Kingswood H. Regulatory News (KWG)

30th June 2022

KINGSWOOD HOLDINGS LIMITED

("Kingswood", the "Company" or the "Group")

2021 Results

- 2021: another transformational year for Kingswood with record levels of revenue and operating profit

- Revenue of £149.7m increased by 488% compared to 2020 and operating profit increased by £5.5m to £6.3m, reflecting the successful integration of acquisitions in the UK and growth in the US

- Kingswood UK continues to build a leading international integrated wealth and investment management business, completing 9 UK acquisitions since August 2021 adding £5.1m annual operating profit and c.£2.6bn Assets under Management and Advice (AUM/A) to the Group

- Kingswood US raised over $9.0bn capital for Investment Banking clients in 2021 and increased the number of registered representatives in its Registered Investment Adviser (RIA) and Independent Broker Dealer (IBD) business by 21% to 211

Kingswood Holdings Limited (AIM: KWG), the international, fully integrated wealth and investment management group, is pleased to announce its audited financial results for the year ended 31 December 2021.

David Hudd, Kingswood Chairman, commented: "In my first year as Chair of Kingswood I have been impressed by the strong progress we are making in achieving our long-term strategy to become a leading international fully integrated wealth and investment management business. I am immensely proud of our dedicated team who have navigated the continued challenges of the COVID-19 pandemic throughout 2021, while delivering outstanding service to our clients in the UK and US.

"Despite the challenges faced, I am pleased to report record levels of revenue and operating profit with significant growth across Wealth Planning, Investment Management, and the US. We have a strong, well-capitalised balance sheet and have benefited from our partnership with Pollen Street Capital who have now invested £77.4m to enable our acquisition and growth strategy."

Strategic Highlights

- Group AUM/A increased by 15% in the year to £6.8bn - 10% driven by organic growth and 5% through acquisitions.

- Kingswood now comprises 292 people across the globe managing £9.0bn of client assets.

- Completed 4 acquisitions in the UK during 2021, adding £2.4m annual operating profit and c.£1.8bn Assets under Management and Advice (AUM/A) to the Group

- A further 5 UK acquisitions completed during H1'22 - Allots Financial Services, Joseph R Lamb Financial Advisers, DJ Cooke Life and Pensions, AiM Independent Financial advisers and Vincent & Co Ltd. Collectively these acquisitions add £2.7m of annual operating profit and c.£0.8bn AUA to the Group.

- 8 UK acquisitions are currently in exclusive due diligence, comprising a total of £7.7m annual operating profit, and are expected to conclude in the third quarter of 2022.

- Kingswood US raised over $9.0bn capital for Investment Banking clients in the year. Increased the number of registered representatives in its Registered Investment Adviser (RIA) and Independent Broker Dealer (IBD) business by 21% to 211, supporting growth in AUM by £0.5bn to c.$2.5bn.

- The strategic acquisition of IBOSS in the UK transforms our Central Investment Proposition and gives us a long-term track record of high performance and award-winning service proposition.

- Launch of 'Kingswood Go', providing clients with easier online access to their investment portfolio

David Lawrence, Kingswood Chief Executive Officer, commented: "Kingswood continues to demonstrate a strong track record in sourcing and securing acquisitions and in doing so is quickly building scale. We have a single-minded focus on both Financial Advice / Planning and Investment Management activity, relying on leading market external expertise for other aspects of the client value-chain.

"I believe to be a truly successful firm we must put the client at the heart of the relationship, be highly accessible, have a clear proposition and most importantly provide great value for money. Our staff and technology are key enablers to deliver this success and will therefore be critical pillars of our strategy today and moving forwards."

Mike Nessim, Kingswood US Chief Executive Officer, commented: "2021 was another year of growth and business expansion for Kingswood US. We continue to seek out strategic relationships, allowing advisers to expand their infrastructure and technology ecosystem, and work with innovative investment providers, in order to help meet the needs of our financial advisers and their clients."

2021 Financial Highlights

- Group revenue for the year was £149.7m, a 488% increase on prior year reflecting the impact of acquisitions and growth in the US.

- 87% of the UK's revenue is recurring in nature, providing a strong, annuity-style fee stream. Investment Banking Fees are a larger portion of Kingswood US revenues, and transactional in nature, which means that recurring revenue in the US was 7.4%

- Operating Profit of £6.3m was £5.5m higher than 2020 largely reflecting the additional contribution of acquisitions. The Kingswood Board believes Operating Profit is the most appropriate indicator to explain the underlying performance of the Group. The definition of Operating Profit is profit before finance costs, amortisation and depreciation, gains and losses, and exceptional costs (business re-positioning and transaction costs).

- The Group had £42.9m of cash as at December 2021, an increase of £39.0m since 31 December 2020, largely driven by further investment from our private equity partners at Pollen Street Capital.

Jon Millam, Kingswood Chief Financial Officer, commented: "Despite the continued uncertainty resulting from periods of lockdown and economic volatility the Group delivered material improvements in financial performance across its operating segments, supported by strong asset inflows, both organically and through acquisitions.

"Kingswood's financial strategy is to maintain a robust and disciplined balance sheet to ensure no deferred liability remains uncovered from a funding perspective, and we will continue to have a disciplined approach to expense management.

"With a strong pipeline of activity our near-term target is to build our UK AUM/A in excess of £10bn in the UK and £12.5bn globally. Our medium-term target remains £20m Operating Profit and we believe that with our current acquisition pipeline and organic growth trajectory this is achievable."

