The Group's consolidated results for the year ended 31 March
2020 show total revenue of GBP98.5 million (2019: GBP52.6 million),
operating profits of GBP25.9 million (2019: GBP15.2 million) and
adjusted profit before tax of GBP7.7 million (2019: GBP5.92
million).
For the year ended 31 March (GBPm) 2020 2019 % Growth
------------------------------------------- ------ ------ ---------
Revenue 98.5 52.6 +87%
Operating profit 26.2 15.2 +72%
% margin 26.6% 28.9% (230)bps
Adjusted* profit before tax 8.0 5.9 +36%
Adjusted** diluted earnings per share (p) 14.9p 18.8p (21)%
Dividend per share (p) - 6.0p n/a
Net (debt)/cash (9.0) (2.9)
------------------------------------------- ------ ------ ---------
The Group presents two Alternative Performance Measures
("APMs"). These APMs include adjustments for specific items in
order to provide a balanced view of the underlying performance of
the Group's operations.
*Adjusted profit before tax is calculated as profit before tax
after:
- adding back non-recurring items of GBP1.6 million in 2020
(2019: GBP14.3 million). In 2020, these primarily relate to costs
for the final phase of the Ince acquisition when new network
arrangements were established with certain Ince overseas offices;
and
- deducting partners' profit shares and other non-controlling
interests of GBP16.4 million in 2020 (2019: GBP9.3 million).
Partners' profit share and other non-controlling interests
represent the costs of rewarding and motivating the relevant
business generators. It is one of the largest outgoings (and
variable) costs of the business and is reported in the statutory
accounts as part of the non-controlling interests. The reported
profit metrics therefore do not provide a true reflection of the
underlying profits generated by the operations and available to
equity holders. The adjusted disclosure essentially treats all
forms of remuneration as operating costs of the business (just as
employees' costs).
**Adjusted earnings per share is calculated by adjusting for
taxation and dividing by the weighted average number of shares in
issue for the period, on a diluted basis where a materially
different result is produced.
The result is adjusted profit before tax and adjusted earnings
per share (both for continuing operations) as shown below.
For the year ended 31 March 2020 2019
GBPm GBPm
Profit before tax from statement of comprehensive
income 23.20 0.97
Deduct: Non-controlling interests including
partners' profit shares (16.85) (9.31)
Add: Non-recurring costs - acquisition
costs and material related costs 1.66 14.26
-------- -------
Adjusted profit before tax 8.01 5.92
Deduct: Taxation (1.54) (0.21)
-------- -------
Adjusted profit after tax for adjusted
earnings per share 6.47 5.71
-------- -------
Key Performance Indicators (KPIs)
To achieve profits for shareholders, we focus the business on a
small number of KPIs which we consider essential business drivers
of profit growth. In simple terms, if we grow revenues, maintain or
increase gross margin, constrain overheads and convert work done
into cash, the profits for shareholders (as measured by adjusted
profit before tax) will grow.
We therefore monitor the progress of the business through four
essential KPIs:
o Revenue (measured net of disbursements and VAT)
o Gross margin percentage
o Overheads as a percentage of revenue
o Lockup
For management purposes we regard the profit and loss account as
follows:
2020 2019
GBPm GBPm
Revenue 98.5 52.6
Production costs - employment costs (31.6) (12.0)
Production costs - non-controlling interests (16.8) (9.3)
Production costs - amortisation * (2.0) (1.5)
Production costs - other (4.2) (4.2)
------- -------
Gross margin 43.9 25.6
Administrative salaries and non-productive
profit shares (13.6) (6.3)
Other overheads (22.3) (13.4)
------- -------
Adjusted profit before tax 8.0 5.9
------- -------
* - this represents amortisation of client portfolio intangibles
of acquired businesses, recognised in in line with relevant fee
billings / cash collections
Revenue is discussed in the Group Chief Executive's report
above.
Production costs are the profit shares of the equity partners
and the employment costs of the other fee earners together with
their direct costs (such as travel) and direct support costs (such
as dedicated secretaries) and provision for doubtful and bad debts
(where we provide for all unsecured debts over six months old).
This also includes the amortisation of client portfolios.
Gross margin is the fees charged to clients less direct
production costs and is expressed as a percentage of revenue. Gross
margin is in the control of the heads of each department or
business unit and these individuals are rewarded with a
participation in gross margin achieved in excess of 45%. In the
current year (and after including amortisation which will be
replaced by a partners' profit share in due course) it was 44.6%
(2018: 48.6%). The current year's gross margin reflects:
- The incorporation of the gross margin profiles of the Ince
overseas offices (39% in the year), which were brought into the
Group in the knowledge they required a certain level of investment
in fee earners through lateral hires to improve their fee earning
capacity:
o This began in the year with the hiring into our Greater China
practice in Q1 of a team of three partners supported by twenty fee
earner colleagues into our Hong Kong office, which resulted in that
region delivering gross margin of 48% for the year (GBP9.3m).
o Management is now focussing on securing lateral hires into
other regions, with the recent hires in Singapore, Dubai and
Gibraltar mentioned earlier.
Overheads are all the other costs of running the business -
premises, insurance, computing and telephones etc. - apart from the
costs of acquisitions. In the year, overheads as a percentage of
fees charged to clients were 36.4% (2019: 37.4%) while our target
is 30%. The target becomes more achievable the more fees are
generated, so the successful deployment of lateral hires into the
overseas offices will be critical to delivering this metric. As
noted below, we are also reviewing our overhead cost base in the
light of the impact of Covid-19.
Lock up is defined for our KPI as the value of trade debtors and
work in progress compared with fees charged to clients, in each
case excluding disbursements and VAT. This measure is under the
control of the Client Care Partner for each client and they are
guided and assisted in this by our revenue management team. Our
current target for this is 100 days for the Group, although within
this we expect some degree of variance across the different
jurisdictions in which we operate. In the last quarter of the
financial year, lock up significantly increased as Covid-19
impacted the Group, first in our Asian operations and latterly in
the UK. Lock up as at 31 March 2020 was therefore 96 days. This was
despite a marked slowing of debtor collections in the period
immediately preceding the lockdown in the UK and a significant
build up in debtors in Greater China.
Management's focus remains on achieving the above lock up, gross
margin and overheads targets in the medium term. There is an
aspiration of a 15% net margin but management believes 10-12% is
realistically achievable in a shorter term after non-recurring
expenses. Management is also closely focussed on optimising the
productive capacity of fee earners and delivering organic growth
through collaborative selling across our different disciplines and
jurisdictions.
Funding and external facilities
In February 2020, the Group raised GBP14.0 million through a
share issue of 31,214,182 new shares.
In the placing announcement for the issue of new shares, the
Group indicated an intention to pay down its GBP6.5 million RCF
from Barclays Bank plc. This RCF is part of the external debt
facilities put in place in December 2018 at the point of the first
phase of the Ince acquisition. It was planned that the repayment
would take place during the financial year ending 31 March
2021.
When Covid-19 began to impact the international markets in which
the Group operates, the Directors decided to delay repayment of the
RCF to mitigate the adverse cash flow impacts from Covid-19. As
noted below, revised forecasts, including an estimate of Covid-19's
impact, show the Group will be able to meet the Barclays Bank plc
external debt facilities' covenants over the next 12 months.
Balance sheet and cash flow
The acquisition of Ince gave rise to intangible assets which
have been recognised in three ways - as goodwill, as client
portfolio and as trademark, associated to the value of the Ince
brand. A third party valuation of the Ince brand at the date of
acquisition has been commissioned and an initial valuation of GBP17
million has been received and included in the balance sheet as part
of the intangible asset acquisition of Ince. We have also received
initial guidance that the efforts we have invested in developing
the brand have significantly increased this value since
acquisition. Both goodwill and the value of the trademark will be
reviewed annually for impairment. The client portfolio value is
being amortised over the three years during which the deferred
consideration is being paid to the former Ince partners (until
December 2021), at an annual charge of some GBP2 million.
At the end of the year, the balance sheet had net borrowings of
GBP9.0 million (2019: net borrowings of GBP2.9 million), comprising
cash and cash equivalents of GBP5.2 million and borrowings of
GBP14.2 million, predominantly comprising the Barclays facilities
discussed above. As noted above, this net debt position is higher
than anticipated at the time of the share issue, as we have
continued to use the Group's GBP6.5 million RCF whilst Covid-19 has
temporarily reduced business activity and slowed cash collections
in some parts of the business.
The Consolidated Statement of Cash Flow shows that the Group had
GBP14.7 million of cash flow generated by operating activities
(2019: GBP5.9 million).
As was outlined in last year's statutory accounts, whilst some
tax losses remain available for use, this year the rate of tax (at
6.7%) has moved closer to the standard UK rate of Corporation Tax.
It remains our expectation that this trend will continue moving
forward. As a result of the disallowance of the amortisation of
client portfolios as an expense, the effective tax rate on Adjusted
Profit before tax is higher than the standard UK rate and this is
expected to continue for the next financial year before returning
towards that standard rate.
Covid-19
The Covid-19 virus has had a rapid and significant impact on the
global economy, affecting many of the markets and sectors in which
we operate. As a result of this pandemic, the level of chargeable
work being done in various practice areas has reduced in particular
in transactional areas such as real estate and corporate.
Accordingly, the Group has taken proactive action across all of
its locations and has activated business continuity plans
minimising the risk of disruption to business operations, taking
account of relevant local government advice and the need to
safeguard the health of our workforce. Steps have been taken to
reduce / delay costs, including:
- Discretionary expenditure across all our locations has been
cancelled or deferred, unless an immediate, business critical
requirement is identified, and key suppliers / stakeholders have
been engaged with to temporarily defer or reduce expenditure.
- The Group has taken advantage of the UK Government's furlough
scheme in the case of colleagues who cannot for various reasons
effectively work other than in the Group's offices and also where
clients do not need servicing (for example in the residential
conveyancing part of the UK business). Departmental management has
been tasked with using the scheme to maintain a level of
utilisation above 60%.
- All Board and most UK colleagues' salaries have been reduced
on a temporary basis and partners' drawings have been reduced and
profit distributions deferred.
We have been pleased with the level of engagement and support we
have received from colleagues and partners as well as our supplier
network. We will continue to follow the various national
institutes' policies and advice and in parallel will look to
continue our operations in the best and safest way possible without
jeopardising anyone's health.
Furthermore, although the impact was first seen in our Asian
offices in late January 2020, these offices have now seen activity
levels return to levels included in the original forecast for the
year ending 31 March 2021.
Going concern
In light of the impact of Covid-19, the Directors revised the
original forecasts for the financial year ending 31 March 2021 to
sensitise for the potential impact on profitability and cash flow
over the next 12 months.
This revised model was prepared using the expected impact based
on trading patterns in March and April 2020, which indicated a
potential reduction in activity levels and therefore revenue of 20%
to 30%. The actual adverse impact to date has not been as
significant with revenues to 30 June only c.10% behind our budget
prepared before Covid-19 and cash at 30 July 2020 approximately
GBP6.4 million.
The cash flow forecast indicates a low point of cash across the
Group in October 2020 of GBP2.7 million (with GBP8.3 of net debt),
once the impact of the cash management actions described above is
taken into account and after paying all debt repayments due on
schedule. The Group's external debt facilities are not due for
renewal until December 2021 and forecasts indicate the Group will
meet its covenant requirements for the next 12 months.
Consequently, the Board of Directors expect that the Company and
the Group have adequate resources to continue to trade for the next
12 months. Accordingly, these accounts have been prepared on a
going concern basis.
Simon Oakes
31 July 2020
Consolidated Statement of Comprehensive Income
Year ended Year ended
) )
31-Mar-20 31-Mar-19
) )
Note GBP'000 GBP'000
) )
--------------------------------------------- ----- ----------- ---------------------
Continuing operations
98,478 52,576
Fees and commissions 5 ) )
--------------------------------------------- ----- ----------- ---------------------
Staff costs 6 (45,153) (18,296)
Depreciation and amortisation (8,279) (1,665)
Other operating expenses (19,182) (17,406)
Other operating income 354 ) 38 )
--------------------------------------------- ----- ----------- ---------------------
26,218 15,247
Operating profit 7 ) )
--------------------------------------------- ----- ----------- ---------------------
Finance income 8 352 ) 218 )
Finance expense 8 (1,571) (251)
Non-recurring costs 9 (1,657) (14,267)
Share of (loss)/profit of associates (140) 19 )
--------------------------------------------- ----- ----------- ---------------------
23,202
Profit before income tax ) 966 )
Income tax expense 10 (1,543) (206)
--------------------------------------------- ----- ----------- ---------------------
21,659
Profit from continuing operations ) 760 )
Profit from discontinued operations 137 ) - )
--------------------------------------------- ----- ----------- ---------------------
21,796
Profit for the period ) 760 )
--------------------------------------------- ----- ----------- ---------------------
Attributable to:-
Equity holders of the Company 4,952 ) (8,552)
16,844
Non-controlling interests ) 9,312 )
--------------------------------------------- ----- ----------- ---------------------
21,796
Profit for the period ) 760 )
--------------------------------------------- ----- ----------- ---------------------
Earnings per share
Basic earnings per share (pence) 11 11.78 ) (28.66)
Adjusted basic earnings per share
(pence) 11 15.39 ) 19.15 )
Diluted earnings per share
Diluted earnings per share (pence) 11 11.42 ) (28.10)
Adjusted diluted earnings per share
(pence) 11 14.92 ) 18.77 )
Other comprehensive income
Items that may be reclassified subsequently
to profit or loss:
Translation of foreign operations 35 ) - )
--------------------------------------------- ----- ----------- ---------------------
Other comprehensive income for the
period 35 ) - )
Total comprehensive income for the 21,831
period ) 760 )
--------------------------------------------- ----- ----------- ---------------------
As disclosed in note 11 adjusted profit before tax for the year
is GBP8,015,000 (2019: GBP5,921,000).
There is no tax on any component of other comprehensive income
or expense.
The attached notes are an integral part of these consolidated
financial statements.
