ARDN.L Regulatory News (ARDN)

Arden Partners plc

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

Preliminary results for the year ended 31 October 2019

Arden Partners plc (AIM: ARDN), the institutional stockbroking company, today announces unaudited preliminary results for the year ended 31 October 2019.

Operational highlights

·; Equity capital markets were extremely challenging throughout the financial year as a result of political, macroeconomic and Brexit uncertainties

o As a consequence, revenues across the Group were impacted negatively

o Costs controlled in response to market conditions

·; Corporate clients increased to 55 at year end (2018: 51) with a corresponding increase in the level of recurring revenues derived from the associated client retainers

·; Encouraging start to the current financial year with a number of transactions completed in the first quarter, including a number of equity fundraisings

o Current year to date revenues and profits well ahead of comparative prior period

Financial highlights

·; Revenue: £6.6 million (2018: £7.4 million)

·; Loss before tax: £2.6 million (2018: £2.8 million loss before tax)

·; Basic loss per share: 8.9p (2018: 9.6p loss per share)

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

"2019 was a challenging market environment for everyone involved in small and mid cap equity capital markets. We reacted by tightly managing our costs and focusing on growing our corporate client list.

As a result of our actions, Arden continues to have the balance sheet strength and the people to compete effectively.

Furthermore, the current financial year has started well with a number of transactions being completed including a number of equity fundraisings. The decisive result of the UK General Election in December 2019 has removed some of the uncertainty which has impacted markets and we are well placed to capitalise on opportunities as and when they arise."

For further enquiries:

Arden Partners plc 020 7614 5900

Donald Brown - Chief Executive Officer

James Reed-Daunter - Executive Director

Steve Douglas - Group Finance Director

GCA Altium Limited (NOMAD) 020 7484 4040

Sam Fuller / Tim Richardson

Notes for editors

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

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

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

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

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

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

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

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

Chairman's Statement

Equity capital markets for small and mid cap companies were extremely challenging throughout the financial year under review. The prevailing political, macroeconomic and Brexit uncertainties led to falls in business confidence, corporate activity, stock liquidity, trading volumes and investment, together with a sharp increase in volatility levels. The impact of these factors across the small and mid-cap community - from quoted companies to advisers - was marked. Aggregate activity levels were substantially reduced as many investment decisions were put on hold pending some form of clarity.

As a result of these external factors, the Group's performance for the year was significantly impacted with revenues down 10% to £6.6 million (2018: £7.4 million) and a loss before tax of £2.6 million (2018: £2.8 million loss before tax). Loss per share was 8.9p (2018: loss per share of 9.6p).

Despite this market backdrop, we continued to make progress in delivering our strategy. We grew our retained corporate client base with a corresponding increase in the level of recurring revenues derived from associated retainers. Further, we increased the number of transactions we completed for these clients (although the number of completed equity fundraisings was significantly reduced from the prior year). We are now retained to act for 55 listed companies (2018: 51), 80% of which are listed on AIM. The average market capitalisation of our corporate clients rose in the year to £138 million (2018: £125 million). This continued progress is a testament to our focus on superior client service and delivery in-line with or above our clients' expectations. The Group also continued carefully to monitor its cost base given the prevailing market conditions.

The current year has started in a promising manner. We have already generated revenues well in excess of those achieved in the same period last year and we are trading profitably. The UK general election in December 2019 delivered a decisive result which should remove some of the market uncertainties that impacted 2019. The government has promised a pro-business fiscal regime and there is early evidence of capital returning to the UK.

Our balance sheet remains strong. We hold cash and cash equivalents in excess of our capital adequacy requirements and sufficient to protect us against short to medium term market fluctuations. We continue to believe the Group is well positioned in its markets, a position from which we can continue to execute our ongoing growth strategy.

Corporate progress is not possible without good people and this is especially true in challenging times. It has been great to see the energy levels, skill and enthusiasm remain high despite the challenging market backdrop. I would like to thank my Board, our corporate and institutional clients and all our hard-working staff for their support during this year.

Mark Ansell

Chairman

Chief Executive's Statement

Our performance for the year was significantly impacted by macroeconomic and political uncertainty. These uncertainties led to a decline in volumes in UK equities and a significant increase in market volatility levels. Institutional investors typically adopted a more cautious approach toward investing in UK equities, specifically at the smaller end of the market, with many long-only institutions suffering cash outflows. Consequently, activity levels amongst our institutional clients were generally subdued.

