Kingswood H. Regulatory News (KWG)

18 September 2014

European Wealth Group Limited

("EWG" or the "Group")

Unaudited interim results for the six months ended 30 June 2014

European Wealth Group Limited (AIM: EWG, EWGL), the fast growing wealth management group, today announces its unaudited results for the six months ended 30 June 2014.

Highlights

· Corporate structure consolidated with the acquisition of the outstanding 52 per cent. of European Wealth Management Group ("European Wealth")

· Continued growth in funds under management and advice, up approximately 24 per cent. since 31 December 2013 to £0.82bn

· Acquisition of Compass Financial Benefits Limited ("Compass"), European Wealth's fifth acquisition in four years

· Cash at the period end of £0.74m

· The Board believes that the Group continues on course to be profitable for the year as a whole, on an EBITDA basis, excluding the one-off costs of the acquisition of European Wealth

John Morton, Executive Chairman of European Wealth, commented:

"The first six months have been a transformational period for the Group in terms of its corporate structure, awareness in the market-place, and growth of funds under management and advice. We believe that we now have the right corporate structure and ethos in place to make the most of the ever changing currents of the wider market-place so as to best protect our clients' wealth and the interests of our shareholders."

For further information, please contact

European Wealth Group Limited

John Morton, Rod Gentry: +44 (0)20 7293 0733

Daniel Stewart & Company Plc - Nominated Adviser and Broker

Antony Legge, Alex Brealey, Mark Treharne: +44 (0)20 7776 6550

GTH Communications

Toby Hall: +44 (0)20 7822 7493 / +44 (0)7713 341072

The report is available to view and download from the Company's website at www.europeanwealth.com

DIRECTORS' REVIEW

Overview

We are pleased to present the Group's unaudited interim results for the six months to the 30 June 2014. The principal event of the period was the acquisition ("Acquisition") of the remaining 52 per cent. of European Wealth, thus consolidating the corporate structure of the Group, which completed on 7 May 2014. Whilst the financial results only include the impact of European Wealth's trading from that date, we have also included in the review below comparative figures for European Wealth on a standalone basis to provide a picture of the underlying trends.

We are also pleased to report that as at 1 September 2014, the total funds under management and advice have risen by approximately 24 per cent since 31 December 2013 to £ 0.82bn, getting ever closer to our short term target of exceeding £1.0 bn.

Financial Review

Revenue for the period was £1.9m (H1 2013: £0.006m), of which £1.09m derives from the consolidation of European Wealth from 7 May. Of the remainder, the majority derives from the uplift on EWG's investment in European Wealth, which was recognised on the Acquisition; which also helped drive the increase in pre-tax profits to £0.33m (H1 2013: loss of £0.11m). 

For the six month period to 30 June 2014 revenue for European Wealth was approximately £3.4m, up 13 per cent. on the same period last year. This reflected the investment in staff and systems in the second half of last year and the increase in funds under management and advice ("FUMA"), which increased approximately 24 per cent. over this interim period to £0.82bn. (H1 2013: FUMA increased approximately 26 per cent. to £0.62bn). Operating profits at European Wealth were broadly in line with the same period last year, with operating margins falling slightly due to the continuing investment in staff and systems. 

Net assets increased significantly to £11.4m (H1 2013 £5.6m). This was due mainly to the recognition of £18.8m of goodwill and intangibles, which was partially offset by the issue of £5.75m convertible loans. The first conversion period for these loans commences on 3 November 2014, and runs for 14 days. With the Group's share price currently trading at an approximate premium of over 30 per cent. to the conversion price, the Board expects that convertible loan note holders may consider converting their loan notes. Not only will this reduce the Group's gearing and strengthen its balance sheet, but it will also reduce the interest charge.

The Group experienced a small outflow of operating cash in the period, due mainly to the one-off costs of the Acquisition. However, this was more than offset by the placing in June which raised £0.67m, leaving the Group with £0.74m of cash at the period end.

The Board believes that the Group continues on course to be profitable for the year as a whole, on an EBITDA basis, excluding the one-off costs of the acquisition of European Wealth. 