Statements of Financial Position
The Ince Group plc (Registered number: 03744673)
Restated
)
Group Group Company Company
) ) ) )
31-Mar-20 31-Mar-19 31-Mar-20 31-Mar-19
) ) ) )
GBP'000 GBP'000 GBP'000 GBP'000
Note ) ) ) )
ASSETS
Non-current assets
3,761 1,182
Property, plant and equipment 13 ) ) 90 ) - )
17,441
Right-of-use assets 14 ) - ) 696 ) - )
80,825 74,443
Intangible assets 15 ) ) - ) - )
47,607
Investments 16 470 ) 379 ) ) 47,191
102,497 76,004 48,393
) ) ) 47,191
---------- ---------- ---------- ----------
Current assets
44,412 31,960 38,886 30,223
Trade and other receivables 17 ) ) ) )
Corporation tax - ) - ) - ) 168 )
5,250 4,759
Cash and cash equivalents 18 ) ) 3 ) 987 )
49,662 36,719 38,889 31,378
) ) ) )
---------- ---------- ---------- ----------
152,159 112,723 87,282 78,569
Total assets ) ) ) )
---------- ---------- ---------- ----------
EQUITY
Capital and reserves attributable
the Company's equity holders
Share capital 19 686 ) 370 ) 686 ) 370 )
24,126 11,192 24,126 11,192
Share premium 20 ) ) ) )
Reverse acquisition reserve 20 (24,724) (24,724) - ) - )
Foreign exchange translation
reserve 20 35 ) - ) - ) - )
3,460 2,874
Other reserves 20 634 ) 48 ) ) )
41,527 38,787 18,894 30,543
Distributable reserves 20 ) ) ) )
---------- ---------- ---------- ----------
42,284 25,673 47,166 44,979
) ) ) )
9,064 5,807
Non-controlling interest ) ) - ) - )
---------- ---------- ---------- ----------
51,348 31,480 47,166 44,979
Total equity ) ) ) )
---------- ---------- ---------- ----------
LIABILITIES
Non-current liabilities
22,453 35,431
Trade and other payables 21 ) ) - ) - )
10,400 5,240 10,400 5,100
Borrowings 22 ) ) ) )
2,189 2,050
Provisions 23 ) ) - ) - )
13,284
Lease liabilities 14 ) - ) 370 ) - )
---------- ---------- ---------- ----------
48,326 42,721 5,100
) ) 10,770 )
Current liabilities
39,325 27,822 27,756 27,590
Trade and other payables 21 ) ) ) )
1,372
Corporation tax ) 245 ) - ) - )
3,829 2,370 1,200
Borrowings 22 ) ) ) 900 )
2,407 8,085
Provisions 23 ) ) - ) - )
5,552
Lease liabilities 14 ) - ) 390 ) - )
---------- ---------- ---------- ----------
52,485 38,522 29,346 28,490
) ) ) )
---------- ---------- ---------- ----------
100,811 81,243 40,116 33,590
Total liabilities ) ) ) )
---------- ---------- ---------- ----------
152,159 112,723 87,282 78,569
Total equity and liabilities ) ) ) )
---------- ---------- ---------- ----------
The Company has taken advantage of the exemption contained in
S408 Companies Act 2006 and has not presented a separate income
statement for the Company. The Company recorded a loss of
GBP9,437,000 for the 12 month period ending 31 March 2020.
The financial statements were approved and authorised for issue
by the Board of Directors and were signed on its behalf on 31 July
2020 by S. Oakes - Director.
The attached notes are an integral part of these consolidated
financial statements.
Consolidated Statement of Cash Flows
Group ) Group Company Company
) ) )
12 months 12 months 12 months 12 months
to ) to ) to ) to )
31-Mar-20 31-Mar-19 31-Mar-20 31-Mar-19
) ) ) )
GBP'000 GBP'000 GBP'000 GBP'000
) ) ) )
Cash flows from operating activities
Profit before tax from continuing
operations 23,202 ) 966 ) (9,269) (886)
Profit before tax from discontinued
operations 137 ) - ) - ) - )
Adjustments for:
Finance income (352) (218) - ) - )
Finance expense 1,571 ) 251 ) - ) 50 )
14,267
Non-recurring costs 1,657 ) ) 391 ) - )
Depreciation, amortisation and
impairment 8,279 ) 1,665 ) 294 ) 48 )
Share options expense 172 ) - ) 172 ) - )
Gain on sale of discontinued
operations (51) - ) - ) - )
Share of loss of associates 140 ) (19) - ) - )
Net exchange differences (323) - ) - ) - )
Changes in operating assets
and liabilities (net of acquisitions):
Decrease/(increase) in trade
and other receivables (9,616) (15,589) (731) (63)
(Decrease)/increase in trade
and other payables (1,787) (1,388) 292 ) 99 )
(Decrease)/increase in provisions (6,380) 6,571 ) - ) - )
---------- ---------- ---------- ----------
16,649 6,506
Cash generated by operations ) ) (8,851) (752)
Interest and other financial
costs paid (1,054) (92) (370) (50)
Tax paid (896) (554) - ) - )
Net cash generated by operating 14,699 5,860
activities ) ) (9,221) (802)
---------- ---------- ---------- ----------
Cash flows from investing activities
Cash paid on acquisitions (net
of cash acquired) 2,078 ) (6,388) - ) - )
Payment of contingent and deferred
consideration (10,126) (4,762) - ) - )
Payment of acquisition related
costs (1,657) (7,525) - ) - )
Purchase of PPE (1,436) - ) (116) - )
Proceeds from disposal of PPE 2 ) - ) - ) - )
Purchase of intangible assets (1,627) (795) - ) - )
Disposal of subsidiary, net
of cash disposed of (191) - ) - ) - )
Interest received 352 ) 218 ) - ) - )
Net cash absorbed by investing
activities (12,605) (19,252) (116) - )
---------- ---------- ---------- ----------
Cash flows from financing activities
Movement in borrowings (including
finance leases) 6,133 ) 6,969 ) 5,600 ) 6,000 )
(Advances to)/repayments by
subsidiaries - ) - ) (8,073) (14,157)
11,504 14,048 11,504
Proceeds from issues of shares 14,046 ) ) ) )
Transaction costs relating to
issue of shares (800) (460) (800) (460)
Dividends paid (2,197) (1,150) (2,197) (1,150)
Transactions with non-controlling
interests (15,513) (7,699) - ) - )
Direct cost of leases (24) - ) (17) - )
Payment of lease liability (3,268) - ) (208) - )
Net cash absorbed from financing 9,164 8,353 1,737
activities (1,623) ) ) )
---------- ---------- ---------- ----------
Net (decrease)/increase in cash
and cash equivalents 471 (4,228) (984) 935 )
Cash and cash equivalents at
beginning of period 4,720 8,948 ) 987 ) 52 )
Effects of exchange rate changes
on cash - - ) - ) - )
Cash and cash equivalents at 4,720
end of period 5,191 ) 3 ) 987 )
---------- ---------- ---------- ----------
The attached notes are an integral part of these consolidated
financial statements.
Consolidated Statement of Changes in Equity
Foreign
Reverse exchange Non-
Share Share acquisition translation Other Distributable controlling Total
capital premium reserve reserve reserves reserves interest equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
) ) ) ) ) ) ) )
Balance at 1 288 48,489 4,512 28,795
April 2018 ) 230 ) (24,724) - ) - ) ) ) )
Profit/(loss)
and total
comprehensive
income/(expense) 9,313
for the period - ) - ) - ) - ) - ) (8,552) ) 761 )
Dividend paid - ) - ) - ) - ) - ) (1,150) - ) (1,150)
Shares issued 11,422 11,504
in period 82 ) ) - ) - ) - ) - ) - ) )
Share options
acquired - ) - ) - ) - ) 48 ) - ) - ) 48 )
Share issue
transactions
costs - ) (460) - ) - ) - ) - ) - ) (460)
Transferred to
members - ) - ) - ) - ) - ) - ) (8,018) (8,018)
Balance at 31 370 11,192 48 38,787 5,807 31,480
March 2019 ) ) (24,724) - ) ) ) ) )
-------- -------- ------------ ------------ --------- -------------- ------------ ---------
Balance at 1 370 11,192 38,787 5,807 31,480
April 2019 ) ) (24,724) - ) 48 ) ) ) )
Profit for the 16,844 21,796
period - ) - ) - ) - ) - ) 4,952 ) ) )
Other
comprehensive
income - ) - ) - ) 35 ) - ) - ) - ) 35 )
Dividend paid - ) - ) - ) - ) - ) (2,212) - ) (2,212)
Shares issued 316 13,734 414 14,464
in period ) ) - ) - ) ) - ) - ) )
Share options 172
acquired - ) - ) - ) - ) ) - ) - ) 172 )
Share issue
transaction
costs - ) (800) - ) - ) - ) - ) - ) (800)
Transferred to
members - ) - ) - ) - ) - ) - ) (13,587) (13,587)
Balance at 31 686 24,126 634 41,527 9,064 51,348
March 2020 ) ) (24,724) 35 ) ) ) ) )
-------- -------- ------------ ------------ --------- -------------- ------------ ---------
As both the capital redemption reserve and retained earnings are
by nature distributable these items have been presented on a
combined basis in the above.
The attached notes are an integral part of these consolidated
financial statements.
Company Statement of Changes in Equity
Share Share Other Distributable Total
) ) ) ) )
capital premium reserves reserves equity
) ) ) ) )
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
) ) ) ) )
Balance at 1 April 2,826 35,755
2018 288 ) 230 ) ) 32,411 ) )
Profit/(loss) and total
comprehensive income/(expense)
for the period - ) - ) - )) (718) (718)
Dividend paid - ) - ) - )) (1,150) (1,150)
11,422 11,504
Shares issued in period 82 ) ) - ) )
Share options acquired - ) - ) 48 )) - ) 48 )
Share issue transactions
costs (460) - )) - ) (460)
Balance at 31 March 11,192 2,874 30,543 44,979
2019 370 ) ) )) ) )
-------- -------- --------- -------------- --------
Balance at 1 April 11,192 2,874 44,979
2019 370 ) ) )) 30,543 ) )
Profit/(loss) and total
comprehensive income/(expense)
for the period - ) - ) - )) (9,437) (9,437)
Dividend paid - ) - ) (2,212) (2,212)
13,734 14,464
Shares issued in period 316 ) ) 414 )) - ) )
Share options acquired - ) - ) 172 )) - ) 172 )
Share issue transactions
costs - ) (800) - )) - ) (800)
Balance at 31 March 24,126 3,460 18,894 47,166
2020 686 ) ) )) ) )
-------- -------- --------- -------------- --------
The attached notes are an integral part of these consolidated
financial statements.
Notes to the Financial Statements
1. General information
The Ince Group plc (the Company) and its subsidiaries (together
'The Ince Group' or 'the Group') provide legal & professional
services and independent financial advisory services to businesses
and high net worth individuals in the UK.
The Company is a public limited company incorporated and
domiciled in the UK. The address of its registered office is
Aldgate Tower, 2 Leman Street, London E1 8QN.
These consolidated financial statements have been approved for
issue by the Board of Directors on 31 July 2020.
2. Summary of significant accounting policies
2.1 Basis of preparation
These consolidated financial statements of The Ince Group plc
are for the 12 month period to 31 March 2020. The financial
statements have been prepared in accordance with IFRS as adopted by
the European Union and those parts of the Companies Act 2006
applicable to companies reporting under IFRS.
The financial statements have been prepared on the going concern
basis. In deciding this, the directors have considered the detailed
budgets for the current financial year and high level budgets for
the succeeding year including in both cases cash flows.
They have also considered the impact of adverse changes
resulting from the major risks and uncertainties they consider
apply to the group. At the date of this report, the Group is taking
the Covid-19 threat to its clients, vendors, staff and overall
business very seriously. The Group is taking proactive action and
has activated business continuity plans, where required across the
jurisdictions in which the Group operates, to minimise the risk of
disruption to business operations. In doing this, the Group has
taken account of government advice in the jurisdictions in which it
operates and the need to safeguard the health of our clients. At
this stage, the impact on our business and results is limited. We
will continue to follow the various locations' national policies
and advice and in parallel will do our upmost to continue our
operations in the best and safest way possible without jeopardising
anyone's health.
As a result of Covid-19, the Directors revised the original
forecasts for the financial year ending 31 March 2021 to sensitise
for the potential impact on profitability and cash flow over the
next 12 months. This revised forecast indicates the Group has
sufficient cash to trade for at least the next 12 months and will
meet its covenant requirements under its external debt facilities
in this period.
Consequently, the Board of Directors have a reasonable
expectation that the Company and the Group have adequate resources
to continue in operational existence for the next 12 months.
The financial statements have been prepared in accordance with
those IFRS standards and IFRIC interpretations issued and effective
or issued and early adopted as at the time of preparing these
statements. The policies set out below have been consistently
applied to all the periods presented.
The preparation of financial statements in conformity with IFRS
requires the use of certain critical accounting estimates. It also
requires management to exercise its judgment in the process of
applying the group's accounting policies. The areas involving a
higher degree of judgment or complexity, or areas where assumptions
and estimates are significant to the consolidated financial
statements are disclosed in Note 4.
The Group has adopted all of the new and revised standards and
interpretations issued by the International Accounting Standards
Board ("IASB") that are relevant to its operations and are
currently effective. A number of new or amended standards became
applicable for the current reporting period, and the Group had to
change its accounting policies and make retrospective adjustments
as a result of adopting IFRS 16 Leases. The impact of the adoption
of the leasing standard and the new accounting policies are
disclosed in Note 34. The other standards did not have any impact
on the group's accounting policies and did not require
retrospective adjustments.
2.2 EU adopted IFRS not yet applied
The Group has not adopted any standards or interpretations in
advance of the required implementation dates.
2.3 Consolidation
Subsidiaries are entities controlled by the Company. The Group
controls an entity when it 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 over the entity.
The financial statements of subsidiaries are included in the
consolidated financial statements from the date that control
commences to the date that control ceases.
The purchase method of accounting is used to account for the
acquisition of subsidiaries by the group. The cost of an
acquisition is measured as the fair value of the assets given,
equity instruments issued and liabilities incurred or assumed at
the date of exchange. Costs directly attributable to the
acquisition are expensed in the period. Identifiable assets
acquired and liabilities and contingent liabilities assumed in a
business combination are measured initially at their fair values at
the acquisition date, irrespective of the extent of any
non-controlling interest. The excess of the cost of acquisition
over the fair value of the group's share of the identifiable net
assets and contingent liabilities acquired is recorded as goodwill.
