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(Alliance News) - Kingswood Holdings Ltd on Thursday posted a widened annual loss and said that it has bought Hull, Yorkshire-based financial adviser Sterling Trust Financial Consulting Ltd for up to GBP19.6 million, which will double the company's wealth advisory business.
London-based wealth manager Kingswood will pay an initial GBP17.8 million in cash for Sterling Trust. An additional deferred payment of up to a maximum of GBP1.8 million is payable upon achievement of financial targets over a three-year period.
Sterling Trust provides independent financial advice to individuals and corporates across the UK. It currently employs 48 people and manages GBP1.2 billion in assets under management on behalf of 5,000 clients.
The acquisition has been funded by Kingswood's issue of a total of 7.8 million new convertible preference shares, under the terms of its subscription agreement with Pollen Street Capital Ltd. In September 2019, Kingswood agreed a GBP80 million funding pact with Pollen Street to fund its acquisition pipeline.
Kingswood Chief Executive Gary Wilder said: "This is a transformative transaction for the Kingswood Group, doubling our wealth advisory business and providing us with an opportunity to own a profitable regional financial planning business with built-in expertise and capacity to expand."
For 2019, Kingswood recorded a pretax loss of GBP5.6 million, widened from GBP3.7 million loss in 2018. Revenue increased 34% year-on-year to GBP10.1 million from GBP7.5 million.
The widened pretax loss was due to an increase in administrative and amortisation & depreciation costs. Administrative expenses jumped to GBP12.6 million from GBP9.9 million.
Operating earnings before interest, tax, depreciation and amortisation - the company's preferred profit measure - totalled GBP653,000 compared with a GBP1.6 million loss a year ago. The swing to Ebitda profit was attributed to solid underlying business performance, partly offset by a significant investment in people and technology during the year.
At the end of 2019, the company's assets under advice and management stood at GBP2.47 billion, up from GBP1.65 billion a year before. Currently, the company's assets amount to around GBP4.8 billion, with around 16,000 active clients.
CEO Wilder said: "Kingswood is significantly undervalued relative to its fully integrated peer group and wealth managers in general, and a major focus of myself and the board is to execute our strategy and maximise value and returns for our shareholders. The last 18 months have seen a continual refinement and investment in our centralised client investment proposition, and following this investment and the rigorous repositioning programme now completed, Kingswood is in prime position to continue to capitalise on the numerous consolidation and acquisition opportunities available in the international wealth and investment management market."
Shares in Kingswood were up 15% at 18.42 pence each in London on Thursday afternoon, though the stock remains down 10% so far in 2020.
By Tapan Panchal; tapanpanchal@alliancenews.com
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