An abridged presentation of Kingswood's results and strategic direction is available on the website https://www.kingswood-group.com/financial-reports/

The annual report will shortly be sent to shareholders and is available to be viewed or downloaded from the Company's website: https://www.kingswood-group.com/financial-reports/

ENDS

For further details, please contact:

About Kingswood

Kingswood Holdings Limited (trading as Kingswood) is an AIM-listed (AIM: KWG) international fully integrated wealth management group with circa £9.0bn billion of Assets under Advice and Management. It services circa 19,000 clients from a growing network of offices in the UK including Abingdon, Beverley, Conisbrough, Darlington, Derby, Eastleigh, Grimsby, Harrogate, Hull, Lincoln, London, Maidstone, Newcastle, Sheffield (2), Worcester and York with overseas offices in Johannesburg, South Africa and Atlanta, New York and San Diego in US.

Kingswood offers a range of trusted investment solutions to its clients, which range from private individuals to some of the UK's largest universities and institutions, including investment advice and management, personal and company pensions and wealth planning. Kingswood is focused on becoming a leading player in the wealth and investment management market through targeted acquisitions in the UK and US, creating a global business through strategic partnerships.

Registered office address: Mont Crevelt House, Bulwer Avenue, St. Sampson, Guernsey, GY2 4LH

· Kingswood Holdings Limited and its subsidiaries (the "Group" or "Kingswood") is an international, fully integrated wealth and investment management business listed on the AIM market of the London Stock Exchange under ticker symbol (AIM: KWG).

· Kingswood offers a range of wealth planning and investment management solutions to its clients, which range from private individuals to some of the UK's largest universities and institutions. Kingswood is focussed on becoming a leading participant in its sector through targeted acquisitions in the UK and US, complemented by strong organic growth to create a global wealth management business.

· The Group's core proposition centres on primary offerings in wealth planning and investment management to deliver best in class financial solutions for clients.

2021 HIGHLIGHTS

Strategic Highlights

· Several key UK acquisitions were completed in 2021, including Admiral Wealth Management Ltd, Smythe and Walter Ltd, Money Matters (North-East) Ltd, contributing to an increase in Kingswood's reported Assets under Management and Advice (AUM/A) balance to £6.8bn at 31 December 2021. Metnor Holdings Limited was acquired on 31 December 2021 with AUM of £1.5bn, increasing the Group AUM/A to £8.3bn.

· A further five UK acquisitions have completed in 2022, as outlined in note 33 of the Notes to the Financial Statements, contributing to an increase in Group AUM/A to c.£9.0bn.

· In March 2022, we launched the 'Kingswood Go' app to provide clients with easier access to their investments. The app consolidates available financial data into one place to present a clear view of a client's finances, provides safe storage of key documents and a secure messaging system that allows clients to contact their investment manager and Kingswood adviser directly.

· 2021 was a year of growth for the Kingswood US Registered Investment Adviser (RIA) and Independent Broker Dealer (IBD) business. We increased the number of registered representatives by 37 to 211 and grew our total assets under management by $0.5bn to $2.5bn.

· The Kingswood US Investment Banking business completed over 100 transactions with over $9.0bn capital raised for clients.

· In January 2022, Kingswood Capital Partners and Skyway Capital Markets LLC announced an exclusive partnership in which the Skyway investment banking team will work closely with Kingswood advisors and their clients to execute M&A transactions.

2021 Financial Highlights

· Group revenue was £149.7m, a 488% increase on prior year (2020: £25.5m), reflecting growth in the US and the impact of 2020 and 2021 in-year acquisitions in the UK.

· 87% of the UK's revenue is recurring in nature, providing a strong, annuity-style fee stream. Investment Banking Fees are a larger portion of Kingswood US revenues, and transactional in nature, which mean that recurring revenue in the US was 7.4%. Combined, Group recurring revenue was 19.0%.

· Operating Profit of £6.3m was £5.5m higher compared to 2020. The Kingswood Board believes Operating Profit is the most appropriate indicator to explain the underlying performance of the Group. The definition of Operating Profit is profit before finance costs, amortisation and depreciation, gains and losses, and exceptional costs (business re-positioning and transaction costs).

*AUM/A excludes the impact of Metnor Holdings Limited, which was acquired on 31 December 2021 with AUM of £1.5bn. Including Metnor 2021 AUM/A increases to £8.3bn

CHAIRMAN'S STATEMENT

In my first year as Chair of Kingswood I have been impressed by the strong progress we are making in achieving our long-term strategy to become a leading international fully integrated wealth and investment management business. I am immensely proud of our dedicated team who have navigated the continued challenges of the pandemic in 2021, while delivering outstanding service to our clients both in the UK and US.

2021 has been a transformational year for Kingswood. Despite the challenges faced, I am pleased to report record levels of revenue and operating profit with significant growth across Wealth Planning (WP), Investment Management (IM), and the US. We have a strong, well-capitalised balance sheet and have benefited from our partnership with Pollen Street Capital which has now invested £77.4m to enable our acquisition and growth strategies. Through investment and growth, at the time of writing this report we employ 292 people across the globe and manage c.£9.0bn of client assets.

In the UK, Kingswood has completely transformed itself within the space of a few years creating a highly successful, fast growing, vertically integrated wealth and investment management business. The UK wealth management sector continues to exhibit strong, long-term growth characteristics supported by demographic trends, a complex regulatory environment, and ongoing consolidation within a fragmented industry. Our acquisition strategy takes advantage of this by providing a seamless transition process with a centralised support service and investment proposition that allows advisers to spend more of their time with their clients. Since 2018, the Group has acquired 14 UK wealth management businesses which are projected to deliver strong, sustainable revenues and operating profit. We now have over 85 financial advisers and investment managers operating across 18 regional offices to support our retail and institutional client base. Under the leadership of David Lawrence, growth is supported by a strong and unrelenting focus on our client experience, supported by a progressive investment in technology and an equal investment in our colleagues, all of which is underpinned by strong integration and operational excellence.