If the cost of acquisition is less than the fair value of the net
assets of the subsidiary acquired, the difference is recognised
directly in the income statement. Inter-company transactions,
balances and unrealised gains on transactions between group
companies are eliminated. Unrealised losses are also eliminated but
considered an impairment indicator of the asset transferred.
Accounting policies of subsidiaries have been changed where
necessary to ensure consistency with the policies adopted by the
group.
The Company's accounting period date 31 March is in line with
its subsidiaries, except in the instance of the subsidiary Herring
Parry Khan Law Office (Ince & Co Greece). This entity's results
as at 31 December are consolidated, as it is considered impractical
to consolidate the results at 31 March. The impact of this is not
considered material and any transactions in this entity, which are
considered to be material and have occurred in the period between
January and March, are included in the consolidated accounts.
2.4 Investments in subsidiaries
Investments in subsidiaries are included at cost less provision
for impairment in value.
2.5 Investments in associates
Associates are those entities over which the Group has
significant influence, but neither control nor joint control over
the financial and operating policies. Associates are accounted for
using the equity method and are initially recognised at cost. The
financial statements include the Group's share of total
comprehensive income and equity movements of associates from the
date when significant influence commences to the date the
significant influence ceases.
2.6 Segment reporting
A business segment is a group of assets and operation engaged in
providing products or services that are subject to risks and
returns that are different from those of other business segments.
The group's two business segments are described in the strategic
report, being legal & professional services and independent
financial advisory services. No segment reporting disclosures are
required for these due to the fact that the smaller segment,
financial services advisory, falls beneath the quantitative
thresholds set out by IFRS 8 paragraph 13.
The group provides a segmental analysis to enhance the
understanding of the financial statements.
2.7 Business combinations
The Group applies the acquisition method of accounting to
account for business combinations in accordance with IFRS 3 (R),
'Business Combinations'. The consideration transferred for the
acquisition of a subsidiary is the fair values of the assets
transferred, the liabilities incurred and the equity interests
issued by the Group. The consideration transferred includes the
fair value of any asset or liability resulting from a contingent
consideration arrangement. Identifiable assets acquired and
liabilities and contingent liabilities assumed in a business
combination are measured initially at their fair values at the
acquisition date. The excess of the consideration transferred over
the fair value of the Group's share of the identifiable net assets
acquired is recorded as goodwill. All transaction related costs are
expensed in the period they are incurred. If the consideration is
lower than the fair value of the net assets of the subsidiary
acquired, the difference is recognised in the income statement.
Any contingent consideration to be transferred by the Group is
recognised at fair value at the acquisition date. Subsequent
changes to the fair value of the contingent consideration that is
deemed to be an asset or liability is recognised in accordance with
IFRS 9 in the income statement.
2.8 Intangible assets
Intangible assets include the cost of acquiring client
portfolios and the Ince brand.
Client portfolios are carried at cost less accumulated
amortisation losses and impairment losses. Amortisation of the cost
is being provided for in line with the fees billed and cash
collections being generated by the client portfolio acquired.
The Ince brand is carried based on an independent external
valuation which applied a discounted cash flow model under the
relief from royalty method. The brand has existed for 150 years and
it has been confirmed as part of the independent valuation that it
has an indefinite useful economic life.
Intangible assets also include internally generated software and
intellectual property, which are held at cost less subsequent
amortisation and impairment. These intangible assets are amortised
at rates in order to write off the assets on a straight line basis
over their estimated useful lives of between 3 and 10 years.
Internally generated software are amortised at the point from which
the software is considered fully functional.
The remaining amortisation period of these assets varies from 1
year - 6.5 years.
2.9 Goodwill
Goodwill arising in a business combination is recognised as an
asset at the date that control is acquired (the acquisition date).
Goodwill is initially measured as the excess of the sum of the
consideration transferred, the amount of any non-controlling
interest in the acquired entity and the fair value of the
acquirer's previously held equity interest (if any) in the entity
over the net of the acquisition date amounts of the identifiable
assets acquired and the liabilities assumed.
The company tests annually whether goodwill has suffered any
impairment. The carrying value of the goodwill is dependent on the
future income stream from that asset.
Goodwill recognised in a business combination does not generate
cash flows independently of other assets or groups of assets. As a
result, the recoverable amount, being the value in use, is
determined at a cash generating unit (CGU) level.
The determination of a CGU is judgemental. The identification of
CGU's involves an assessment of whether the asset or group of
assets generate independent cash flows.
For impairment purposes goodwill is tested annually at the CGU
level. This was carried out at 31 March 2020. The carrying value of
goodwill and the key assumptions used in performing the annual
impairment assessment are disclosed in note 15.
2.10 Impairment of assets
Assets that have an indefinite useful life are not subject to
amortisation and are tested annually for impairment and whenever
events or changes in circumstance indicate that the carrying amount
may not be recoverable.
Assets that are subject to amortisation are tested for
impairment whenever events or changes in circumstance indicate that
the carrying amount may not be recoverable. An impairment loss is
recognised where the amount by which the asset's carrying amount
exceeds its recoverable amount. The recoverable amount is the
higher of an asset's fair value less costs to sell and the value in
use.
For the purposes of assessing impairment, assets are grouped at
the lowest levels for which there are separately identifiable cash
flows (cash-generating units).
Critical estimates and assumptions made
In assessing the value in use of each CGU, our calculations
required estimates in relation to uncertain items, including
management's expectations of future growth, operating costs, profit
margins, operating cash flow and the discount rate for each
CGU.
Future cash flows used in the value in use calculations, are
based on the latest approved financial plans extrapolated for
future periods expected to benefit from the goodwill for each CGU.
The future cash flows are discounted using a post-tax discount that
reflects current market assessments of the time value of money.
2.11 Financial instruments
The group classifies financial instruments, or their component
parts, on initial recognition as a financial asset, a financial
liability or an equity instrument in accordance with the substance
of the contractual arrangement. Financial instruments are
recognised on trade date when the group becomes a party to the
contractual provisions of the instrument. Financial instruments are
recognised initially at fair value plus, in the case of a financial
instrument not at fair value through profit and loss, transaction
costs that are directly attributable to the acquisition or issue of
the financial instrument. Financial instruments are derecognised on
trade date when the group is no longer a party to the contractual
provisions of the instrument.
Financial assets are included on the statement of financial
position as trade and other receivables and cash and cash
equivalents.
Financial liabilities are included on the statement of financial
position as trade and other payables and borrowings.
(a) Trade receivables
Trade receivables are stated at their original invoiced value,
as the interest that would be recognised from discounting future
cash receipts over the short credit period is not considered to be
material. Trade receivables are reduced by appropriate allowances
for estimated irrecoverable amounts.
(b) Trade payables
Trade payables are stated at their original invoiced value, as
the interest that would be recognised from discounting future cash
payments over the short payment period is not considered to be
material.
(c) Interest-bearing borrowings
Interest-bearing borrowings are stated at amortised cost using
the effective interest method. The effective interest method is a
method of calculating the amortised cost of a financial liability
and of allocating interest expense over the relevant period. The
effective interest rate is the rate that exactly discounts
estimated future cash payments through the expected life of the
financial liability.
2.12 Foreign currency translation
(a) Functional and presentation currency
The consolidated financial statements are presented in pounds
sterling, which is the Company's functional and presentation
currency.
(b) Transactions and balances
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
period-end exchange rates of monetary assets and liabilities
denominated in foreign currencies are recognised in the statement
of comprehensive income.
(c) Subsidiary accounts denominated in foreign currency
On consolidation, assets and liabilities of non-sterling
entities are translated to sterling at year-end rates of exchange,
while their statements of income, other comprehensive income and
cash flows are translated at monthly average rates. The resulting
translation differences are recognised as currency translation
differences within other comprehensive income.
2.13 Property, plant and equipment
Property, plant and equipment ("PPE") is shown at cost less
subsequent depreciation and impairment. 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 Group and the cost of the item can be measured
reliably. All other repairs and maintenance are charged to the
statement of comprehensive income during the financial period in
which they are incurred.
Depreciation on assets is calculated using the straight-line
method to allocate the cost of each asset less its residual value
over its estimated useful life, as follows:
Computers, plant and 3-10 years
machinery
Equipment 3-5 years
Leasehold improvements 3-5 years
The assets' residual values and useful lives 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
proceeds with carrying amount. Write downs and gains and losses on
disposals are included in the statement of comprehensive
income.
2.14 Cash and cash equivalents
Cash and cash equivalents includes cash in hand, deposits held
at call with banks, other short-term highly liquid investments with
original maturities of three months or less, and bank overdrafts.
Bank overdrafts are shown within borrowings in current liabilities
on the statement of financial position.
2.15 Borrowings
Borrowings are recognised initially at fair value, net of
transaction costs incurred. Borrowings are subsequently stated at
amortised cost; any difference between the proceeds (net of
transaction costs) and the redemption value is recognised in the
statement of comprehensive income over the period of the borrowings
using the effective interest method.
Borrowings are classified as current liabilities unless the
Group has an unconditional right to defer settlement of the
liability for at least 12 months after the statement of financial
position date.
2.16 Deferred income tax
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 and company financial statements. The deferred income
tax is 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/loss. Deferred income tax is
determined using tax rates (and laws) that have been enacted or
substantially enacted by the statement of financial position date
and are expected to apply when the related deferred income tax
asset is realised or the deferred income tax liability is
settled.
Deferred income tax assets are recognised to the extent that it
is probable that future taxable profit will be available against
which the temporary differences can be utilised.
Deferred income tax is provided on temporary differences arising
on investments in subsidiaries, joint ventures and associates,
except where the timing of the reversal of the temporary difference
is controlled by the Group and it is probable that the temporary
difference will not reverse in the foreseeable future employee
benefits.
2.17 Pension obligations
The Group operates a pension scheme which is a defined
contribution plan. A defined contribution plan is a pension plan
under which the Group pays fixed contributions into a separate
entity.
The Group has no legal or constructive obligations to pay
further contributions if the fund does not hold sufficient assets
to pay all employees the benefits relating to employee service in
the current and prior periods.
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. The contributions are recognised
as employee benefit expense when they are due. Prepaid
contributions are recognised as an asset to the extent that a cash
refund or a reduction in the future payments is available.
2.18 Profit-sharing and bonus plans
The Group recognises a liability and an expense for bonuses and
profit-sharing, based on a formula that takes into consideration
the profit attributable to that part of the Group for which the
employee is profit responsible. The Group recognises a provision
where contractually obliged or where there is a past practice that
has created a constructive obligation.
2.19 Provisions
Provisions for clawback of indemnity commission, pensions
review, unpaid salaries and other claims are recognised when the
Group has a present legal or constructive obligation as a result of
past events; it is more likely than not that an outflow of
resources will be required to settle the obligation; and the amount
has been reliably estimated.
Where there are a number of similar obligations, the likelihood
that an outflow will be required in settlement is determined by
considering the class of obligations as a whole. A provision is
recognised even if the likelihood of an outflow with respect to any
one item included in the same class of obligations may be
small.
Provisions are measured at management's best estimate of the
expenditure required to settle the obligation at the statement of
financial position date.
2.20 Revenue Recognition
Revenue comprises the fair value of the sale of services, net of
value-added tax, rebates and discounts and after eliminating sales
within the Group.
Revenue from the sale of professional services is recognised as
follows:
(a) Legal & professional services
Revenue from the provision of legal and professional services is
recognised over time in the accounting period in which services are
rendered. Contracts for the provision of legal and professional
services may include fixed fee arrangements, variable fee
arrangements based on time and materials or contingent fee
arrangements. For fixed fee arrangements, revenue is recognised
based on the actual services provided to the end of the reporting
period as a proportion of the total services to be provided. For
variable fee contracts based on time and materials, revenue is
recognised at the amount of fees that the Group has a right to
invoice for services provided, based on the fee rates agreed with
the client. For conditional fee arrangements, fees are billed on
completion depending on the outcome of the matter (e.g. Personal
Injury or Clinical Negligence cases on a 'no win, no fee' basis).
Revenue in respect of contingent fee assignments, over and above
any agreed minimum fee, is included in revenue only to the extent
that it is highly probable that the amount will not be subject to
significant reversal when the uncertainty is resolved. This is
generally when the matter is resolved and the outcome is known.
A receivable is recognised when a bill has been invoiced as this
is the point in time that the consideration is considered
unconditional because only the passage of time is required before
payment is due. Where income has not been billed at the reporting
date, it is included in Accrued Income.
No element of financing is deemed to exist as payment is
typically due within one year of the service being performed.
(b) Employee benefits and financial advisory
Revenue relating to the employee benefits and financial advisory
business represents fees and life and pension commission and is
recognised at a point in time. Fees are recognised when invoiced
and commissions are recognised when confirmation is received from
the underwriters that payment is being made to the Group. A
provision is made for clawback of commission which is deducted from
turnover.
(c) Interest income
Interest income is recognised on a time-proportion basis using
the effective interest method.
2.20 Leases
As explained in note 34, the Group has changed its accounting
policy for leases where the Group is the lessee. The new policy is
described in note 34.2 and the impact of the change in note
34.1.
Until 31 March 2019, leases of property, plant and equipment
where the Group had substantially all the risks and rewards of
ownership were classified as finance leases. Finance leases, were
capitalised at the lease's inception at the lower of the fair value
of the leased asset and the present value of the minimum lease
payments. Each lease payment was allocated between the liability
and finance charges so as to achieve a constant rate on the finance
balance outstanding. The corresponding rental obligations, net of
finance charges, were included in other borrowings. The interest
element of the finance cost was charged to the income statement
over the lease period so as to produce a constant periodic rate of
interest on the remaining balance of the liability for each period.
The property, plant and equipment acquired under finance leases
were depreciated over the shorter of the asset's useful life and
the lease term.
Leases where the lessor retains substantially all the risks and
rewards of ownership were classified as operating leases. Payments
made under operating leases (net of any incentives received from
the lessor) were charged to the statement of comprehensive income
on a straight-line basis over the period of the lease.