Operating Review

The Group's two operating divisions, European Investment Management ("EIM") and European Financial Planning ("EFP"), both performed in line with expectations during the period. 

EFP currently acts for 1,966 private clients and 46 corporate pension schemes with 2,782 active group scheme members and aggregate funds under advice of approximately £337m. Within EFP we have three distinct business segments; advice to individuals, sophisticated tax planning services and the management of group personal pension schemes. Turnover for the period was broadly in line with last year, with growth in the private client business offsetting a decrease in revenues from corporate pension schemes, which last year had a very strong first half; demonstrating the strength of having uncorrelated revenue streams. The Board believes that the breadth of expertise within the financial planning business will help generate strong organic growth and also build the group's reputation within the professional marketplace. 

EIM is made up of traditional discretionary and advisory investment management services to a wide range of clients, a growing stockbroking business and a traditional institutional fixed interest offering. Revenues for the period were £1.86m, up 26% on the same period last year. This growth was driven by both an increase in assets under management and also the strong stock markets experienced in the first half which led to an increase in trading activities by clients. AUM at the period end was £483m (up approximately 28 per cent. on the same period last year) split between £267m of, mainly discretionary, equity investments and £216m of fixed interest investments. Average AUM per client was £269,728 up 30.9 per cent on 2013.

At the heart of any investment management business must be the performance of the underlying assets. When EIM was established, a considerable amount of time was spent developing a robust investment process and we are pleased to report that this has resulted in some excellent investment performance over the last six and twelve months as illustrated below:

As well as the Trustee Managed Portfolio Indices ("TMPI") reports, which continue to show EIM outperforming its peers, this performance has started to be recognised by the industry with EIM winning the 'Investment Strategy Firm of the Year' award from Financial Business.

In January 2014, EIM became the promoter of a Dublin-based UCITs, an umbrella structure. The fund has been renamed the European Wealth Investment Fund Limited and currently has three sub funds, being a bond fund and two equity funds.

The Group's strategy is to combine strong organic growth with targeted acquisitions which both grow its client base and enhance its client offering. The acquisition of Compass is a very good illustration of the Group's business model. The business was acquired on 25 June and by the end of September the integration of Compass into EFP will have been completed. This will result in a significant amount of cost saving as full advantage is taken of the back office infrastructure that has been built within EFP over the last three years. Through these measures alone, we would expect to be able to double the profit contribution from Compass by the end of this year.

Since the end of the period under review, the investment management arm, European Investment Management Limited ("EIM"), has announced the opening of a new office in Manchester. For a number of months, we have been looking for an avenue through which to establish a presence in the North West. We are delighted that David Mellett and Nigel Gilland have joined EIM and we are hopeful that the Manchester office will make a significant contribution to the group in the near future.

Our business model is built around the principle that by having a high proportion of our services in-house, we inevitably have a high fixed cost base which currently stands at 73% of our total cost. As the business grows by both acquisition and recruitment, it is important that the growth in our cost base is kept under control. 

Outlook

It is your Board's belief that the investment management and financial planning industries in the UK will continue to go through a period of significant change. This change is primarily being driven by an ever-changing regulatory landscape, the need for individuals to plan for their retirement and respond to changing pensions legislation. particularly highlighted by changes announced in the budget which have been described as one of the greatest changes in pensions for the last 20 years. 

One area of change in the Financial Planning marketplace is the recent confirmation by the Department for Work & Pensions of the cap on Qualifying Workplace Pensions and the banning of member borne deductions. Employer paid fees are already a feature of many EFP group pension schemes and arrangements to formally switch commission based group pension schemes are well advanced and should be completed by the end of this calendar year.

The coming six months will continue to present challenges for the Group. Trading volumes within our stockbroking business and financial planning business have been seasonally low over the summer months. The return to normal volumes over the remainder of the year will depend upon the outlook for stock markets and general consumer confidence. 

Stock markets are generally reaching historically high levels being driven by the continued low interest rate environment around the world. Whilst the next move in interest rates around the world are likely to be up, we continue to believe the increases will be modest and spread over a longer period of time than currently expected by market commentators. 