Under the leadership of Mike Nessim, our US CEO, the US business has delivered exceptional levels of growth in 2021 through three core divisions: Independent Broker Dealers, Registered Investment Advisers, and Investment Banking. The Investment Banking business completed over 100 transactions, raising c.$9.0bn capital for clients. The RIA and IBD business increased its advisor representatives to 211 by December 2021, managing c.$2.5bn of client assets. With a strong business model and an exceptional leadership team playing in the largest global wealth management market, the Kingswood US business is well set for further growth in the coming years.

The Board places great importance on building a business with strong governance and a culture that supports sustainable long-term success. With that in mind we focus on where we can make the largest positive impact on the environment, both in measuring and reducing our carbon footprint and offering clients a suite of ESG portfolios which consider environmental social and governance issues. We are committed to creating a workplace and culture that is welcoming and inclusive for everyone and have taken steps to enhance this in 2021 through the creation of an employee-led Diversity and Inclusion Forum. We will continue to make a significant investment in Learning and Development for all colleagues by launching career paths and supporting colleagues with their professional and career development. 

We are investing in our client experience through technology and other means. We launched our client portal in 2021 in the UK, Kingswood Go, which allows clients to have single sign-on single client view across multiple platforms which has transformed our client experience. In the US we have invested in technology infrastructure to provide advisors with a superior integrated wealth management platform offering products such as Annuities, Equities, Alternatives, and Mutual Funds. In addition, Kingswood US has integrated a new fully automated alternative platform, a fully automated CRM and a leading back-office processing system.

The Board continues to operate a robust risk management framework so that we can maintain compliance with our regulatory responsibilities and ensure both customers and suppliers are always treated fairly. Jonathan Freeman, in his capacity as an independent Non-Executive Director, continues to assume responsibility for ensuring that the Group has appropriate corporate governance standards in place and that these standards are applied within the Group as a whole. 

We were delighted to have recently announced that David Lawrence has been appointed to the Board as Chief Executive Officer. The Board is confident David will take the business to another level over the coming years to fully realise its potential. I would like to express huge thanks to Gary Wilder for stepping into the Group CEO role over three years ago and having the vision for what Kingswood can become both domestically and internationally. The Board will continue to benefit from this as Gary steps back into a non-executive role. Jon Millam was appointed to the role of Group Chief Financial Officer in August 2021, joining us with the credentials to lead our finance function through the next stage of our journey. I am also pleased to welcome Richard Avery-Wright to the Boards of our UK regulated subsidiaries, KW Wealth Planning Limited and KW Investment Management Limited. Richard will be a strong addition to the Group's governance and brings a deep and highly successful track record of building and creating value.

Turning to 2022, the terrible events unfolding in Ukraine, the re-emergence of significant geopolitical risk and inflationary pressure have created a great deal of uncertainty in the outlook for the year. Despite these macro-economic pressures, however, I expect 2022 to be another transformational year for the Group. We have already completed five UK acquisitions this year and have a strong pipeline for future acquisitions. The US has successfully recruited seven financial advisers who collectively oversee $295m in client assets. The progress that David and Mike and their respective teams have made in the last two years will ensure we continue to deliver on our strategic priorities and remain well placed for growth as we move forwards. 

Finally, on behalf of the Board, I would like to thank our management team and all our colleagues for their effort, focus and commitment to achieving our goals in what has continued to be a challenging operating environment.

David Hudd

Chairman

Date: June 2022

GROUP CHIEF EXECUTIVE OFFICER STATEMENT

Introduction

I am delighted to present our financial results for 2021, my first full financial year as UK Chief Executive Officer. 2021 was a year which saw significant progress in the growth of both our UK and US businesses. Whilst I joined the board of Kingswood Holdings Limited as Chief Executive Officer in April 2022, for the purpose of these results I have focused my commentary on the progress of the UK business, and am grateful to Mike Nessim, whose exceptional leadership is delivering a great performance in the US, for his separate commentary on the US.

Market Overview

Despite the general economic uncertainty, the UK wealth management sector continues to exhibit strong, long-term growth characteristics as supported by demographic trends, increasing complexity in laws and regulations and the consolidation of what is a highly fragmented sector in financial services.

The so called "advice gap" represents a significant opportunity for firms to provide accessible advice to clients that are either under-served or in many cases unserved. The need for financial advice has never been greater and in this sense firms such as Kingswood can help fulfil what I believe to be a societal need.

Our clients want us to provide sound advice on some of the things that matter most in life. They trust us to do this well and, in most cases, also want us to manage their investments. This convergence of financial advice and investment management is the cornerstone of Kingswood's strategy and business model.

The resilience of the sector during Covid-19, the speed and scale of regulatory change and higher sale multiples continues to drive high levels of consolidation. Multiple numbers of acquirers are now also operating in the sector making for a highly competitive environment. Despite this, Kingswood continues to demonstrate a strong track record in sourcing and securing acquisitions and in doing so is quickly building scale. The opportunity remains strong with over 2,750 firms across UK with 2-50 advisers representing potential targets.

Business overview

We have a single-minded focus on both Financial Advice / Planning and Investment management activity, relying on leading market external expertise for other aspects of the client value-chain.

Our Financial Advisers take time to understand our clients, their goals and what is important to them. From this, we are then able to provide a comprehensive range of solutions to meet their needs. By building enduring relationships with clients, we can help realise the best of financial outcomes for them. Our taglines of 'Advice Every Step of the Way' and 'Protect and Grow' are perfect manifestations of this.