2.21 Dividend distribution
Dividend distribution to the Company's shareholders is
recognised as a liability in the Group's financial statements in
the period in which the dividends are approved by the Company's
shareholders. Interim dividends are recognised when paid.
2.22 Share-based payments
The fair value at the date of grant of the equity instrument is
recognised as an expense, spread over the vesting period of the
instrument. The total amount to be expensed is determined by
reference to the fair value of the awards, excluding the impact of
any non-market vesting conditions. At each statement of financial
position date, the group revises its estimate of the number of
equity instruments which are expected to become exercisable. It
recognises the impact of the revision of original estimates, if
any, in the statement of comprehensive income and a corresponding
adjustment is made to equity. On vesting or exercise, the
difference between the expense charged to the statement of
comprehensive income and the actual cost to the group is
transferred to retained earnings. Where new shares are issued, the
proceeds received are credited to share capital and share
premium.
3. Financial risk management
3.1 Financial risk factors
The Group's activities expose it to a variety of financial
risks: market risk (including foreign exchange risk and price
risk), credit risk, liquidity risk, cash flow risk and fair value
interest-rate risk. The Group's overall risk management programme
focuses on the unpredictability of financial markets and seeks to
minimise potential adverse effects on the Group's financial
performance. Further details are set out in note 31.
Risk management is carried out by the Board of Directors. The
Board identifies, evaluates and hedges financial risks in close
co-operation with the Group's operating units. The Board provides
written principles for overall risk management, as well as written
policies covering specific areas, such as foreign exchange risk,
interest-rate risk, credit risk, use of Convertible loan stock and
non-Convertible loan stock, and investing excess liquidity.
(a) Credit risk
Because the Group has a wide range of clients, in different
market sectors, it has no significant concentrations of credit
risk. It has policies in place to ensure that if customers do not
settle their accounts within the agreed terms then the transaction
is cancelled minimising the credit exposure.
(b) Liquidity risk
Prudent liquidity risk management implies maintaining sufficient
cash and marketable securities, and the availability of funding
through an adequate amount of committed credit facilities. The
Group aims to maintain flexibility in funding by keeping committed
credit lines available.
(c) Cash flow and fair value interest rate risk
The Group's income and operating cash flows are substantially
independent of changes in market interest rates. The interest rates
of finance leases to which the Group is lessee are fixed at
inception of the lease. These leases expose the Group to fair value
interest rate risk.
The Group's cash flow interest rate risk arises from borrowings.
Borrowings issued at variable rates expose the Group to cash flow
interest rate risk. Borrowings issued at fixed rates expose the
Group to fair value interest rate risk. Group policy is to maintain
approximately 33 per cent of its borrowings in fixed rate
instruments. At March 2020, 100 per cent of borrowings were at
fixed rates.
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.
The Group makes estimates and assumptions concerning the future.
The resulting accounting estimates will, by definition, seldom
equal the related actual results. The estimates and assumptions
that have a significant risk of causing a material adjustment to
the carrying amounts of assets and liabilities within the next
financial year are discussed below.
(a) Estimated impairment of goodwill
Determining whether goodwill is impaired requires an estimation
of the value in use of the cash generating units to which goodwill
has been allocated. The value in use calculation requires the
entity to estimate the future cash flows expected to arise from the
cash generating unit and a suitable discount rate.
(b) Other receivables
Other receivables represent unbilled amounts for client work and
are measured initially at fair value and held at amortised cost
less provisions for foreseeable losses based upon current
observable data and historical trend.
(c) Impairment of receivables
Receivables are held at cost less provisions for impairment.
Provisions for impairment represent an allowance for doubtful debts
that is estimated, based upon current observable data and
historical trend.
(d) Valuation of intangible assets
Business combinations are accounted for at fair value. The
valuation of goodwill and acquired intangibles is calculated
separately on each individual acquisition. In attributing value to
intangible assets arising on acquisition, management has made
certain assumptions in relation to expected growth rates,
profitability, length of key customer relationships and the
appropriate discount rate. The value of intangible assets at 31
March 2020 was GBP80,825,000 (2019:GBP74,443,000 restated).
(e) Provisions
Provisions are recognised when the Group has a present
obligation (legal or constructive) as a result of a past event, it
is probable that the Group will be required to settle that
obligation and a reliable estimate can be made of the amount of the
obligation. Provisions are measured using management's best
estimate of the expenditure required to settle the obligation at
the reporting date and are discontinued to present value where the
effect is material. The value of provisions at 31 March 2020 was
GBP4,596,000 (2019: GBP10,135,000 restated).
(f) Amortisation of intangible assets other than goodwill
The useful life used to amortise intangible assets relates to
the expected future performance of the assets acquired and
management's judgement of the period over which economic benefit
will be derived from the asset.
5. SEGMENT INFORMATION
Group
In the following table, revenue from contracts with customers is
disaggregated by primary geographical market and major service
offering:
Legal &
professional
services Other Total
GBP'000 GBP'000 GBP'000
-------------------------- ------------- -------- --------
Year ended 31 March 2020
UK 61,740 2,120 63,860
Europe, Middle East &
Africa 13,328 - 13,328
Asia 21,290 - 21,290
Total Revenue 96,358 2,120 98,478
-------------------------- ------------- -------- --------
Year ended 31 March 2019
UK 49,835 1,944 51,779
Asia 797 - 797
Total Revenue 50,632 1,944 52,576
-------------------------- ------------- -------- --------
Non-current assets other than financial instruments and deferred
tax assets by geographical areas are not presented, as this
information is not provided to the chief operating decision maker
of the group.
6. Staff costs
Group
The average number of persons employed by the Group (excluding
directors) during the period, analysed by category, was as
follows:
No. of employees
2020 2019
---------------------- --------- --------
Fee earners 342 194
Direct support staff 134 69
Support staff 258 133
Total 734 396
---------------------- --------- --------
The aggregate employment costs of these persons were as
follows:
2020 2019
GBP'000 GBP'000
------------------------- -------- --------
Wages and salaries 38,304 15,473
Social security costs 3,495 1,740
Employee benefits costs 2,088 569
Pension costs 1,266 514
Total Staff Costs 45,153 18,296
------------------------- -------- --------
Company
The Company has no employees (excluding directors) (2019: none);
all personnel are employed by subsidiary entities.
Details of the remuneration of and transactions with directors
are included in the Directors' Remuneration Report accompanying
these financial statements. The directors are considered to be key
management personnel.
7. Operating profit
Operating profit is stated after charging/ (crediting):
Group Group
2020 2019
GBP'000 GBP'000
--------------------------------- -------- --------
Fees payable to the company's
auditor for the audit of
the company's annual accounts 70 54
Fees payable to the company's
auditor and its associates
for other services:
- audit of the accounts
of subsidiaries 241 190
- audit-related assurance
services 47 69
- other assurance services 33 73
- corporate finance services - 141
Depreciation of tangible
fixed assets
- owned assets 1,487 81
- hire purchase - 17
Depreciation of right-of-use
assets 4,663 -
Amortisation / impairment
of intangible assets:
- turnover related 2,046 362
- other 83 1,205
Bad debt expense 2,041 1,764
Hire of plant and equipment 94 336
Share based payment expense 172 48
--------------------------------- -------- --------
8. Finance income and expense
Group Group
2020 2019
GBP'000 GBP'000
------------------------------- -------- --------
Finance income
Bank interest receivable 347 213
Other income 5 5
-------- --------
352 218
------------------------------- -------- --------
Finance expense
Bank interest payable (11) (95)
Hire purchase (3) (5)
Finance charge on leases (514) -
Other loans (519) (84)
Other interest (8) (3)
Financial assets at fair
value through profit or loss (516) (64)
(1,571) (251)
------------------------------- -------- --------
Net finance income/(expense) (1,219) (33)
------------------------------- -------- --------
9. Non recurring costs
Non recurring costs include acquisition related costs of
GBP588,000 (2019: GBP5,823,000) and other material items related to
the acquisition which will not recur of GBP1,069,000 (2019:
GBP8,444,000) .
Acquisition related costs represent professional fees and other
costs incurred in acquisitions completed or under negotiation
during the year.
Other material items represent costs incurred specifically as a
result of the integration activities associated with the Ince &
Co acquisition. These costs include restructuring and merging of
administrative functions (such as redundancy costs, the necessary
hardware and software costs to enable the merging of systems and
re-branding costs) and the equity fund raising. In addition, the
group had certain onerous contractual costs including the costs of
premises no longer being used and had to make a number of
non-contractual payments to former suppliers of the Ince entities
in respect of the liabilities of those entities to ensure access to
continuing services.
Non recurring costs include non-audit fees payable to the
Company's auditors of GBP54,000 (2019: GBP336,000) .
10. Taxation
i. Analysis of charge in the period
Group ) Group )
2020 ) 2019 )
GBP'000
GBP'000 ) )
------------------------- ---------- --------
The charge for taxation
comprises:
Taxation charge for the
current period 1,375 ) 206 )
Adjustment in respect
of prior periods 168 ) - )
1,543 ) 206 )
------------------------- ---------- --------
ii. Factors affecting the tax charge for the period:
The tax assessed for the year is lower than the standard rate of
corporation tax in the UK of 19.0 per cent (2019:19.0 per cent).
The differences are explained below:
Group
) Group )
2020
) 2019 )
GBP'000 GBP'000
) )
-------------------------------------- --------- --------
Profit on ordinary activities 23,202
before taxation ) 966 )
Less profit arising in partnerships,
on which tax is payable by
the members personally (15,148) (1,009)
--------------------------------------
Profit on ordinary activities
of corporate entities before 8,054
taxation ) (43)
-------------------------------------- --------- --------
Profit on ordinary activities
multiplied by the standard
rate of corporation tax of 1,530
19% (2019: 19%) ) (8)
Effects of:
Impact of tax exempt items (279) 237 )
Losses (utilised) / carried
forward - ) (23)
Difference in overseas tax
rates 124 ) - )
-------------------------------------- --------- --------
Total taxation charge for 1,375
the current period ) 206 )
-------------------------------------- --------- --------
11. Earnings per share
Earnings per share are based on the weighted average number of
shares of the Company in issue or issued as consideration for the
entities whose results are reported in the period. The number of
shares and periods are as follows:
1 April 2017 12,509,623
15 June 2017 13,417,143 Being the shares issued by the Company
as consideration for the acquisition of
all of the shares in issue by Culver Holdings
Limited at the date of the reverse acquisition
4 August 28,597,310 Being the Company's issued shares on re-admission
2017 to the AIM market of the London Stock Exchange
19 January 28,759,711 Being the Company's issued shares following
2018 new shares issued to Culver Ventures Limited
loan stock holders
12 February 36,976,730 Being the Company's issued shares following
2019 new shares issued as part of an equity
placing exercise
27 November 37,326,730 Being the Company's issued shares following
2020 new shares issued as consideration on acquisition
of Ince Compliance Solutions Limited
3 February 68,540,912 Being the Company's issued shares following
2020 new shares issued as part of an equity
placing exercise
Basic earnings per share, shown on the statement of
comprehensive income, is based on profit after tax GBP4,952,000
divided by 42,043,732 being the weighted average total number of
ordinary shares in issue during the period.
Adjusted basic earnings per share, shown on the statement of
comprehensive income, is based on adjusted profit before tax
GBP8,015,000 after deducting tax of GBP1,543,000 divided by
42,043,732, being the weighted average total number of ordinary
shares in issue during the period.
If the 2,178,562 share options issued on 31 December 2018
(described in note 12) were included the weighted average total
number of shares for the period would be 43,379,204 which is
applied in the calculation of diluted earnings per share, also
shown on the consolidated income statement.
Adjusted profit before tax is calculated as follows:
Group
Group ) )
2020 ) 2019 )
GBP'000 GBP'000
) )
-------------------------------------- --------- --------
Profit before tax from statement 23,202
of comprehensive income ) 966 )
Deduct: Partners profit shares
shown as non-controlling interests (16,844) (9,312)
Add: Non-recurring expenses:
- Acquisition related expenditure 588 ) 5,823 )
- Material-related costs 1,069 ) 8,444 )
-------------------------------------- --------- --------
Adjusted profit before tax 8,015 ) 5,921 )
Deduct: Income tax (1,543) (206)
--------------------------------------
Adjusted profit after tax 6,472 ) 5,715 )
-------------------------------------- --------- --------
12. Share-based payment arrangements
The Group has established the Ince Group Share Option Plan 2017
("Plan") for the grant of share options to certain eligible
employees to acquire shares in the capital of the Company in order
to reward such eligible employees for their contribution to the
Company's success and to provide an incentive going forward.
As part of the consideration for the acquisition of the members'
interests of Ince & Co LLP, the members of Ince & Co LLP
were collectively granted 2,392,846 ordinary shares of 1p each in
the Group as part of the Plan on 31 December 2018. The options have
a vesting period of 3 years from issue and a contractual life of 10
years.
The fair value of the employee share options has been measured
using the Black-Scholes formula. Service and non-market conditions
attached to the arrangements were not taken in to account measuring
fair value.
At 1 April 2019 the brought forward number of ordinary shares of
1p at an exercise price of 140p was 2,392,846.
During the year, 214,284 ordinary shares of 1p at an exercise
price of 140p were forfeited by resigning members of Ince & Co
LLP.
At 31 March 2020 the carried forward number of ordinary shares
of 1p at an exercise price of 140p was 2,178,562.