Further, the freezing of funds at a high profile smaller-cap investor led to liquidity reviews across the UK institutional smaller-cap investor base. Equity markets are designed to fund growth businesses and we hope to see increased liquidity to the smaller cap segment of the market in the near term.

In addition, UK business confidence weakened and decisions regarding investment and/or M&A were often deferred. In aggregate, there were only seven AIM IPO's in the first ten months of calendar 2019, the lowest number since AIM's inception in 1995. Similarly, the quantum of secondary fundraisings on AIM fell substantially in 2019; in the twelve months to October 2019 only £3.1bn was raised (2018: £4.8bn). The number of fund raisings (primary and secondary) undertaken by our clients declined significantly compared to the prior year.

However, we continued to make good strategic progress in growing the core fundamentals of our business - in particular, our retained corporate client base rose to 55 at 31 October 2019 from 51 a year earlier.

Business review

Corporate Finance

The number of corporate transactions completed during the year rose but transactions requiring funds to be raised fell significantly. This was in line with the market as a whole. As a consequence, funds raised for clients in the year were significantly lower than in the previous year. Completed transactions tended to be smaller or more technical in nature, resulting in much lower average fees per transaction. Towards the end of the financial year, we noted an increase in public company M&A transactions and that trend has continued into the new financial year. Furthermore, we have seen increasing appetite for fund raisings - both IPO and secondary - following the UK election. Whilst it is still too early to draw firm conclusions, the signs are encouraging that equity capital market conditions might be improving.

It is pleasing to report the growth in number of retained corporate clients to 55 from 51. This has increased our annualised recurring revenues from retainers and we have risen to 11th place in the ARL corporate advisers guide (by number of corporate clients) (2018: 12th place). The average market capitalisation of our clients rose to £138 million (2018: £125 million).

Equities

The repercussions of MiFID II, introduced in January 2018, continued to impact the performance of the Equities division, which also reflected reduced trading activity amongst our institutional client base.

Our research offering has been expanded and new sectors added to our coverage. We have launched our Research Portal, which provides the greatest possible access for potential investors to Arden's corporate client research. Our research is also available via the ResearchTree portal where it has been repeatedly top ranked for its quality and we were delighted when our oil and gas analyst was voted No.1 Small and Mid-Cap Oil & gas sector analyst in the 2019 Extel Awards. Our research fees have remained steady year on year.

The market making book and a revaluation of certain warrants recorded a cumulative profit of £0.1 million in the year (2018: £0.4 million loss).

Current trading and outlook

The current financial year has started well with the completion of a number of transactions including a number of equity fundraisings. The decisive result of the UK General Election in December 2019 has removed some of the uncertainty which has impacted our markets and we are well placed to capitalise on opportunities as and when they arise.

Revenues generated in the current financial year are well in excess of those achieved in the same period last year and we are trading profitably in the year to date. Furthermore, we remain active in the market and have a healthy pipeline of corporate transactions which gives us visibility on a strong first half performance. We remain well capitalised and will protect our balance sheet whilst remaining focussed on our growth strategy and on our clients' needs.

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

Donald Brown

Chief Executive Officer

Finance Review

Revenue

Revenue for the full year totalled £6.6 million, a decrease of 10.0% on 2018 as unfavourable political and macroeconomic conditions impacted all aspects of our business. Revenues were more equally split across the year highlighting that the difficult market conditions were in evidence throughout the period: £3.4 million of second half revenue accounted for 52.4% of total revenues. (2018: £4.7 million / 64.4%).

Average headcount increased by 4% in the year as we continued to invest in our people in order to deliver our superior client service and position the Group for future growth. This plus the fall in the revenue materially impacted the revenue per head measure.

Costs

Staff related costs comprise the majority of our cost base and they reduced marginally year on year due to the absence of any restructuring payments.

Non-staff costs were tightly controlled and, as a result, reduced by 17.8% as we managed our costs in light of market conditions.

Liquidity position

The Group's liquidity position (which comprises cash and cash equivalents, long market making equity positions, trade and other receivables) was £6.9 million at the year end (2018: £9.8 million). The decrease is primarily due to funding the trading losses for the year.