Our investment managers and research teams have deep capability in both the manufacture and distribution of investment solutions, where we can exhibit a strong long-term track record of high performance and low volatility and a great level of client support and service.

For our Kingswood advisers, we operate a Central Investment Proposition (CIP) which is Discretionary in nature and comprises a set of active risk rated core Model Portfolios. Complementary models are also available such as Passive, ESG and / or Income variants. These solutions are available on most of the recognised third-party platforms. For some clients with more complex needs, we also offer a more personalised, tailored approach, including the introduction of an investment manager into the client relationship where appropriate.

Following the acquisition of IBOSS Asset Management (IBOSS AM) in December 2021, our new client CIP is now the IBOSS range of model portfolios. Work is underway to align the Kingswood MPS to this during 2022. Through IBOSS, the business now also distributes discretionary and advisory solutions to IFA firms across the UK that complement our internal distribution.

For the institutional market, our long-standing Fixed Income business provides a treasury service to institutional clients, typically UK Universities. 

Delivering Business Growth

The UK strategy is focussed on building a leading business in the sector. Our delivery of this is through the optimising of a series of value drivers:

1. Acquisition

I am delighted that we were able to purchase the businesses of Admiral Wealth Management, Smythe and Walters, Money Matters (North East), and Metnor Holdings (compromising Novus Financial Services and IBOSS AM) in 2021. Collectively these acquisitions add £2.4m of annual operating profit and c.£1.8bn AUM/A. The acquisition of Metnor Holdings completed on 31 December 2021, which included c.£1.5bn of AUM/A.

In 2022, Kingswood has purchased a further five businesses - Allots Financial Services, Joseph R Lamb Financial Advisers, DJ Cooke Life and Pensions, AiM Independent Financial advisers and Vincent & Co Ltd. Collectively these acquisitions have added £2.7m of annual operating profit and c.£0.8bn AUA.

2. Integration 

Effective integration is critical to an acquisitive business. We have built a highly effective, collaborative and repeatable process for integration which is both client and colleague centric and respectful of the business being purchased. Ably led by our COO Harriet Griffin, we are now able to substantially integrate a business within three months of purchase where so desired.

3. Organic Growth

Kingswood is typically purchasing businesses where the principals remain committed and, in many cases, have unfulfilled ambition but welcome a freeing up of some of the bureaucracy that has crept in to allow them to get back to advising clients. By creating the right environment for this and supporting the business where needed, all Kingswood purchased businesses are showing healthy organic growth. I was delighted to hire Hayley Burton to lead our Midlands and South teams earlier this year and she will work alongside Jeff Grantham in the North who both provide strong and purposeful leadership.

4. Investment Management 

Kingswood's purchase of IBOSS AM has transformed its CIP by introducing an investment solution that has a long-term track record of high performance and low volatility, supported by an award-winning service proposition. Capably led by our CIO Chris Metcalfe and Head of Investment Management, Paul Surguy, the IBOSS proposition, alongside the Kingswood Personal Portfolio Service creates a strong investment solution for our clients and enables high levels of asset migration, where suitable, for the client.

The purchase of IBOSS also created an open market distribution for the Kingswood Group to UK IFA's. We hope to build on this during 2022 and support some of these firms with exit strategies as and when appropriate. The combination of stronger asset flows originating from vertical integration and a growth in the number of firms served by IBOSS will fuel this driver of growth.

Nigel Davies continues to ably lead our Fixed Income business, serving the treasury needs of some leading UK Universities, a business that each year generates continued and sustainable growth. 

5. Building a leading business

a. Under the capable leadership of Rachel Bailey (CPO), we are actively investing in our colleague proposition with a clear aim to become a magnetic people business. This includes a significant investment in Learning and Development for all colleagues, the launch of career paths and supporting colleagues with their professional and career development. We were delighted to appoint Ellie Pilkington to lead this area in the latter part of 2021. We have had two colleagues successfully graduate from our adviser academy and have launched a new academy programme in 2022.

Diversity is a challenge in our sector. We are a significantly more effective organisation for the diversity that exists across my leadership team and are actively working to address imbalance elsewhere, not least in the adviser community where currently only 15% of our advisers are female.

b. We are investing in our client experience through technology and other means. We have been delighted to make two senior hires in this area over the past twelve months - Lucy Whitehead as Chief Client Officer and Christopher Calvocoressi as Head of Technology Transformation. We launched our client portal 'Kingswood Go' in 2021 to transform our client experience by enabling a single client investment view across multiple platforms. We have an ambitious technology programme to deliver over the next 12-18 months which will digitise the client journey and open up new propositions for existing and target clients.

c. We have invested in our Finance and Compliance functions under the leadership of Jon Millam and Richard Bernstein to create centres of excellence to support our core and acquired businesses. 

Dimensions

As at 31 December 2021, the UK business had 203 employees of which 70 were client facing financial advisers and investment managers operating from 14 sites across the UK with £1.7bn Assets under Management (AUM) and a further £3.2bn Asset under Advice (AUA). At time of writing this has increased to c.270 employees of which 85 are client facing financial advisers and investment managers operating from 18 sites across the UK with £3.0bn AUM and £4.0bn AUA.

*AUM/A excludes the impact of Metnor Holdings Limited, which was acquired on 31 December 2021 with AUM of £1.5bn. Including Metnor 2021 AUM/A increases to £8.3bn

Outlook

Building on the 9 acquisitions completed under my leadership to date and those that came before, we have a further 8 purchase transactions in exclusive due diligence comprising a total annual operating profit of £7.7m. We expect to conclude these transactions in the third quarter of 2022. In addition, we have a healthy pipeline of future opportunities at various stage of study and negotiation.