The inputs used in measurement of the fair values at grant date
of the shares were as follows:
Fair value 0.24
Share price 1.79
Exercise price 1.40
Risk-free interest rate (based
on government bonds) 0.59%
Expected volatility (weighted
average) 1.14%
Dividend yield 3.35%
Expected life (weighted average) 3 years
---------------------------------- --------
13. Property, plant and equipment ("PPE")
Group
Furniture
)
Land and fittings Leasehold
) and ) )
buildings equipment Improvements
) ) ) Total )
GBP'000 GBP'000 GBP'000 GBP'000
) ) ) )
--------------------------- ---------- ---------- ------------- --------
Cost
Balance at 1 April 2019 230 ) 1,137 ) - ) 1,367 )
Acquisition of subsidiary
(note 16.1) - ) 2,960 ) 2,488 ) 5,448 )
Additions - ) 572 ) 865 ) 1,437 )
Disposals - ) (57) - ) (57)
Exchange differences - ) 159 ) 86 ) 245 )
Balance at 31 March 2020 230 ) 4,771 ) 3,439 ) 8,440 )
--------------------------- ---------- ---------- ------------- --------
Depreciation
Balance at 1 April 2019 - ) 185 ) - ) 185 ))
Acquisition of subsidiary
(note 16.1) - ) 2,007 ) 947 ) 2,954 )
Disposals - ) (55) - ) (55)
Exchange differences - ) 64 ) 44 ) 108 )
Charge for the period - ) 933 ) 554 ) 1,487 )
Balance at 31 March 2020 - ) 3,134 1,545 ) 4,679 )
--------------------------- ---------- ---------- ------------- --------
Carrying value
At 31 March 2019 230 ) 952 - ) 1,182 )
At 31 March 2020 230 ) 1,637 1,894 ) 3,761 )
--------------------------- ---------- ---------- ------------- --------
Included in the carrying value of PPE is GBPNil (2019: GBPNil)
of assets held by the Group under hire purchase or finance leases.
The depreciation charge for the period for these assets was GBPNil
(2019: GBP17,000).
The figures for the previous period are as follows:-
Furniture
fittings
Land and and
buildings equipment Total
GBP'000 GBP'000 GBP'000
--------------------------- ---------- ---------- --------
Cost
Balance at 1 April 2018 230 223 453
Acquisition of subsidiary
(note 15) - 914 914
Additions - - -
Balance at 31 March 2019 230 1,137 1,367
--------------------------- ---------- ---------- --------
Depreciation
Balance at 1 April 2018 - 86 86
Charge for the period - 99 99
Balance at 31 March 2019 - 185 185
--------------------------- ---------- ---------- --------
Carrying value
At 31 March 2018 230 137 367
At 31 March 2019 230 952 1,182
--------------------------- ---------- ---------- --------
Company
Furniture
)
fittings Leasehold
and ) )
equipment Improvements Total
) ) )
GBP'000 GBP'000 GBP'000
) ) )
-------------------------- ---------- ------------- --------
Cost
Balance at 1 April 2019 - ) - ) - )
Additions 2 ) 114 ) 116 )
Balance at 31 March 2020 2 ) 114 ) 116 )
-------------------------- ---------- ------------- --------
Depreciation
Balance at 1 April 2019 - ) - ) - )
Charge for the period 1 ) 25 ) 26 )
Balance at 31 March 2020 1 ) 25 ) 26 )
-------------------------- ---------- ------------- --------
Carrying value
At 31 March 2019 - ) - ) - )
At 31 March 2020 1 ) 89 ) 90 )
-------------------------- ---------- ------------- --------
14. Leases
14.1 Right-of-use assets
Group
Furniture
)
Land and fittings
) and )
buildings equipment
) ) Total )
GBP'000 GBP'000 GBP'000
) ) )
----------------------------- ---------- ---------- --------
10,241
Balance at 1 April 2019 9,958 ) 283 ) )
5,734
Additions ) 292 ) 6,026 )
Acquisition of subsidiaries 5,945 ) - ) 5,945 )
Disposals (297) - ) (297)
Exchange differences 189 ) - ) 189 )
Depreciation charge for
the year (4,563) (100) (4,663)
16,966
Balance at 31 March 2020 ) 475 ) 17,441
----------------------------- ---------- ---------- --------
Company
Furniture
)
Land and fittings
) and )
Buildings equipment Total
) ) )
GBP'000 GBP'000 GBP'000
) ) )
-------------------------- ---------- ---------- --------
Balance at 1 April 2019 - ) - ) - )
Additions 964 ) - ) 964 )
Depreciation charge for
the year (268) - ) (268)
Balance at 31 March 2020 696 ) - ) 696 )
-------------------------- ---------- ---------- --------
14.2 Lease Liabilities
2020
GBP'000
---------------------------------------------- --------
Maturity analysis - contractual undiscounted
cash flows
Less than one year 5,968
One to five years 9,918
More than five years 2,050
Total undiscounted lease liabilities
at 31 March 17,936
----------------------------------------------- --------
Lease liabilities included in the statement of financial
position
Current 5,552
Non-current 13,284
18,836
------------- -------
14.3 Amounts recognised in profit or loss
2020
GBP'000
------------------------------------------ --------
Interest on lease liabilities 514
Expenses relating to short-term
leases 336
Expenses relating to leases of low-value
assets 94
------------------------------------------- --------
Total cash outflow for leases in the year was GBP3,292,000.
Termination options are included in a number of property leases
across the Group. As at 31 March 2020, potential future cash
outflows of GBP24,072,000 (undiscounted) have not been included in
the lease liability because it is not reasonably certain that the
lease will not be terminated.
15. Intangible assets
Group
Internally
Brand
Client & generated Intellectual
Goodwill Portfolio trademarks software Property Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------------- --------- ---------- ----------- ----------- ------------- --------
Cost
At 1 April 2019
(as restated) 50,820 12,219 17,000 1,248 189 81,476
Acquisition of subsidiary 4,227 3,248 - - - 7,475
Additions - - - 1,036 - 1,036
At 31 March 2020 55,047 15,467 17,000 2,284 189 89,987
--------------------------- --------- ---------- ----------- ----------- ------------- --------
Amortisation and
impairment
At 1 April 2019 - 6,818 - 168 47 7,033
Charge for period - 2,046 - 64 19 2,129
At 31 March 2020 - 8,864 - 232 66 9,162
--------------------------- --------- ---------- ----------- ----------- ------------- --------
Carrying value
At 31 March 2019 50,820 5,401 17,000 1,080 142 74,443
--------------------------- --------- ---------- ----------- ----------- ------------- --------
At 31 March 2020 55,047 6,603 17,000 2,052 123 80,825
--------------------------- --------- ---------- ----------- ----------- ------------- --------
Client portfolio represents the acquisition of the business and
certain assets from other professional services firms. The client
portfolio intangible asset is carried at cost less accumulated
amortisation. Amortisation is provided for in line with the fees
billed and cash collections generated by the client portfolio
acquired.
Brands and trademarks GBP17,000,000 (2019: GBP17,000,000)
relates to the value attributed to the Ince brand that the Group
acquired on 1 January 2019. This has been determined based on an
external valuation report, as detailed in note 2.8.
Internally generated software includes GBP2,284,000 (2019:
GBP1,248,000) of development costs relating to development of
software applications. The directors have considered the carrying
value of internally generated software of GBP2,052,000 (2019:
GBP1,080,000) as appropriate as it is expected to create future
economic benefit.
Intellectual property carrying amount includes GBP123,000 (2019:
GBP142,000) of intellectual property acquired on the acquisition of
certain assets and liabilities of Prolegal Limited from its
administrator.
Details of the restatement of balances at 31 March 2019 are set
out in note 35.
The intangible assets of the group for the prior year (restated)
were as follows:-
Internally
Brand
Client & generated Intellectual
Goodwill portfolio Trademarks software Property Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------------------- --------- ---------- ----------- ----------- ------------- --------
Cost
Balance at 1 April
2018 24,150 7,719 - 453 189 32,511
Acquisition of subsidiary 26,387 4,500 17,000 - - 47,887
Additions 279 - - 795 - 1,074
Reassessment of fair
value 4 - - - - 4
Eliminated on disposal - - - - - -
Balance at 31 March
2019 50,820 12,219 17,000 1,248 189 81,476
----------------------------- --------- ---------- ----------- ----------- ------------- --------
Amortisation and impairment
Balance at 1 April
2018 - 5,336 - 103 28 5,467
Charge for the period - 1,482 - 65 19 1,566
Eliminated on disposal - - - - - -
Balance at 31 March
2019 - 6,818 - 168 47 7,033
----------------------------- --------- ---------- ----------- ----------- ------------- --------
Carrying value
At 31 March 2018 24,150 2,383 - 350 161 27,044
At 31 March 2019 50,820 5,401 17,000 1,080 142 74,443
----------------------------- --------- ---------- ----------- ----------- ------------- --------
Goodwill
Goodwill acquired in a business combination is allocated, at
acquisition, to the cash generating units (CGUs), or group of units
that are expected to benefit from that business combination and is
analysed below.
Culver
White
Financial &
Investments Services Black Regions
GBP'000 GBP'000 GBP'000 GBP'000
---------------------------- ------------ ---------- --------- --------
Cost
At 1 April 2019 (restated) 8,494 4,185 2,005 8,722
Acquisition of subsidiary 417 - - -
Balance at 31 March
2020 8,911 4,185 2,005 8,722
---------------------------- ------------ ---------- --------- --------
Impairment
At 1 April 2019 and
31 March 2020 - - - -
---------------------------- ------------ ---------- --------- --------
Carrying value
At 31 March 2019 8,494 4,185 2,005 8,722
---------------------------- ------------ ---------- --------- --------
At 31 March 2020 8,911 4,185 2,005 8,722
---------------------------- ------------ ---------- --------- --------
Platt,
PLI Total
& Ince Overseas Goodwill
GBP'000 GBP'000 GBP'000
---------------------------- ------------ ---------- --------- --------
Cost
At 1 April 2019 (restated) 26,316 1,098 50,820
Acquisition of subsidiary - 3,810 4,227
Balance at 31 March
2020 26,316 4,908 55,047
---------------------------- ------------ ---------- --------- --------
Impairment
At 1 April 2019 and
31 March 2020 - - -
---------------------------- ------------ ---------- --------- --------
Carrying value
At 31 March 2019 26,316 1,098 50,820
---------------------------- ------------ ---------- --------- --------
At 31 March 2020 26,316 4,908 55,047
---------------------------- ------------ ---------- --------- --------
An annual goodwill impairment review was performed. The CGU's
represent the smallest identifiable groups of assets that generate
cash flows, and to which goodwill is allocated.
The value in use of each CGU is determined using cash flow
projections derived from financial plans. This reflects
management's expectations of future revenue growth, operating costs
and cost reductions due to synergies, profit margins, operating
cash flows based on past performance and future expectations of
business performance. The cash flows have then been extended for a
minimum of five years. Estimated taxation has been deducted
calculated at the estimated applicable corporation tax rate, of 19%
for the next two years and 17% for the years thereafter, in line
with current HMRC guidance.
In respect of the above, income budgets are based on historic
results adjusted for experience and capacity level of fee earning
staff and known changes in circumstances. These are reviewed with
the heads of department for each fee earning area. Average annual
growth rate of 6.06% is based on past performance and management
expectations.
Costs are largely fixed staff and establishment costs and are
forecast based on the current structure of the business, adjusting
for inflationary increases but not reflecting any future
restructurings or cost saving measures.
The future cash flows have been discounted using a post-tax
discount rate of 7.9%.
The two year financial plans include growth rates for each CGU
based on the individual market assessment for each CGU.
Company
There are no intangible assets held by the company (2019:
None).
16. Investments
The carrying value of investments held by the group and company
were as follows:
Group Group Company Company
2020 2019 2020 2019
GBP'000 GBP'000 GBP'000 GBP'000
------------------------- -------- -------- -------- --------
Investments in group
undertakings - - 47,607 47,191
Interests in associates 470 379 - -
-------------------------
470 379 47,607 47,191
------------------------- -------- -------- -------- --------
16.1 Investments in group undertakings
Company
Investments
in group
undertakings
GBP'000
--------------------------- -------------
Cost
Balance at 1 April 2019 50,709
Additions 416
Balance at 31 March 2020 51,125
---------------------------- -------------
Impairment and provisions
Balance at 1 April 2019 3,518
Impairment -
Balance at 31 March 2020 3,518
---------------------------- -------------
Carrying value
At 31 March 2019 47,191
At 31 March 2020 47,607
---------------------------- -------------
On 31 March 2020, The Ince Group plc had control for the
purposes of IFRS 10 of the following subsidiary undertakings which
are included in the consolidated financial statements.
Interest Registered
UK Companies Principal activity held office
----------------------------------------- ------------------------ ----------- -----------
Culver Holdings Limited Intermediate holding Note 1 (b)
company
Ince Gordon Dadds Corporate Intermediate holding Note 1 (b)
Finance Limited company
Culver Financial Management Independent financial Note 1 (b)
Limited advisor
Hanover Financial Management Independent financial Note 1 (b)
Limited advisor
Hanover Employee Benefits Limited Independent financial Note 1 (b)
advisor
Ince Gordon Dadds Services Management services Note 1 (b)
Limited
Hanover Pensions Limited Professional services Note 1 (b)
Ince Gordon Dadds MAP Limited Legal services Note 1 (b)
GDGS (Alen-Buckley) Limited Legal services Note 1 (b)
GDGS (Metcalfes) Limited Legal services Note 1 (b)
White & Black Limited Legal services Note 1 (c)
e.Legal Technology Solutions IT services Note 2 (b)
Limited
Ince Gordon Dadds Professional Professional services Note 1 (b)
Services Limited
Gordon Dadds Corporate Services Corporate services Note 1 (a)
Limited
Ince Gordon Dadds Talent Services Professional services Note 1 (b)
Limited
Ince Process Agents Limited Legal services Note 1 (a)
Culver Finance Limited Intermediate holding Note 1 (b)
company
IGD (Cardiff) Limited Legal services Note 1 (b)
Gordon Dadds Private Office Legal services Note 1 (d)
Limited
Ince Compliance Solutions Limited Professional services Note 1 (b)
Interest Registered
UK Limited Liability Partnerships Principal activity held office
----------------------------------------- ------------------------ ----------- -----------
Ince Gordon Dadds Holdings Intermediate holding Note 3 (b)
LLP LLP
Ince Gordon Dadds LLP Legal services Note 3 (a)
White & Black Legal LLP Legal services Note 3 (c)
Ince Gordon Dadds AP LLP Professional services Note 5 (b)
Ince Gordon Dadds CP LLP Professional services Note 5 (b)
CW Energy LLP Professional services Note 3 (b)
IGD International LLP Professional services Note 3 (b)
Ince Consultancy LLP Professional services Note 5 (b)
Interest Registered
Overseas Companies Location Principal activity held office
------------------------------- ------------ -------------------- --------- -------------
Ramparts Corporate Advisors (e)
Limited Gibraltar Legal services Note 1
Penlee Legal Investments Professional (f)
Limited Guernsey services Note 1
Ramparts Corporate Services Professional (e)
Limited Gibraltar services Note 1
Ince Consulting Hong Professional (g)
Kong Limited Hong Kong services Note 1
Incisive Limited Hong Kong Management services Note 1 (g)
UK Limited Liability Registered
Partnerships operating Interest office
overseas Location Principal activity held
------------------------------- ------------ -------------------- --------- -------------
Ince & Co Middle East (a)
LLP Dubai Legal services Note 4
Ince & Co Germany LLP Germany Legal services Note 4 (a)
Interest Registered
Overseas LLPs and Partnerships Location Principal activity held office
------------------------------- ------------ -------------------- --------- -------------
Ince & Co Singapore LLP Singapore Legal services Note 4 (h)
Ince & Co (Hong Kong) Hong Kong Legal services Note 4 (g)
Herring Parry Khan Law
Office Greece Legal services Note 4 (i)
Ince & Co Monaco SARL
(Monaco) Monaco Legal services Note 4 (j)
Note The Group holds 100% of ordinary share capital.