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

Net asset position and capital adequacy

The Group's net assets at the year end were £6.1 million (2018: £9.2 million), the reduction being the result of the loss incurred in the year. The capital adequacy ratio as at 31 October 2019 was 266% (2018: 428%).

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

Steven Douglas

Group Finance Director

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the year ended 31 October 2019

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

At 31 October 2019

CONSOLIDATED STATEMENT OF CASH FLOWS

For the year ended 31 October 2019

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the year ended 31 October 2019

Notes

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

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

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

NOTES

1) Accounting policies

Basis of preparation

The financial information included in this preliminary announcement is unaudited. This information does not constitute the annual report and accounts of the Group for the year ended 31 October 2019 within the meaning of section 434 of the Companies Act 2006. The audited annual report and accounts of the Group for the year ended 31 October 2018 has been filed with the Registrar of Companies. The auditor's report on those financial statements was unqualified and did not contain any statement under section 498 (2) or (3) of the Companies Act 2006 and did not include references to any matters to which the auditor drew attention by way of emphasis.

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

These policies are in accordance with International Financial Reporting Standards, International Accounting Standards and Interpretations (collectively, "IFRS") issued by the International Accounting Standards Board as endorsed for use in the European Union. The Group and Company Financial Statements have been prepared in accordance with IFRS. These financial statements have also been prepared in accordance with those parts of the Companies Act 2006 that are applicable to companies preparing their financial statements in accordance with IFRS.

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

New standards effective during the year

The Group applies, for the first time, IFRS 9 Financial Instruments and IFRS 15 Revenue from Contracts. The impact of which is set out below.

IFRS 9 Financial Instruments

The Group has identified that the adoption of IFRS 9, which replaces IAS 39 Financial Instruments: Recognition and Measurement from 1 November 2018, has had material impact on its consolidated financial statements with the Group recognising a £98,000 impairment charge during the year. Further details can be found in Note 16 to the financial statements.

Transitions

The standard has been adopted from 1 November 2018 and applied retrospectively by adjusting where necessary, the statement of financial position at the date of initial application, with no requirement to restate comparative periods.

Classification and measurement of financial assets

The Group's financial assets consist of trading assets from its Equities, Corporate Finance and Wealth Management activities are currently measured at fair value through profit and loss either held for trading or designated at fair value. This treatment will therefore not change under IFRS 9. However, at the date of transition the Group held £520k of investments as available-for-sale, which will be classified as being at amortised cost under IFRS 9. The available for sale asset was subsequently disposed of during the financial year, all changes in the fair value up to the point of disposal were recorded in the consolidated statement of comprehensive income. In addition, the balance on the available for sale reserve at 31 October 2018 of £7,000 has been transferred to retained earnings.

The following table and the accompanying notes below explain the original measurement categories under IAS 39 and the new measurement categories under IFRS 9 for each class of the Group's financial assets and financial liabilities as at 1 November 2018:

Impairment

The Group applies an expected credit loss model when calculating impairment losses on its trade and other receivables. In applying IFRS 9 the Group must consider the probability of a default occurring over the contractual life of its trade receivables and contract asset balances on initial recognition of those assets. The new impairment model applies to financial assets measured at amortised cost but not to investments in equity instruments.

IFRS 15 Revenue from Contracts with Customers

This standard has been adopted on its mandatorily effective date of 1 November 2018 and applied on a retrospective basis. There was no material impact of applying the standard on this basis due to the type of revenue which is earned within the Group and the absence of any long-term contract arrangements and therefore no cumulative effect to adjust in the opening balance of retained earnings. The Group will continue to assess individual customer contracts for separate performance obligations to allocate the correct transaction price as they occur.

Standards that have been issued, but are not yet effective for the year ended 31 October 2019 include:

IFRS 16 Leases

In January 2016, the IASB issued IFRS 16 Leases. The standard is effective for annual periods beginning on or after 1 January 2019 with early adoption permitted. The standard was endorsed in November 2017. The Group has decided it will apply the modified retrospective adoption method in IFRS 16, and, therefore, will only recognise leases on the balance sheet as at 1 November 2019.

IFRS 16 results in lessees accounting for most leases within the scope in a manner similar to the way in which finance leases are currently accounted for under IAS 17 Lease. Lessees will recognise a 'right of use' asset and a corresponding financial liability on the balance sheet. The asset will be amortised over the period of the lease and the financial liability measured at amortised cost.