Organic growth is a core focus post integration where we can confidently expect year on year growth in initial and ongoing fees from accretive assets under influence. 

The purchase of IBOSS is a game changer for Kingswood - it offers a stronger central investment proposition, provides an independent open market distribution channel to a growing number of IFA's across the UK and creates exit strategies for wealth management businesses. All three business development opportunities are gaining traction in 2022.

I believe to be a truly successful firm we must put the client at the heart of the relationship, be highly accessible, have a clear proposition and most importantly provide great value for money. Our staff and technology are key enablers to deliver this success and will therefore be critical pillars of our strategy today and moving forwards.

Key Performance Indicators

Jon Millam, Group CFO, presents the financial performance of the Group in his section but total revenue for the UK was £21.9m in 2021, a £4.7m increase on the prior year reflecting the impact of recent acquisitions. 87% of UK revenue is recurring in nature providing a strong, annuity style fee stream which is critical to delivering sustainable, long term returns to shareholders.

*AUM/A excludes the impact of Metnor Holdings Limited, which was acquired on 31 December 2021 with AUM of £1.5bn. Including Metnor 2021 AUM/A increases to £8.3bn

To end, growing a sustainable business at the pace at which we are doing it requires colleagues who are special individuals. I am proud, not only my leadership team, but of what everyone at Kingswood does each and every day for our clients and each other, without which the exciting story as outlined in this report is not possible.

David Lawrence

Chief Executive Officer

June 2022

US CHIEF EXECUTIVE OFFICER STATEMENT

Introduction

Kingswood US is a premier wealth management firm with over $2.5bn AUM and offices throughout the United States. With both an SEC-registered RIAs and a FINRA-licensed broker/dealer in-house alongside an institutional-quality product offering and a personal approach to service, Kingswood is an ideal partner for independent financial advisors looking for a new place to call home. The business also includes Kingwood Capital Markets, a national investment banking platform that leverages our expanding distribution channels and drives growth across equity and debt advisory, capital raising and M&A.

2021 was another year of growth and business expansion for Kingswood US. We added 37 new registered representatives, which further expanded our US footprint and grew our AUM by $0.5bn. We continued to grow the team, seek out strategic relationships to help these advisors expand their infrastructure and technology ecosystem, and work with innovative investment providers to help meet the needs of our financial advisors and their clients.

In June 2021, the banking division of Benchmark Investments changed their name to EF Hutton. Over the course of 2021, EF Hutton completed over 100 deals - including IPOs, SPACS, follow-on offerings, preferred stock offerings and debt placements - raising over $9 billion for their clients across both debt and equity markets.

Market Overview

The US retail wealth market is large and remains fragmented. The distribution channels vary substantially in terms of business models and approaches to client service. The market can be broken down into the broker-dealer channel (commission-based) and the RIA channel (fee-based).

The total market size is estimated at over $26 trillion with close to 315,000 advisors, representing a 12% 5-year CAGR, with independent market channels such as IBDs and RIAs experiencing the fastest growth relative to typical wire-house channels.

The shift to independence by the financial advisor community has been supported by a number of factors such as greater control of their books and increased compensation. The overall retail wealth management sector is experiencing substantial growth due to an aging population with excess disposable income, overall wealth accumulation, and an increased demand for financial advisors. Robo-advice is increasingly displacing advisors with smaller productions at wire-houses, expanding the appeal of independent platforms where they can continue to service their clients, and creating a universe of advisors willing and able to move to independent platforms.

The changes in this and other protocols at wire-houses are driving Registered Representatives to move to independent platforms like Kingswood US, who can replicate most of the services whilst providing greater flexibility and independence. Mergers & acquisitions in the independent channels continued at a record pace due to ever-increasing regulatory costs, competitive pressures and economies of scale.

Firms continue to look for ways to transition brokerage-based business to fee-based advisory business (charging a fee based upon assets under management) as means of generating higher levels of recurring revenue and accessing greater valuation multiples than that placed on transaction-based commissions.

Our Core Propositions

Our FINRA-supervised IBD platforms buy and sell securities on behalf of clients on a commission basis, executing trades and custody of assets. We offer a fast, smooth service with access to many investment products and sectors including equities, fixed income, alternatives, and mutual funds. We also offer insurance products and related services. Through our SEC-registered RIAs, we provide ongoing wealth, estate, philanthropic, tax and succession planning services. We generate predictable and recurring revenue streams from advice and management of our client assets through these programs.

Our strategy for growth can be broken down into four key pillars:

1. Revenue growth

a. Enhanced advisor recruitment efforts supported by the continued build-out of our in-house recruitment team and relationships with third party recruiters.

b. Expansion of product offering for advisors with a particular focus on alternative investments, which can deliver yield and diversification benefits to investors.

c. Continued build-out of advisory services and the transition existing commission-based assets to fee-based assets.

2. Margin Expansion

a. Recognise synergies across broker-dealers to drive down costs.

b. Expand upon shared services to enhance efficiency and provide more product offerings to advisers.

c. Transition away from low margin investment banking and capital markets revenue towards higher margin commission and fee-based revenue streams.

3. Lift-outs & Acquisitions

a. Expand advisor network via pipeline of potential lift-outs.

b. Continue to add scale through vertical and horizontal consolidation, with a particular focus on the IBD and RIA channels where valuation multiples are more attractive and where justification for consolidation is more pressing.

4. Technology

a. Continue to build upon tech stack through modernisation and digitisation.

b. Drive scale through technology products.