1.
Note The Group holds 60% of ordinary share capital.
2.
Note The Group has 100% interest as the sole economic member.
3.
Note Profit sharing and voting control of these entities is
4. held by the local members. The entities are subject to
regulation by the regulator in the jurisdictions in which
they operate.
Note The Group indirectly controls the entities by virtue of
5. contractual agreements.
Registered offices of all subsidiaries:
Aldgate Tower, 2 Leman Street, London, United
(a) Kingdom, E1 8QN
Llanmaes, Michaelston Road, St Fagans, Cardiff,
(b) United Kingdom, CF5 6DU
Home Park, Grove Road, Bladon, Oxfordshire,
(c) England, OX20 1FX
Leconfield House, Curzon Street, London,
(d) United Kingdom, W1J 5JA
6.20 World Trade Center, 6 Bayside Road,
(e) Gibraltar
P.O. Box 661, St. Peter Port, Guernsey,
(f) GY1 3PW
Suites 4404-10, 44/F, One Island East, 18
(g) Westlands Road, Taikoo Place, Hong Kong
5 Shenton Way #19-01, V on Shenton, Singapore
(h) (068808)
The Livanos Building, 47-49 Akti Miaouli,
(i) Piraeus 18536, Greece
Gildo Pastor Center, 7 Rue du Gabian, 98000
(j) Monaco
16.2 Business combinations and acquisitions
The details set out below provide the information required under
IFRS 3 'Business Combinations' for the acquisitions that occurred
during the year ended 31 March 2020.
The total amount of revenue and associated profit derived from
acquired entities in the year was GBP29,749,000 and GBP29,000. An
estimate of the annualised revenue and associated profit/(loss)
(based on pro-rated figures) had the acquisitions occurred at the
start of the year is GBP29,885,000 and (GBP42,000).
Ince & Co Overseas
With effect from 1 April 2019 the Group gained control for the
purposes of IFRS 10 over the following Ince overseas network
entities:
- Ince & Co (Hong Kong)
- Ince & Co Singapore LLP
- Ince & Co Middle East LLP
- Herring, Parry, Khan Law Office
- Ince & Co Germany LLP
Until 31 December 2018 these entities were subsidiaries of Ince
& Co International LLP (now in administration and renamed).
With effect from 1 April 2019, revised arrangements were agreed
with these entities which gave the group control for the purposes
of IFRS 10 as shown above.
As part of the new arrangements concluded with effect from 1
April 2019, the Group has agreed to make payments to the partners
of those entities depending on the levels of revenue achieved in
the three year period ending 31 December 2021. Based on revenue
expectations, the group currently estimates that these payments
will amount in aggregate to GBP10 million over the three years of
which GBP3,248,000 is regarded as the purchase of a client
portfolio and will be amortised in line with the fees billed and
cash collections being generated by the client portfolio
acquired.
Initial consideration was GBP500,000, contingent consideration
of GBP6,446,000 and goodwill of GBP3,710,000 was recognised in
accounting for the acquisition.
Ramparts Corporate Services Limited
On 10th June 2019, the Group acquired 100% of the issued share
capital of Ramparts Corporate Services Limited, a Gibraltar-based
practice providing corporate and administrative support for listed
funds and listing market instruments.
Initial consideration was GBP258,000 and goodwill of GBP100,000
was recognised in accounting for the acquisition.
Ince & Co Monaco SARL
Ince Monaco was formally consolidated into the Group on 1
November 2019. Its acquisition represents a further expansion of
the global network through which the Group now operates, with the
associated future benefits that is expected to bring. Accordingly,
negative goodwill of GBP591,000 was recognised in accounting for
the acquisition.
Ince Compliance Solutions Limited
On 27(th) November 2019, the Group acquired 100% of the issued
share capital of Ince Compliance Solutions Limited (formerly
Mahtcorp1 Limited), a UK based company which has the benefit of a
service contract with Mark Tantam who was appointed as the Group's
Global Head of Consulting.
350,000 new ordinary shares in The Ince Group plc were issued as
consideration and goodwill of GBP417,000 was recognised in
accounting for the acquisition.
16.2.1 Identifiable assets acquired and liabilities assumed
The fair values of the identifiable assets and liabilities at
the date of acquisition were as follows:
Ramparts
) Ince )
Corporate Compliance
) )
Ince & Services Ince & Solutions
Co ) ) Co ) ) Total )
Overseas Limited Monaco Limited Acquisitions
) ) ) ) )
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
) ) ) ) )
----------------------------- --------- ---------- -------- ----------- -------------
Property, plant and
equipment 2,460 ) 8 ) 26 ) - ) 2,494 )
Right-of-use assets 5,823 ) - ) 122 ) - ) 5,945 )
Intangible asset 3,248 ) - ) - ) - ) 3,248 )
Investments - ) - ) - ) - ) - )
10,048 1,128 11,308
Trade and other receivables ) 132 ) ) - ) )
Cash and cash equivalents 2,538 ) 42 ) 256 ) - ) 2,836 )
Trade and other payables (12,846) (24) (759) - ) (13,629)
Borrowings (494) - ) - ) - ) (494)
Provisions (769) - ) (60) - ) (829)
Lease liabilities (5,902) - ) (122) - ) (6,024)
-----------------------------
Net identifiable assets
and liabilities 4,106 ) 158 ) 591 ) - ) 4,855 )
Goodwill 3,710 ) 100 ) - ) 417 ) 4,227 )
Negative goodwill - ) - ) (591) - ) (591)
Non-controlling interest
in the recognised amounts
of identifiable assets
and liabilities (870) - ) - ) - (870)
Total consideration 6,946 ) 258 ) - ) 417 ) 7,621
----------------------------- --------- ---------- -------- ----------- -------------
Satisfied by:
Cash 500 ) 258 ) - ) - ) 758
Equity instruments - ) - ) - ) 417 ) 417
Contingent consideration 6,446 ) - ) - ) - ) 6,446
Total consideration
transferred 6,946 ) 258 ) - ) 417 ) 7,621
----------------------------- --------- ---------- -------- ----------- -------------
Net cash outflow arising
on acquisition:
Cash consideration 500 ) 258 ) - ) - ) 758
Less: cash and cash
equivalent balances
acquired (2,538) (42) (256) - ) (2,836)
Net cash outflow/(inflow) (2,038) 216 ) (256) - ) (2,078)
----------------------------- --------- ---------- -------- ----------- -------------
16.3 Discontinued operations
On 25(th) June 2019, the Group sold 100% of its shareholding in
Allium Law Limited (formerly Thomas Simon Limited) for
consideration of GBP59,000.
On 30(th) January 2020, the Group disposed of its interest and
retired as a member of GD Financial Markets LLP for consideration
of GBP258,000.
Financial information relating to discontinued operations for
the period to the date of disposal is set out below:
GD )
Allium Financial
) ) Total )
Markets Discontinued
Law ) ) )
Limited Operations
) LLP ) )
GBP'000 GBP'000 GBP'000
) ) )
------------------------------------ -------- ---------- -------------
Results of discontinued operation:
1,366
Revenue - ) ) 1,366 )
Elimination of internal revenue - ) (314) (314)
1,052
External revenue - ) ) 1,052 )
External expenses - ) (966) (966)
Profit before tax - ) 86 ) 86 )
Income tax expense - ) - ) - )
Profit after tax of discontinued
operation - ) 86 ) 86 )
Gain/(loss) on disposal of
the subsidiary after income
tax 84 ) (33) 51 )
Profit/(loss) from discontinued
operation 84 ) 53 ) 137 )
------------------------------------ -------- ---------- -------------
Consideration received or
receivable:
Cash 59 ) - ) 59 )
Deferred consideration - ) 258 ) 258 )
Total consideration 59 ) 258 ) 317 )
Less: carrying amount of
net assets sold 25 ) (570) (545)
Add back: non-controlling
interest - ) 279 ) 279 )
Gain/(loss) on disposal of
the subsidiary after income
tax 84 ) (33) 51 )
------------------------------------ -------- ---------- -------------
Consideration received, satisfied
in cash 59 ) - ) 59 )
Cash and cash equivalents
disposed of (1) (249) (250)
Net cash inflow/(outflow) 58 ) (249) (191)
------------------------------------ -------- ---------- -------------
16.4 Interests in associates
Group
2019
2020 ) )
GBP'000 GBP'000
) )
--------------------------------- -------- --------
Cost of investment in associate 621 ) 390 )
Share of post-acquisition
loss net of dividends received (151) (11)
Carrying value of interests
in associates 470 ) 379 )
--------------------------------- -------- --------
The Group holds 100% of the New Series C Shares, representing
30% of the total share capital of James Stocks & Co (holdings)
Limited, a professional services firm who specialise in corporate
finance and strategic advice. James Stock & Co (holdings)
Limited was incorporated and operates in Gibraltar.
Summarised financial information in respect of James Stocks
& Co (holdings) Limited is set out below:
2020 ) 2019 )
GBP'000 GBP'000
) )
------------------- -------- --------
Net profit/(loss) (467) 77 )
Net assets 192 ) 148 )
------------------- -------- --------
17. Trade and other receivables
Restated
Group Group Company Company
2020 2019 2020 2019
GBP'000 GBP'000 GBP'000 GBP'000
------------------------------- -------- --------- -------- --------
Trade receivables 26,870 15,598 - -
Accrued income 5,925 3,960 - -
Other receivables 4,033 8,570 518 153
Amounts due from subsidiaries - - 37,977 30,045
Prepayments 7,584 3,832 391 25
44,412 31,960 38,886 30,223
------------------------------- -------- --------- -------- --------
Trade receivables are stated including GBP3,481,000 of VAT and
GBP3,412,000 of disbursements.
18. Cash and cash equivalents
Company Company
Group ) Group ) )
2020 ) 2019 2020 ) 2019 )
GBP'000 GBP'000 GBP'000
) GBP'000 ) )
--------------------- -------- -------- -------- --------
Cash in hand and at
bank 5,250 ) 4,759 3 ) 987 )
Total 5,250 ) 4,759 3 ) 987 )
--------------------- -------- -------- -------- --------
Cash and cash equivalents include the following:
4,759
Cash as above 5,250 ) ) 3 ) 987 )
Bank overdrafts (59) (39) - ) - )
4,720
Total 5,191 ) ) 3 ) 987 )
----------------- -------- ------ ---- ------
19. Share capital
2020 2020 2019
% Number GBP'000 GBP'000
--------------------- ---- ----------- -------- --------
Authorised
Ordinary shares of
1p each 100 68,540,912 686 370
686 370
--------------------- ---- ----------- -------- --------
2020 2020 2019
% Number GBP'000 GBP'000
--------------------- ---- ----------- -------- --------
Allotted, called up
and fully paid
Ordinary shares of
1p each 100 68,540,912 686 370
686 370
--------------------- ---- ----------- -------- --------
Ordinary shares rank equally as regards to dividends, other
distributions and return on capital. Each ordinary share carries
the right to one vote.
On 27(th) November 2019, 350,000 ordinary shares were issued at
1p per share, with a nominal value of 1p per share.
On 3(rd) February 2020, 31,214,182 ordinary shares were issued
at 45p per share, with a nominal value of 1p per share.
2020 2020
Number GBP'000
---------------------- ----------- --------
Ordinary shares of
1p each
At 1 April 36,976,730 370
Shares issued during
the year 31,564,182 316
At 31 March 68,540,912 686
------------------------ ----------- --------
Details of share options issued in the year are set out in note
12.
20. Reserves
Share premium represents the difference between the amount
received and the par value of shares issued less transaction
costs.
The reverse acquisition reserve has arisen under IFRS3 'Business
Combinations' following the acquisition of The Ince Group.
Other reserves represents the impact of the valuation of share
options issued in the year, details of which are set out in note
12, and the difference between fair value and nominal value of
shares issued in share-for-share exchanges.
Foreign exchange translation reserve includes gains or losses in
translating overseas operations into GBP sterling.
21. Trade and other payables
Restated
Group Group Company Company
2020 2019 2020 2019
GBP'000 GBP'000 GBP'000 GBP'000
----------------------------- -------- --------- -------- --------
Current:
Trade payables 12,263 7,666 524 289
Amounts due to subsidiaries - - 26,621 27,187
Other taxes and social
security 3,445 2,436 36 12
Other payables 3,133 6,008 - 1
Deferred consideration 14,608 7,436 - -
Unpaid dividends 15 - 15 -
Accruals 5,861 4,276 135 101
39,325 27,822 27,331 27,590
----------------------------- -------- --------- -------- --------
Non-current:
Other payables 1,391 - - -
Deferred consideration 21,062 31,409 - -
Accruals - 4,022 - -
22,453 35,431 - -
----------------------------- -------- --------- -------- --------
Total 61,778 63,253 27,331 27,590
----------------------------- -------- --------- -------- --------
Deferred consideration relates to business combinations and the
purchase of client lists and relationships.