The Group anticipates recording a right of use asset of £0.4m and a corresponding lease liability of £0.3m, with the right of use asset depreciated over the life of the lease and the lease liability calculated by discounting the quarterly lease payments over the remaining term of the lease at a discount rate which represents the incremental cost of borrowing.

IFRIC 23 Uncertainty Over Income Tax Positions

IFRIC 23 clarifies how to recognise and measure current and deferred income tax assets and liabilities when there is uncertainty over income tax treatments.

Significant accounting policies

Basis of consolidation

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

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

The Company has taken advantage of Section 408 of the Companies Act 2006, and the Statement of Comprehensive Income of the parent Company is not presented. The parent Company's loss after taxation for the financial year amounted to £2,565,000 (2018: loss £2,821,000).

Revenue

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

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

Corporate Finance Division

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

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

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

Equities Division

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

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

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

Interest receivable

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

Property, plant and equipment

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

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

Improvements to leasehold buildings - 33.33% per annum

Fixtures, fittings and computer equipment - 33.33% per annum

Investments in subsidiaries

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

Financial instruments

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

Financial assets and liabilities

Investments are recognised and derecognised on the trade date where the purchase or sale of an investment is under a contract whose terms require delivery of the investment within the timeframe established by the market concerned, and are initially measured at fair value, plus transaction costs, except for those financial assets classified as at fair value through profit or loss, which are initially measured at fair value.

Assets and liabilities are presented net where there is a legal right to offset and an intention to settle in that way.

Stock borrowing collateral

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

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

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

Foreign currency transactions

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

Taxation

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

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

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

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

Dividends

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

Own Shares

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

Leased assets

Operating lease rentals are charged to the Statement of Comprehensive Income on a straight line basis over the period of the lease.

Pension costs

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

Employee Benefit Trust

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

Share based payments - equity settled

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

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

Critical accounting estimates

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

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

Derivative Financial Assets

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

Share Based Payments

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

Policy applicable from 1 November 2018 under IFRS 9:

The two principal classification categories for financial assets are: measured at amortised cost and fair value through profit or loss (FVTPL). The classification of financial assets under IFRS 9 is generally based on the business model in which a financial asset is managed and its contractual cash flow characteristics.

Financial assets are not reclassified subsequent to their initial recognition unless the Group changes its business model for managing financial assets, in which case all affected financial assets are reclassified on the first day of the first reporting period following the change in the business model.

A financial asset is measured at amortised cost if it meets both of the following conditions and is not designated as at FVTPL:

·; it is held within a business model whose objective is to hold assets to collect contractual cash flows; and

·; its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

All financial assets not classified as measured at amortised cost are measured at FVTPL. This includes all derivative financial assets. On initial recognition, the Group may irrevocably designate a financial asset that otherwise meets the requirements to be measured at amortised cost as at FVTPL if doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise.

Assets held at FVTPL are subsequently measured at fair value. Net gains and losses, including any interest or dividend income, are recognised in profit or loss.

Financial assets at amortised cost are subsequently measured at amortised cost using the effective interest method. The amortised cost is reduced by impairment losses. Interest income, foreign exchange gains and losses and impairment are recognised in profit or loss. Any gain or loss on derecognition is recognised in profit or loss.

Dividends are recognised as income in profit or loss unless the dividend clearly represents a recovery of part of the cost of the investment.

Policy applicable before 1 November 2018 under IAS 39:

Financial assets

Financial assets comprise held for trading instruments, those designated at fair value through profit or loss, available for sale assets, and loans and receivables. The Group classifies its financial assets into one of the categories discussed below, depending on the purpose for which the asset was acquired. The Group has not classified any of its financial assets as held to maturity. Purchases and sales of financial assets are recognised on trade date.

The Group's accounting policy for each category is as follows:

·; Assets held at fair value: Held for trading instruments represent long market making positions and are measured at fair value with gains and losses from changes in fair value being taken to the Statement of Comprehensive Income. Derivative financial assets may include options which are valued using the Black-Scholes model, which management intends to hold in the short term and any change in fair value are taken to the Statement of Comprehensive Income. The derivative financial instruments are not designated as hedging instruments.

Assets designated at fair value through profit and loss are valued with reference to current quoted prices in active markets. They are designated as fair value through profit and loss as management review performance of the asset as part of a portfolio of assets at fair value.