Key performance indicators

*A full year operating performance is presented for 2020 to provide a like-for-like comparison

Responsible Business Practices 

In the Autumn of 2021, Kingswood US announced a partnership with A Friend's House, a non-profit organization based in Stockbridge, Georgia that serves as both a shelter and home to youth in crisis in the Atlanta area. A Friend's House works with the Department of Family and Children Services to create a permanency plan for each child, which may include reunification with family or continued foster care services. Kingswood US is proud to raise money for improvements to their facility, including new washing machines, a lounge area and an outdoor courtyard, hosted celebratory events to lift the children's spirits and provided mentorships for residents seeking them. 

Outlook

We remain optimistic about growth in 2022 despite recent turmoil in the US markets and rising interest rates because we believe it will be driven by a number of factors, including the recruitment of independent financial advisors dislocated and frustrated with the challenges they face either in the large wire-houses, or the rising costs of managing a small, sub-scale firm. We aim to acquire such small to medium size IBD and RIA firms and support them in driving sales growth by offering a superior wealth management platform and supporting practice. We will take away the management and regulatory burden and free the advisers to focus on growing their client base.

Mike Nessim

Kingswood US Chief Executive Officer

June 2022

GROUP CHIEF FINANCIAL OFFICER

Introduction

Despite the continued uncertainty resulting from periods of lockdown and economic volatility, the Kingswood Group delivered record levels of Revenue and Operating Profit in 2021. We have seen material improvements in financial performance across our operating segments, Investment Management, Wealth Planning and Kingswood US, which has been supported by strong asset inflows, both organically and through acquisitions.

Recurring revenues as a percentage of total revenue increased during the year and operating profit margins improved across both Investment Management and Wealth Planning. We are now seeing the benefits of our buy, build and grow strategy following the acquisitions of Sterling Trust and Regency Investment Services in 2020 and have since completed a further 9 acquisitions in the UK which will continue the growth trajectory into 2022 and beyond. The US business exceeded all expectations in 2021, delivering significant amounts of revenue and operating profit for the Group as a whole.

We continued to maintain cost discipline in 2021 as operating expenditure was broadly flat year over year, excluding the impact of acquisitions. Our Balance Sheet remains well capitalised, with strong support from Pollen Street Capital. We continue to maintain an effective discipline in how we think about the businesses we acquire, ensuring that the multiples we pay are within our risk appetite and funding profile. 

The UK business is a well-diversified proposition with an effective business model, underpinned by organic growth in assets that generate recurring revenues in excess of 85% and a predictable cost base. Our acquisitions complement this and provide the opportunity to deliver both revenue and cost synergies. Wealth Planning provides holistic financial advice to clients, generating both initial and ongoing fees. Our tailored Investment Management offering across a Managed Portfolio Service (MPS) and Personal Portfolio Service (PPS) includes an open market advisory and discretionary portfolio service to individuals and more than 100 IFA firms. The acquisition of IBOSS at the end of 2021 will drive increased flows into Kingswood and further scale the open market opportunity. Our Fixed Income business, included within Investment Management, is a leading provider of liquidity and treasury services to local councils and universities that continues to generate growth in AUM.

Kingswood US operates across three core divisions; Investment Banking, RIA and IBD. Investment Banking serves mid-market corporate clients and helped 100 public and private clients raise $9bn of capital in 2021. The IBD business offers our clients investment opportunities across Alternatives, Mutual Funds and Equities and our RIA business provides holistic financial advice to our clients, with similar characteristics to our Wealth Management business in the UK. 

In our June 2021, "Positioned for Growth" investor presentation Kingswood outlined its ambition to deliver £20m of Operating Profit over the medium-term. Whilst we still have a way to go to get there, our 2021 financial results and trajectory demonstrate that the business has a strong base and the right credentials to deliver. 

Financial Performance

The Group's financial performance for the year was strong. AUM/A of £6.8bn was 15% higher than 2020, 10% driven from organic growth and 5% through acquisitions. Revenue was £149.7m, a 488% increase year over year, reflecting growth in the US and the impact of 2020 in-year acquisitions in the UK. Operating Profit increased by £5.5m, or 634%, to £6.3m in the year. 

The UK business benefited from a full 12 months of trading following the acquisitions of Sterling Trust and Regency Investment Services, being consolidated into the Group's financial results for 6 months and 2 months respectively in 2020, and the acquisitions of Admiral, Money Matters and Smythe and Walters in 2021. In the US, having acquired 50.1% of Manhattan Harbor Capital in November 2020, now rebranded Kingswood US, the US was consolidated into Group results for 12 months in 2021 compared to 2 months in 2020.

Operating expenditure of £22.9m was £6.7m higher than the prior year largely driven by acquisitions, with the existing cost base remaining broadly flat compared to the prior year reflecting careful cost management.

Profit before Tax for the period to 31 December 2021 was a Loss of £14.5m reflecting £7.0m of acquisition related deferred consideration expense, £2.4m amortisation and depreciation, other losses of £3.0m, £4.9m finance costs and £3.4m business re-positioning and transaction costs.

The Group's balance sheet reflects the growth of the business. The Group had £42.9m of cash as at December 2021, an increase of £39.0m compared to 31 December 2020. This is largely driven by further investment from our private equity partners at Pollen Street Capital, £27.9m net of acquisition related payments, and £2.7m of cash acquired from acquisitions. Net cashflow generated from operating activities of £1.7m was largely driven by the timing of the settlement of Investment Banking commission payments, partially offset by £8.5m of acquisition related contingent remuneration payments. Net Assets were £76.9m, an increase of £26.7m compared to the prior year. 

Segmental Analysis

The table below provides a breakdown of the annual financial performance of the operating segments within the Kingswood Group: Investment Management, Wealth Planning and Kingswood US. The Group separately reports on Central Costs incurred to support the running of the Operating Segments and the PLC.