22. Borrowings
Group Group Company Company
2020 2019 2020 2019
GBP'000 GBP'000 GBP'000 GBP'000
------------------------------- -------- -------- -------- --------
Bank overdrafts 59 39 - -
Bank loans 11,651 6,000 11,600 6,000
Other loans 2,519 1,542 - -
Obligations under hire
purchase and lease contracts - 29 - -
Total borrowings 14,229 7,610 11,600 6,000
------------------------------- -------- -------- -------- --------
Current 3,829 2,370 1,200 900
Non-current 10,400 5,240 10,400 5,100
Total 14,229 7,610 11,600 6,000
------------------------------- -------- -------- -------- --------
The Group has a secured bank loan with Barclays Bank Plc with a
carrying value of GBP5,100,000 at 31 March 2020 (2019:
GBP6,000,000). The loan was entered into on 31 December 2018, has a
term of three years (to be repaid in quarterly instalments which
commenced from September 2019) and carries interest at LIBOR +
2.25% per annum. A GBP6,500,000 revolving credit facility was also
entered into with Barclays Bank Plc at 31 December 2018, and was
drawn down during the year. The loan and the revolving credit
facility are both secured against certain entities within the Group
and are subject to covenants which are assessed each quarter (no
current or forecast breaches have been identified).
The Group has a secured bank loan with Commerz Bank with a
carrying value of GBP51,000 at 31 March 2020. The Group acquired
the loan through the acquisition of Ince & Co Germany LLP
during the year. The loan was entered into on 1 October 2016, has a
term of 4 years (to be repaid in monthly instalments which
commenced from June 2017) and carries interest at 3% per annum.
Other loans of GBP2,519,000 (2019: GBP1,542,000) are unsecured
and carry interest at between 3.0 per cent and 10 per cent per
annum. Other loans are repayable within 12 months, except
non-current other loans of GBPNil (2019: GBP126,000) which has a
maturity of 1-3 years.
23. Provisions
Group
Onerous
)
Lease &
)
employment
) Other )
contracts Provisions
) ) Total )
GBP'000 GBP'000 GBP'000
) ) )
-------------------------- ----------- ----------- --------
7,855 )
Balance at 31 March 2019 10,135
(restated) 2,280 ) 7,855 ) )
Provisions made - ) 562 ) 562 )
Subsidiaries joining
the group - ) 829 ) 829 )
Unwinding of discounting 12 ) - ) 12 )
Utilised during the year (1,167) (3,168) (4,335)
Amounts released - ) (2,607) (2,607)
Balance at 31 March 2020 1,125 ) 3,471 ) 4,596 )
-------------------------- ----------- ----------- --------
Current 684 ) 1,723 ) 2,407 )
Non-current 441 ) 1,748 ) 2,189 )
-------------------------- ----------- ----------- --------
Provisions categorised as current liabilities represent
provisions for liabilities which have the possibility of being
settled within one year.
Provisions for onerous property leases and employment contracts
relate to rental costs for the Group's prior head office and agreed
contractual employment arrangements for a former Ince & Co
employee.
Other provisions include legacy liabilities inherited with the
Ince & Co acquisition of GBP1,347,000 (2019: GBP5,731,000
restated), refurbishment costs for the Group's head office of
GBPNil (2019: GBP1,357,000), and uninsured excess on potential
claims of GBP897,000 (2019: GBP723,000).
24. Pensions
The Group participates in a defined contribution pension scheme.
The assets of the scheme are held separately from those of the
Group in a fund administered by Options Corporate Pensions UK.
Contributions from employers and employees totalling GBP176,000
(2019: GBP226,000) were payable to the fund at the year end and are
included in payables.
25. Ultimate controlling party
The Ince Group plc is owned by its shareholders and there is no
ultimate controlling party.
26. Related party transactions
Group
In addition to the transactions disclosed in the Directors'
Remuneration Report the Group has entered into the following
transactions with related parties:-
The Group occupies office accommodation at Llanmaes, St Fagans,
Cardiff under arrangements with Juratone Limited, a company of
which A J Biles is a director. Rent and service charges of
GBP207,000 (2019: GBP202,000) were charged during the year under
these arrangements and the Group charged Juratone amounts of
GBP23,000 (2019: GBP13,000). At the balance sheet date an amount
due to Juratone Limited of GBPNil (2019:GBPNil) is included in
payables and an amount due from Juratone Limited of GBP104,000
(2019:GBP78,000) is included in receivables.
A J Biles is a designated LLP member of ACR Professional
Services LLP. Professional services of GBP240,000 (2019:
GBP131,940) were charged from ACR Professional Services LLP to the
Group during the year. Fees and reimbursed expenses of GBP20,000
(2019: GBPNil) were charged from the Group to ACR Professional
Services LLP during the year. At the balance sheet date the Group
was owed GBP291,000 (2019: GBP163,000) from ACR Professional
Services LLP.
The Group charged fees and reimbursed expenses of GBP322,000
(2019: GBP724,000) to e.Legal Technology Solutions Limited during
the year. The Group were charged fees and reimbursed expenses of
GBP907,000 (2019: GBP1,353,000) by e.Legal Technology Solutions
Limited during the year. At the balance sheet date the Group owed
GBP145,000 to e.Legal Technology Solutions Limited (2019: the Group
was owed GBP27,000 from e.Legal Technology Solutions Limited).
During the year, e.Legal Technology Solutions Limited transferred
an intangible asset totalling GBP130,000 at nil gain/nil loss to
the Group.
The Group charged Stann Marine Limited, a company in which a
designated member of Ince Gordon Dadds AP LLP is a Director, fees
under a management agreement totalling GBP211,000 (2019:
GBP127,000).
The Group charged fees to associate company James Stocks &
Co Limited of GBP49,000 (2019: GBP37,000) and were charged fees of
GBPNil (2019: GBPNil) during the year. At the balance sheet date
the Group was owed GBP119,000 (2019:GBPNil) from James Stocks &
Co Limited.
The Group charged fees of GBP1,150,000 (2019: GBPNil) to
Incisive Law LLC during the year. The Group was charged fees of
GBP6,696,000 (2019: GBPNil) to Incisive Law LLC. At the balance
sheet date the Group was owed GBP1,999,000 (2019:GBPNil) from
Incisive Law LLC. Incisive Law LLC is Singapore-based a formal law
alliance ("FLA") with Ince & Co Singapore LLP.
Company
In addition to the transactions disclosed in the Directors'
Remuneration Report the Company has entered into the following
transactions with related parties:-
The Company charged reimbursed expenses of GBP692,000
(2019:GBP177,000 ) to subsidiary undertakings during the year. At
the balance sheet date an amount due from subsidiary undertakings
of GBPNil (2019:GBPNil) is included in trade receivables.
The Company was charged fees and reimbursed expenses of
GBP910,000 (2019:GBP76,000) by subsidiary undertakings during the
year. At the balance sheet date an amount due to subsidiary
undertakings of GBPNil (2019:GBPNil) is included in trade
payables.
27. Financial risk management
The company's operations expose it to a number of financial
risks. A risk management programme has been established to protect
the Group and the Company against the potential adverse effects of
these financial risks. There has been no significant change in
these financial risks since the prior year.
Fair value of financial instruments
Financial instruments comprise cash and cash equivalents, trade
and other receivables, including sums due from subsidiaries and
Loan Stock, bank and other loans, obligations under hire purchase
and lease contracts and trade and other payables. In the directors'
opinion the carrying value of the financial instruments
approximates their fair value.
Restated
)
Group Group Company Company
) ) ) )
2019 2019
2020 ) ) 2020 ) )
GBP'000 GBP'000 GBP'000 GBP'000
Note ) ) ) )
------------------------------- ----- --------- --------- -------- --------
Loans and receivables:
26,870 15,598
Trade receivables 17 ) ) - ) - )
5,925 3,960
Accrued income 17 ) ) - ) - )
5,250 4,759
Cash and cash equivalents 18 ) ) 3 ) 987 )
4,033 8,570
Other receivables 17 ) ) 518 ) 153 )
37,552 30,045
Amounts due from subsidiaries 17 - ) - ) ) )
42,078 32,887 38,073 31,185
Total financial assets ) ) ) )
------------------------------- ----- --------- --------- -------- --------
Financial liabilities measured
at amortised cost:
14,229 7,610 11,600 6,000
Borrowings 22 ) ) ) )
18,836
Lease liabilities 14 ) - ) 760 )
12,263 7,666
Trade payables 21 ) ) 524 ) 289 )
3,133 6,008
Other payables 21 ) ) - ) 1 )
35,670 38,845
Deferred consideration 21 ) ) - ) - )
27,187
Amounts due to subsidiaries 21 - ) - ) 26,621 )
84,131 60,129 33,477
Total financial liabilities ) ) 39,505 )
------------------------------- ----- --------- --------- -------- --------
Total financial instruments (42,053) (27,242) (1,432) (2,292)
------------------------------- ----- --------- --------- -------- --------
28. Credit risk
Customers are assessed for credit worthiness and credit limits
are also imposed on customers and reviewed regularly. The maximum
exposure to credit risk is the carrying value of its financial
receivables, trade and other receivables and cash and cash
equivalents as disclosed in the notes.
The Group holds no collateral or other credit enhancements. The
receivables' age analysis is also evaluated on a regular basis for
potential doubtful debts. It is management's opinion that no
further provision for doubtful
debts is required.
Cash and cash equivalents are invested with banks with a credit
rating of no less than A-1.4
Analysis of trade receivables:
Bad debt Total
30 days 31-60 61-90 90-180 >180 Total ) provision Carrying
or less days days days days Gross ) Amount
GBP'000
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 ) GBP'000
------ --------- -------- -------- -------- -------- -------- ------------- ----------
2020 15,105 5,544 2,836 3,385 15,944 42,814 (15,944) 26,870
2019 10,435 2,889 1,606 668 5,351 20,949 (5,351) 15,598
------ --------- -------- -------- -------- -------- -------- ------------- ----------
The Group allows an average trade receivables payment period of
30 days after invoice date. It is the group's policy to assess
receivables for recoverability on an individual basis and to make
provision where it is considered necessary. In assessing
recoverability the group takes into account any indicators of
impairment up until the reporting date. The application of this
policy generally results in debts between 31 and 180 days not being
provided for unless individual circumstances indicate that a debt
is impaired. Receivables over 180 days are provided for. except in
circumstances where the group has security in respect of the debt
or has other arrangements which satisfy the group that the debtor
is in a position to pay and is intending to pay but is stopped
until an event occurs (such as the grant of probate).
The directors have considered whether there is an overall change
in the economic environment which changes the expected lifetime
credit loss on its trade debtors and consider that the existing
policy does not need varying at this yearend.
Trade receivables that are neither impaired nor past due are
made up of 2,832 receivables' balances (2019: 1,429). The largest
individual debtor corresponds to 3.8% (2019: 0.7%) of the total
balance. Historically these receivables have always paid balances
when due. The average age of these receivables is 100 days (2019:
121 days). No receivables' balances have been renegotiated during
the year or in the prior year.
The group individually impaired no net balances (2019: GBPNil).
The group does not hold any collateral over any balances.
29. Interest rate risk
Interest rate risk is the risk that the value of a financial
instrument or cash flows associated with the instrument will
fluctuate due to changes in market interest rates. Interest rate
risk arises from interest bearing financial assets and liabilities
that we use. Interest bearing assets including cash and cash
equivalents are considered to be short-term liquid assets. Our
interest rate liability risk arises primarily from borrowings
issued at floating interest rates which exposes the group to cash
flow interest rate risk. It is the group's policy to settle trade
payables within the credit terms allowed and the group does
therefore not incur interest on overdue balances. Borrowings are
sourced from local financial markets, covering short and long-term
funding. The group manages interest rate risk on borrowings by
ensuring access to diverse sources of funding and reducing risks of
refinancing by establishing and managing borrowings in accordance
with target maturity profiles.
Interest rate exposure and sensitivity analysis:
Given the short term nature of the group and company's financial
assets and liabilities no sensitivity analysis has been prepared as
the impact on the financial statements would not be significant
.
30. Foreign currency risk
Foreign currency risk refers to the risk that the value of a
financial commitment or recognised asset or liability will
fluctuate due to changes in foreign currency rates. Foreign
exchange risk arises when individual Group entities enter into
transactions denominated in a currency other than their functional
currency.
The Group has overseas operations in Europe, Middle East and
Asia and is therefore exposed to changes in the respective
currencies in these territories. The Group maintains bank balances
in each of the entities local currency and in other currencies as
required. Cash positions are monitored and are converted to local
currency at appropriate times minimising the exposure to exchange
fluctuations.
Foreign currency denominated financial assets and liabilities
which expose the Group to currency risk are disclosed below. The
amounts show are those reported to key management translated into
GBP at the closing rate:
Functional currency of individual entity
GBP EUR HKD
2020 2019 2020 2019 2020 2019
) ) ) ) ) )
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
) ) ) ) ) )
--------------------------------- -------- -------- -------- -------- -------- --------
Net foreign currency
financial assets/(liabilities)
GBP - ) - ) (44) - ) (76) - )
328
EUR 434 ) ) - ) - ) (2) - )
HKD (115) (12) - ) - ) -) - )
531
RMB 574 ) ) - ) - ) (0) - )
1,901 1,088
USD ) ) 129 ) - ) 3,254) - )
Other 11 ) (324) (1) - ) -) - )
2,804 1,612 3,176
) ) 84 ) - ) ) - )
--------------------------------- -------- -------- -------- -------- -------- --------
RMB AED SGD
2020 2020 2019 2020 2019
) 2019 ) ) ) )
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
) GBP'000 ) ) ) )
--------------------------------- -------- -------- -------- -------- -------- --------
Net foreign currency
financial assets/(liabilities)
GBP (1) (1) (23) - ) 187) - )
EUR 18) - ) (5) - ) -) - )
HKD 399) - ) -) - ) -) - )
RMB -) - ) -) - ) - ) - )
USD 647) 117 ) 325) - ) 287) - )
Other 18) - ) (4) - ) (9) - )
1,081 117
) ) 293 ) - ) 465 ) - )
--------------------------------- -------- -------- -------- -------- -------- --------
The following table illustrates the sensitivity of profit and
equity in relating to the Group's financial assets and financial
liabilities to a reasonably possible change in exchange rates, with
all other variables held constant and no further foreign exchange
risk management actions taken.