Consumer confidence will have an impact, in the short term, on individuals' appetite to consider financial planning expenditure. However, the trend for individuals to take control of their retirement planning is ever increasing against a backdrop of dramatic changes in the pensions landscape. These changes range from caps on the amount that can be invested into pensions in any financial year to the access individuals can have to establish pension pots. It is these changes that will always present opportunities for the Group to take advantage of the underlying need of clients for transparent advice. We believe we have the right corporate structure and ethos in place to make the most of the ever changing currents of the financial markets so as to best protect our clients' wealth.

The Group has been deliberately structured so as to have diverse revenue sources - some of which complement one another and some that are non-correlated. Each of these business lines will have unique characteristics - it is our challenge to take advantage of the opportunities but also to have a clear focus on our need to manage the Group as efficiently as possible to ensure that each element of our operations is capable of reaching its full potential thus enabling the Group to both increase funds under management and advice and reach improved levels of profitability. 

INCOME STATEMENT

UNAUDITED HALF YEAR END FIGURES TO 30TH JUNE 2014

\* The comparative figures that are presented in this report are for European Wealth Group Limited prior to the reverse takeover. The Income Statement for the current period has been consolidated as at the completion date for the acquisition of European Wealth Management Group Limited of 7 May 2014. More details can be found in note 4 to this report.

\* The balance sheet as at 30 June 2014 is the full Group consolidated balance sheet. The comparative results are for European Wealth Group Limited only (as per prior reported results).

NOTES TO THE UNAUDITED FINANCIAL STATEMENTS

30 JUNE 2014

1. ACCOUNTING POLICIES

1.1 Basis of preparation

These unaudited interim results have been prepared using the accounting policies, presentation and methods of computation that will be adopted in the next audited financial statements, which will be prepared in accordance with applicable International Financial Reporting Standards adopted by the International Accounting Standards Board ("IASB") and interpretations issued by the International Financial Reporting Interpretations Committee ("IFRIC") of the IASB (together "IFRS") as adopted by the European Union.

EWG has previously reported its accounts according to UK Generally Accepted Accounting Principles and no adjustment has been made to reflect IFRS for the historic numbers in these Interim accounts as any adjustments are not expected to have material impact on the results presented in this report. This approach is consistent with the policies under which European Wealth's accounts were produced in the Admission Document published in April.

The information relating to the six months ended 30 June 2014 and the six months ended 30 June 2013 is unaudited and does not constitute statutory financial statements within the meaning of section 434 of the Companies Act 2006. The interim condensed consolidated financial statements do not include all the information and disclosures required in the annual financial statements and should be read in conjunction with EWG's financial statements for the year ended 31 December 2013 and the information in the Admission Document dated 16 April 2014.

1.2 Basis of consolidation

The interim condensed consolidated financial statements consolidate the financial statements of EWG and its subsidiary undertakings as at 30 June 2014. Prior reporting periods represent the results of European Wealth Group Limited as a standalone entity.

Subsidiaries are fully consolidated from the date of acquisition, being the date on which EWG obtains control, and continue to be consolidated until the date that such control ceases. The financial statements of subsidiaries are prepared for the same reporting period as the parent company, using consistent accounting policies.

1.3 Key sources of judgements and estimation uncertainty

The preparation of the condensed consolidated financial statements requires management to make estimates and assumptions that affect the reported amount of revenues, expenses, assets and liabilities and the disclosure of contingent liabilities. If in the future such estimates and assumptions, which are based on management's best judgement at the date of preparation of the financial statements, deviate from actual circumstances, the original estimates and assumptions will be modified as appropriate in the period in which the circumstances change.

2. EARNINGS PER SHARE

The calculation of basic earnings per share is based on the net return on ordinary activities after tax for the period and on the weighted average number of the Company's ordinary shares of 5 pence ("Ordinary Shares") in issue during the period. Accordingly, the weighted average number of Ordinary Shares in issue for the six months ended 30 June 2014 was 11,370,691 (2013: 374,954,068).