*AUM/A excludes the impact of Metnor Holdings Limited, which was acquired on 31 December 2021 with AUM of £1.5bn. Including Metnor 2021 AUM/A increases to £8.3bn

** 2021 'Other' includes £56k share of post-tax profits of equity accounted associates

Investment Management

Revenue of £4.7m was £412k, or 9.7%, higher compared to 2020 largely reflecting a £220m increase in AUM due to the migration of assets into the Kingswood MPS product and further growth within the Fixed Income business, with recurring revenue increasing to 81.1% (2020: 74.7%). Operating expenditure of £2.8m decreased by 11.9% reflecting actions taken to improve the profitability of the business, and Operating Profit was £365k compared to an Operating Loss of £(107)k in the prior year.

Wealth Planning

Revenue of £17.2m was £4.3m, or 33.3%, higher year over year as in-year acquisitions contributed to a £285m increase in AUA and we benefitted from a full 12 months trading following the 2020 acquisitions of Sterling and Regency. Recurring revenue increased to 88.1% (2020: 87.7%) and Operating Profit of £5.8m was 31.9% higher compared to prior year.

US

Revenue of £127.8m increased by £119.5m compared to 2020 and whilst the Group benefited from consolidating the US for a full 12 months, the segment performed exceptionally well. Investment Banking revenues were £103.9m in the period and benefitted from strong capital market activity - the business completed over 100 transactions with a total of over $9.0bn capital raised for clients. The RIA and IBD business delivered revenues of £23.9m, reporting healthy double-digit growth year over year on a like for like basis. AUM of £1.9bn at December 2021 was 23.1% higher than 2020, supported by an increase in the number of advisor representatives from 174 to 211. 

Due to Investment Banking revenues being transactional in nature, recurring revenues in the US (2021: 7.4%, 2020: 12.3%) are lower than the UK which result in overall Group recurring revenues being 19.0% in 2021.

Group Central Costs were £4.9m in 2021 compared to £4.0m in 2020. The Group continued to apply prudency to the management of its cost base in 2021, however, costs increased year over year as a result of the strengthening of the Executive Team and central functions to support a larger business and continuing M&A activity, as well as higher audit fees. 

Reconciliation between Operating Profits and Statutory Profits

Operating Profit is considered by the Board to be an accurate reflection of the Group's performance when compared to the statutory results, as this excludes income and expense categories which are deemed of a non-recurring nature or a non-cash operating item. A reconciliation between operating and statutory profit before tax for the year ended 31 December 2021 with comparatives is shown in the table below:

· 2021 £1.6m Business Re-positioning costs comprise of restructuring costs related to organisational change to Central Function departments and Investment Management. £1.8m Transaction costs are acquisition related and include legal fees, due diligence, broker fees.

· Finance costs reflect a £3.9m cost related to dividends that accrue on the Group's preference shares in issue. In 2021, it was agreed that dividends earned on preference shares would be settled through the issue of Kingswood shares rather than cash which has led to the extinguishing of the £7.3m liability that was reported on the Balance Sheet as at 31 December 2020. As a result, and per accounting standard IFRS 9, £3.4m has been re-classified as equity and £3.9m charged to finance costs. The remaining £1.0m of finance costs charged to the profit and loss in 2021 comprise of costs related to the cost of deferred consideration.

· Amortisation and Depreciation charges represent £1.5m from the amortisation of intangible assets and £0.9m depreciation of Right of Use Assets, property, and IT/office equipment.

· £10.1m Remuneration Charges and Other Gains / (Losses) reflect deferred consideration payments resulting from acquisitions completed in 2019 and 2020. Under the treatment of deferred consideration per IFRS 3, in circumstances where the payment of deferred consideration is contingent on the seller remaining within the employment of the Group during the deferred period, the contingent portion of deferred consideration is treated as remuneration and accounted for as a charge against profits.

Balance Sheet Strength

As at 31 December 2021, Kingswood has issued 77.4m preference shares to Pollen Street Capital in return for £77.4m of capital to provide funding for acquisitions. £25.7m of this funding is included within cash at the balance sheet date. The preference shares are convertible into ordinary shares at 16.5p in December 2023, or earlier under certain conditions. The Pollen Street Capital board members bring significant experience and expertise to the execution of our strategy.

Non-current assets of £83.9m were £32.2m higher than the prior year reflecting higher intangible assets and goodwill following the acquisitions completed in 2021. Current assets increased by £20.6m to £48.8m in the year as a £39.0m increase in cash was partially offset by a £18.5m reduction in trade and other receivables, mainly reflecting the £20m of cash paid across to Kingwood during Q1 2021 in relation to the preference shares issued to Pollen Street Capital in Q4 2020.

Current liabilities increased by £20.0m in the year to £33.8m largely reflecting £9.5m of outstanding commissions payable to US Investment Bankers at 2021 year-end, £1.9m outstanding distributions to partners in the US and a £6.9m increase in deferred consideration payments due in 2022. Non-current liabilities were £22.0m as at 31 December 2021 (2020: £15.9m). The increase of £6.1m year over year largely reflects an increase of £11.3m in deferred consideration payments due after 2023 and a £2.7m increase in deferred tax liabilities partly offset by the £7.3m re-classification of preference share dividends from a liability to equity (£3.4m re-classified to equity and £3.9m expensed through the profit and loss).

Acquisitions

We are pleased with the progress made in expanding Kingswood in the UK and US, with five regional businesses acquired in the UK between 2019 and 2021 and a further 9 acquisitions between August 2021 and May 2022. In addition, during this period, Kingswood acquired 50.1% of Manhattan Harbor Capital which has now been re-branded Kingswood US. We have strong purchase transaction experience across the senior management and have developed a strong internal capability to complete transactions quickly and efficiently, with a standardised documentation and process to simplify due diligence, execution, and subsequent integration.