Increase/(decrease)
in income before Increase/(decrease)
taxation in net assets
Change 2019 2019
in 2020 ) ) 2020 ) )
GBP'000 GBP'000 GBP'000 GBP'000
rate ) ) ) )
---------------------- ------- ---------- ---------- ---------- ----------
Appreciation against
GBP of:
EUR 6% 30 ) 21 ) 75 ) - )
HKD 8% (4) (1) 137 ) - )
RMB 7% 41 ) 38 ) (92) (20)
USD 8% 151 ) 86 ) - ) - )
---------------------- ------- ---------- ---------- ---------- ----------
The above sensitivity information was calculated by reference to
carrying amounts of assets and liabilities at 31 March only. The
effect on income before taxation arises in connection with monetary
balances denominated in currencies other than an entity's
functional currency, the effect on net assets arises principally
from the translation of assets and liabilities that are not
sterling functional.
The higher foreign currency exchange rate sensitivity in profit
in 2020 compared to 2019 is attributable to an increase in foreign
currency denominated balances following the acquisition of overseas
entities into the Group.
31. Liquidity risk
The group seeks to maintain sufficient cash balances.
Management reviews cash flow forecasts on a regular basis to
determine whether the group has sufficient cash reserves to meet
future working capital requirements and to take advantage of
business opportunities. The average creditor payment period is 113
days (2019: 104 days restated).
Trade and other payables and amounts due to subsidiaries are due
within 12 months, the maturity of financial liabilities is set out
below.
The following table sets out the Group's remaining contractual
maturity for its non-derivative financial liabilities with agreed
repayment periods. The table has been drawn up based on the
undiscounted cash flows of financial liabilities based on the
earliest date on which the Group can be required to pay.
Less than Between
3 3 Between Between Total contractual
and 12 1 and 2 2 and 5
months months years years cash flows
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------- ---------- -------- -------- -------- ------------------
31 March 2020
Variable interest
bearing 300 951 1,200 9,200 11,651
Fixed interest rate
instruments 1,061 1,458 - - 2,519
Finance leases 1,381 4,140 5,508 7,807 18,836
2,742 6,659 6,708 17,007 33,006
--------------------- ---------- -------- -------- -------- ------------------
31 March 2019
Variable interest
bearing - 900 1,200 3,900 6,000
Fixed interest rate
instruments 516 901 63 63 1,543
Finance leases 4 13 12 - 29
520 1,814 1,275 3,963 7,572
--------------------- ---------- -------- -------- -------- ------------------
Interest bearing financial liabilities carry interest at between
3.0 per cent and 10 per cent per annum.
The group has also access to financing facilities of GBP250,000
(2019: GBP6,750,000) as described below.
Unsecured bank overdraft facility (GBP250,000 of which GBPNil
was drawn down at 31 March 2020), reviewed annually and payable at
call, and a revolving credit facility (GBP6,500,000 which was fully
drawn down at 31 March 2020), described in note 22:
Group Group Company Company
2020 2019 2020 2019
GBP'000 GBP'000 GBP'000 GBP'000
--------------- -------- -------- -------- --------
Amount used - 38 - -
Amount unused 250 6,712 - 6,500
250 6,750 - 6,500
--------------- -------- -------- -------- --------
32. Capital management
The company's objectives when managing capital are:
- to safeguard the company's ability to continue as a going
concern, so that it can continue to provide returns for
shareholders and benefits for other stakeholders, and
- to provide an adequate return to shareholders by pricing
products and services commensurately with the level of risk.
The company sets the amount of capital in proportion to risk.
The company manages the capital structure and makes adjustments to
it in the light of changes in economic conditions and the risk
characteristics of the underlying assets. In order to maintain or
adjust the capital structure, the company may adjust the amount of
dividends paid to shareholders, return capital to shareholders,
issue new shares, or sell assets to reduce debt.
The company monitors capital on the basis of the
debt-to-adjusted capital ratio. This ratio is calculated as net
debt ÷ adjusted capital. Net debt is calculated as total debt (as
shown in the statement of financial position) less cash and cash
equivalents. Adjusted capital comprises all components of
equity.
Debt-to-adjusted capital ratios
The debt adjusted capital ratios at 31 March 2020 were as
follows:
Company Company
Group ) Group ) ) )
2020 ) 2019 ) 2020 ) 2019 )
GBP'000 GBP'000 GBP'000
GBP'000 ) ) ) )
--------------------------------- ---------- --------- --------- ---------
Total debt 14,229 ) 7,610 ) 11,600 ) 6,000 )
Less: cash and cash equivalents (5,250) (4,759) (3) (987)
Net debt 8,979 ) 2,851 ) 11,597 ) 5,013 )
Total equity 51,348 ) 31,480 ) 47,166 ) 44,979 )
Add: subordinated debt
instruments - ) - - ) - )
31,480 44,979
Adjusted capital 51,348 ) ) 47,166 ) )
1:11.0
Debt-to-adjusted capital 1:5.7 ) ) 1:4.1 ) 1:9.0 )
--------------------------------- ---------- --------- --------- ---------
33. Reconciliation of liabilities arising from financing activities
Adoption Cash
Group ) non-cash changes Group
-----------------------
of IFRS16 flows Other
2019 ) Acquisitions ) 2020
GBP'000 GBP'000 GBP'000
GBP'000 ) GBP'000 ) GBP'000
------------------- -------- ---------- -------- ------------- -------- --------
6,154
Borrowings 7,581 - ) 494 - ) 14,229
Lease liabilities 29 10,212 (3,268) 11,895 (32) 18,836
2,886
7,610 10,212 ) 12,389 (32) 33,065
------------------- -------- ---------- -------- ------------- -------- --------
34. CHANGES IN ACCOUNTING POLICIES
As the Group has applied IFRS 16 using the modified
retrospective approach, comparative information has not been
restated and continues to be reported under IAS 17. The table below
summarises the impact of IFRS 16 on the Group's Income Statement
for the year to 31 March 2020:
IAS 17 IFRS 16
--------------- ------------------------
Rental Expense Depreciation Interest
GBP'000 GBP'000 GBP'000
--------------- ------------- ---------
Property 3,705 4,563 503
Other equipment 103 100 11
--------------- ------------- ---------
Total 3,808 4,663 514
--------------- ------------- ---------
34.1 Adjustments recognised on adoption of IFRS 16
The Group adopted IFRS 16 retrospectively from 1 April 2019, but
has not restated comparatives for previous reporting periods, as
permitted under the specific transitional provisions in the
standard. The reclassifications and adjustments arising from the
new leasing rules are therefore recognised in the opening balance
sheet on 1 April 2019.
The Group has lease contracts for various offices and IT
equipment. Before the adoption of IFRS 16, leases were classified
as either finance or operating leases. Payments made under
operating leases (net of any incentives received from the lessor)
were charged to profit or loss on a straight-line bases over the
period of the lease.
On adoption of IFRS 16, the Group recognised lease liabilities
in relation to leases which had previously been classified as
'operating leases' under the principles of IAS 17 Leases. These
liabilities were measured at the present value of the remaining
lease payments, discounted using the lessee's incremental borrowing
rate as of 1 April 2019 of 3.16%.
For leases previously classified as finance leases the Group
recognised the carrying amount of the lease asset and lease
liability immediately before transition as the carrying amount of
the right of use asset and lease liability at the date of initial
application. The measurement principles of IFRS 16 are only applied
after that date.
2020 )
GBP'000
)
--------------------------------------------------------- ---------
Operating lease commitments disclosed at 31 March
2019 7,402 )
Discounting using the lessee's incremental borrowing
date at the date of initial application (972)
Add: finance lease liabilities recognised as at 31
March 2019 29 )
(Less): short-term leases recognised on a straight-line
basis as expense (344)
(Less): low-value leases recognised on a straight-line
basis as expense (16)
Add: adjustments as a result of a different treatment
of extension and termination options 4,142 )
Lease liability recognised as at 1 April 2019 10,241 )
--------------------------------------------------------- ---------
Of which are:
Current lease liabilities 1,865 )
Non-current lease liabilities 8,376 )
--------------------------------------------------------- ---------
10,241 )
--------------------------------------------------------- ---------
The associated right-of-use assets were measured at the amount
equal to the lease liability, adjusted by the amount of any prepaid
or accrued lease payments relating to that lease recognised in the
balance sheet as at 31 March 2019.
The change in accounting policy affected the following items in
the balance sheet on 1 April 2019:
GBP'000
)
--------------------- ---------
10,241
Right-of-use assets )
Sundry debtors (101)
Lease liabilities (10,212)
Accruals 72 )
Retained Earnings - )
--------------------- ---------
In applying IFRS 16 for the first time the Group has used the
following practical expedients permitted by the standard:
-- The use of a single discount rate to a portfolio of leases
with reasonably similar characteristics
-- Reliance on previous assessments on whether leases are onerous
-- The accounting for operating leases with a remaining lease
term of less than 12 months as at 1 April 2019 as short-term
-- The exclusion of initial direct costs for the measurement of
the right-of-use asset at the date of initial application, and
-- The use of hindsight in determining the lease term where the
contract contains options to extend or terminate the lease
The Group has also elected not to reassess whether a contract
is, or contains a lease at the date of initial application.
Instead, for contracts entered into before the transition date the
Group relied on its assessment made applying IAS 17 and IFRIC 4
Determining whether an Arrangement contains a Lease.
34.2 Summary of new accounting policies
From 1 April 2019, leases are recognised as a right-of-use asset
and a corresponding liability at the date at which the lease asset
is available for use by the group.
Right-of-use assets are measured at cost, less any accumulated
depreciation and impairment losses, and adjusted for any
re-measurement of lease liabilities. The cost of right-of-use
assets includes the amount of lease liabilities recognised, initial
direct costs incurred, and lease payments made at or before the
commencement date less any lease incentives received. Right-of-use
assets are depreciated over the shorter of the asset's useful life
and the lease term on a straight line basis.
Lease liabilities are initially measured at the net present
value of lease payments to be made over the lease term. The lease
payments include fixed payments (including in-substance fixed
payments) less any lease incentives receivable, variable lease
payments that depend on an index or a rate, and amounts expected to
be paid under residual value guarantees. The lease payments also
include the exercise price of a purchase option reasonably certain
to be exercised by the Group and payments of penalties for
terminating a lease, if the lease term reflects the Group
exercising the option to terminate.
In calculating the present value of lease payments, the Group
uses the incremental borrowing rate at the lease commencement date
if the interest rate implicit in the lease is not readily
determinable. After the commencement date, the amount of lease
liabilities is increased to reflect the accretion of interest and
reduced for the lease payments made. In addition, the carrying
amount of lease liabilities is re-measured if there is a
modification, a change in the lease term, a change in the
in-substance fixed lease payments or a change in the assessment to
purchase the underlying asset.
Extension and termination options are included in a number of
the property leases across the group. The Group determines the
lease term as the non-cancellable term of the lease, together with
any periods covered by an option to extend the lease if it is
reasonably certain to be exercised, or any period covered by an
option to terminate the lease, if it is reasonably certain not to
be exercised. The Group applies judgement in evaluating whether it
is reasonably certain to exercise an option to renew or terminate a
lease. Management considers all facts and circumstances that create
an economic incentive to exercise an extension option, or not
exercise a termination option. After the commencement date, the
Group reassesses the lease term if there is a significant event or
change in circumstances that is within its control and affects its
ability to exercise, or not to exercise, the option to renew or
terminate the contract. If a lease modification either increases
the given lease's scope by adding the right to use of an asset then
this modification is treated as a new lease.
Payments associated with short-term leases and leases of
low-value assets (with a value of less than GBP10,000) 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.
35. RESTATEMENT OF PRIOR YEAR
During the year, additional pre-acquisition liabilities were
identified resulting in restatement of the goodwill on acquisition
of Ince & Co LLP. There was no impact on the 2018 results from
these adjustments. In this financial year following the completion
of the second stage of the Ince acquisition, a professional
valuation of the branding and trademark was obtained and a detailed
review of the contractual terms was undertaken which resulted in
the reclassification of certain liabilities and the determination
(as detailed in note 2.8) of a brand value attributable to Ince of
GBP17,000,000. Data on recurring business suggested that the client
portfolios were less valuable than the brand and deemed to be
valued at GBP4,500,000.
The affected financial statement line items for the prior period
have been restated as follows:
Restated
)
Group ) Group )
2019 ) Change 2019 )
Statement of financial GBP'000 GBP'000 GBP'000
position extract ) ) )
----------------------------- --------- --------- ---------
74,443
Intangible assets 53,198 ) 21,245 )
Trade and other receivables 35,222 (3,262) 31,960
Trade and other payables (48,669) (14,584) (63,253)
Provisions (6,736) (3,399) (10,135)
-----------------------------
Net assets 33,015 - ) 33,015
----------------------------- --------- --------- ---------
The affected line items within the Notes to the Financial
Statements for the prior period have been restated as follows:
Restated
)
Group ) Group )
Change
2019 ) ) 2019 )
Statement of financial GBP'000 GBP'000 GBP'000
position extract ) ) )
------------------------------ --------- -------- ---------
50,820
Intangible assets - Goodwill 42,075 ) 8,745 ) )
Intangible assets - Client
portfolio 9,901 ) (4,500) 5,401 )
Intangible assets - Brand 17,000 17,000
& trademarks - ) ) )
Trade receivables 17,229 (1,631) 15,598
Accrued income 5,591 (1,631) 3,960
Other payables (current) (1,344) (4,664) (5,208)
Accruals (current) (4,158) (118) (4,276)
Deferred consideration
(non-current) (21,607) (9,802) (31,409)
Provisions (current) (5,523) (2,562) (11,347)
Provisions (non-current) (1,213) (837) (2,850)
------------------------------
40,951
Net assets 40,951 ) - ) )
------------------------------ --------- -------- ---------
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR SSUEFEESSEFA
(END) Dow Jones Newswires
August 03, 2020 02:00 ET (06:00 GMT)
Ince (LSE:INCE)
Gráfica de Acción Histórica
De Mar 2024 a Abr 2024
Ince (LSE:INCE)
Gráfica de Acción Histórica
De Abr 2023 a Abr 2024