3. CALLED UP SHARE CAPITAL

On 7 May 2014, EWG undertook a share capital re-organisation due to the relatively large number of shares that were in existence. The share reorganisation was effected by:

1. The consolidation and conversion of each block of 60 Existing EWG Shares into one New Ordinary Share and one New Deferred Share; and

2. Where any Existing Shareholder's holding of Existing EWG Shares is not divisible by 60, the compulsory redemption of all of the remaining unconsolidated Existing EWG Shares held by that Existing Shareholder.

The effect of the re-organisation was to reduce the number of ordinary shares in issue from 633,712,300 Existing EWG shares of 0.1p each to 10,561,858 New Ordinary Shares of 5p each.

On 7 May 2014, as part of the consideration for European Wealth Management Group Limited, 2,611,084 new ordinary shares of 5p each were issued to the former shareholders of European Wealth Management Group Limited.

On 25 June 2014, as part of the consideration for Compass Financial Benefits Limited ("Compass"), 269,575 new ordinary shares of 5p each were issued to the former shareholders of Compass at a price of 100p per share.

On 25 June 2014, EWG raised a total of £674,000 via the issue of 749,303 new ordinary shares of 5p each in the Company at a price of 90p per share.

On 25 June 2014, Hearth Investments Limited ("Hearth") agreed to convert a loan plus interest, amounting to £40,997, into 56,940 new ordinary shares at a price of 72p, being the price agreed in the original agreement dated 25 March 2014.

On 25 June 2014, a number of directors subscribed for 56,251 new ordinary shares of 5p each in the Company, in aggregate, at a price of 90p per share raising a total of approximately £51,000 for the Company.

On 25 June 2014, further to the loan agreement disclosed in the Admission Document dated 16 April 2014 between the Group's subsidiary, European Wealth Management Group Limited ("EWMG") and Buzz West, non-executive director of the Group, to borrow £60,000; Buzz West has agreed to convert the entire loan plus interest, amounting to £61,512, into 68,346 new Ordinary Shares at a price of 90p.

4. ACQUISITIONS

Acquisition of European Wealth Management Group Limited

On 7 May 2014, EWG completed the acquisition of the entire share capital of European Wealth Management Group Limited ("EWMG", together with its subsidiaries "European Wealthp"). The consideration was in the form of both new ordinary shares and convertible loan stock ("CLS") and valued European Wealth at approximately £13.45 million.

European Wealth is a fast growing private wealth management business which was founded in 2009 and commenced trading in 2010. Its core services are financial planning, corporate pension advisory and investment management in both equity and fixed interest instruments. Its client base currently ranges from individuals with up to £7 million of assets to invest to institutions investing up to £68 million. It has its headquarters in London and regional offices in Brighton, Cheltenham, Worcester, Wokingham, East Malling and Manchester. The EWMG Group currently has over 60 employees as well as using the services of over 5 consultants.

European Wealth's last 3 years of financial results, under IFRS as presented in the admission document dated 16 April, are summarised below:

Full details of the terms of the acquisition, including the last 3 years of financial statement for European Wealth, can be found in the Admission Document dated 16 April 2014 and is available on the Group's website www.europeanwealth.com .

The acquisition has been accounted for under IFRS as a step acquisition and as such, goodwill and intangibles have been recognised on the balance sheet of the Group.

Acquisition of Compass Financial Benefits Limited

On 25 June 2014, EWG acquired Compass Financial Benefits Limited ("Compass"), an IFA business with £31million of funds under influence. Compass is a family-run, IFA business based in Kingston, Surrey. In the year to December 2013, Compass had turnover of £434,230, of which approximately 76% was recurring income, and recorded a pre-tax profit of £154,250. The principals are John and Michael Robinson.

Compass is being acquired for a maximum consideration of three times its recurring income (being Compass's retail distribution review compliant recurring income) for the 12 months following completion. The consideration is payable in two tranches; an initial tranche, payable on completion, of £539,150, to be satisfied half in cash, being £269,575, and half in 269,575 new Ordinary Shares at a price of 100p per share, based on the 10 business day average mid market closing price up to and including 23 June 2014. The remainder of any consideration due will similarly be satisfied half in in cash and half in new Ordinary Shares.