·; Available for sale assets: Non-derivative financial assets that do not qualify to be classified in another category are classified as available for sale financial assets. They are carried at fair value with changes in fair value recognised directly in a separate component of equity (available for sale reserve). Where there is a significant or prolonged decline in the fair value of an available for sale financial asset (which constitutes objective evidence of impairment), the full amount of the impairment, including any amount previously charged to equity, is recognised in the Statement of Comprehensive Income. When an available for sale financial asset is disposed of, the cumulative gain or loss previously recognised in equity is reclassified from other comprehensive income to the profit or loss account.

·; Loans and receivables: These assets are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They arise principally through the provision of services to customers (e.g. trade receivables), but also incorporate other types of contractual monetary asset. They are initially recognised at fair value plus transaction costs that are directly attributable to their acquisition or issue, and are subsequently carried at amortised cost using the effective interest rate method, less provision for impairment.

Impairment provisions are recognised when there is objective evidence (such as significant financial difficulties on the part of the counterparty or default or significant delay in payment) that the Group will be unable to collect all of the amounts due under the terms receivable, the amount of such a provision being the difference between the net carrying amount and the present value of the future expected cash flows associated with the impaired receivable. For trade receivables, which are reported net, such provisions are recorded in a separate allowance account with the loss being recognised within administrative expenses in the Statement of Comprehensive Income. On confirmation that the trade receivable will not be collectable, the gross carrying value of the asset is written off against the associated provision.

Included within loans and receivables are market receivables which comprise of sold security transactions awaiting settlement at year end. These balances are shown gross and are recognised on trade date at cost.

Cash and cash equivalents

Cash and cash equivalents comprise cash in hand, bank balances that are readily convertible to a known amount of cash and are not subject to a significant risk of changes in value. Cash and cash equivalents all have original dates to maturity of three months or less.

Financial liabilities

The Group classifies its financial liabilities into one of the categories discussed below, depending on the purpose for which the liability was acquired. The Group's accounting policy for each category is as follows:

·; Fair value through profit or loss: These financial liabilities represent short market-making positions and are stated at fair value. Gains and losses from changes in fair value are taken to the Statement of Comprehensive Income.

For financial liabilities which are quoted in active markets, fair values are determined by reference to the current quoted offer price.

·; Other financial liabilities: These comprise market payables, trade payables, other payables and accruals. They are initially recognised at fair value and subsequently carried at amortised cost using the effective interest method.

Included within other financial liabilities are market payables which comprise of purchased security transactions awaiting settlement at the year end. These balances are shown gross and are recognised on trade date at cost.

2) Revenue

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

Included within revenue of the Equities Division is a profit of £97,000 (2018: loss £150,000) relating to the fair value adjustment of derivatives held within assets that are fair valued through profit or loss.

Included within revenue of the Equities Division is a profit of £63,000 (2018: £Nil) relating to the fair value of a warrant over securities which was received as consideration for Corporate Finance services rendered.

The Directors are of the opinion that there are three operating segments and while segment revenues are reviewed internally business resources are not allocated to segments for the purposes of deriving either profit or assets. In 2019, none of the Group's customers contributed revenue of more than 10% of the Group's total revenue. In 2018, one of the Group's customers contributed revenue of £1,075,000, being more than 10% of the Group's total revenue.

3) Dividends

Dividends recognised in the year consisted of the 2018 final dividend of £293,000 (1p per share).

Dividends recognised in the prior year consisted of the 2017 final dividend of £295,000 (1p per share).

4) Earnings per share

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

The Directors believe that the underlying loss and underlying loss per share, which are alternative performance measures, provide more useful information for shareholders on the underlying performance of the Group than the reported numbers as they fairer reflect the underlying operating performance of the Group as these costs are not considered part of the usual operations.

The 2,310,700 (2018: 1,480,700) shares held by the Arden Partners Employee Benefit Trust and 4,304,724 (2018: 2,364,481) shares held in Treasury, being the weighted average number of treasury shares in issue during the year, have been excluded from the denominator.

No adjustment has been made to the diluted loss per share of 8.9p as the dilution effect of the weighted average number of outstanding share options of 52,235 would be to decrease the loss per share.

5) Annual Report and Accounts

Copies of the 2019 Report and Accounts will be posted to shareholders in due course. Copies will also be available from the Company's registered office and from the Company's website www.arden-partners.com