Our selection process is rigorous, and we look at many factors including cultural fit, client focus and dedication, key personnel retention to preserve and grow those client relationships. Our model is to free up adviser time to focus on their clients, and provide a centralised, efficient support infrastructure. We are committed to driving organic growth within every acquired business and bring a 'whole of wallet' approach where Kingswood can bring considerable additional products and services to the table for clients, generating revenue growth from the existing client base.

Financially, we assess businesses on strict performance parameters, with a focus not just on revenue and profit measures but also AUM/A and Return on Investment (ROI). Post-acquisition, we create monthly performance reports against these metrics and adjust strategy and implementation accordingly. The table below confirms the price paid for the 9 acquisitions acquired between August 2021 and May 2022.

Finncap

In October 2021 Kingswood announced the appointment of finnCap Ltd as its Nominated Adviser and Broker.

Outlook

2021's financial performance has demonstrated the fundamental strengths of the Kingswood business model and we continue to be well positioned for further growth in 2022. As outlined in the Chairman's Statement, the terrible events unfolding in Ukraine, the re-emergence of significant geopolitical risk and inflationary pressure has created a great deal of uncertainty in the outlook for the year and as a result we have seen negative market movements impact AUM/A and revenues in the first half of 2022. Despite this, at time of writing, AUM/A is now c.£9.0bn and we are seeing organic revenue growth in the business which is complimented by inorganic growth from recent acquisitions.

We continue to focus on integration, organic growth and to deliver against our acquisition strategy. With a strong pipeline of activity, including 8 potential acquisitions in exclusive due diligence, our near-term target is to build our UK AUM/A in excess of £10bn in the UK and £12.5bn globally.

Our medium-term target remains £20m Operating Profit and we believe that with our current acquisition pipeline and organic growth trajectory this is achievable. This medium-term target includes delivering Operating Profit margins for the UK of c.30% and ongoing margin improvement in the US. With the expected reduction in Restructuring, Remuneration and Finance Charges, Kingswood forecasts to make a Profit before Tax in 2022. Kingswood's financial strategy is to maintain a robust and disciplined balance sheet to ensure no deferred liability remains uncovered from a funding perspective, and we will continue to have a disciplined approach to expense management.

Jon Millam

Group Chief Financial Officer

June 2022

PRINCIPAL RISKS AND UNCERTAINTIES

Principal Risks and Uncertainties

The Board is ultimately responsible for the management of risk and regularly considers the most significant and potential risks likely to impact delivery of the Group's strategy. The Board also has responsibility for implementing and maintaining a Group-wide system of internal controls and a robust risk management framework, and to regularly review the efficiency and effectiveness of those systems and frameworks.

Our risk assessment process considers both the likelihood and impact of risk events which could prevent the implementation of Group strategy and have a material impact on the performance of the Group. These risks can arise from internal or external events. The principal risks identified as having a potential material impact on the Kingswood Group are summarised below together with our mitigation strategies. This list is by no means exhaustive and can and will change over time.

CORPORATE SOCIAL RESPONSIBILITY

Introduction

At Kingswood, we have a strong Environmental, Social and Governance (ESG) focus and prioritise being a responsible corporate citizen. We are committed to doing right by our stakeholders - our clients, shareholders, people, suppliers and chosen charity partners.

ESG and CSR is a Board level agenda item, and we continue to progress our annual group level audit of our ESG practices and our carbon footprint, where we are able to build further action plans and measure progress to our ESG/ CSR responsibilities. As an acquisitive and growing company, we use measurement practices on our new acquisitions to ensure we have a clear benchmark upon integration into the Group.

During the year we remained focused on becoming a more responsible corporate citizen in the communities in which we operate, taking the following actions across our different stakeholder groups:

· Enhanced our commitment to developing our people through dedicated Learning and Development programmes that are available for all colleagues at the varying stages of their careers.

· In January 2021 launched Kingswood Academy, providing a structured programme to nurture and build the talent within our adviser population.

· Initiated a work-life integration framework that promotes flexible working across the business to make sure we support our people as much as we can and developed a strong benefits package for all of our colleagues.

· Continued investment in adviser frameworks and technology across the organisation to better support the organic and inorganic growth goals, enabling us to surpass our client's expectations.

· Created a robust client feedback mechanism to ensure that the customer remains at the centre of our thinking, decision making and future strategy. We regularly survey our clients and achieved a Net Promoter Score of +35 in December 2021.

We were proud to increase the female representation in our UK leadership team to over 40% during the year, however, our sector remains underserved in respect of female advisors and this is a key focus are for us as we build a business more representative of our society.

The business remains focussed on diversity and inclusion, actively supporting a number of initiatives in 2021 including '10,000 Black Interns', an organisation centred around transforming the horizons and prospects of young black people in the community.

The environment

We are consciously focussing on where we can make the largest positive impacts on the environment. We have a fully flexible working policy in place allowing a mix of home, remote and office working, which has created a positive impact on the reduction of travel, linking to our carbon footprint.

Through technology we have also bolstered our environmental principles through enhanced use of video conferencing and collaboration communication tools for colleagues to enable true cross geography collaboration, further reducing our travel. Our new client portal, Kingswood Go, enables clients to view their portfolios online and to hold documentation digitally, sign documents through DocuSign (to replace a physical wet signature) and securely communicate to our adviser teams. This is in turn is reducing reliance on our physical paper resources. 

We have recycling facilities in all offices and are continuing to push forward with our responsible business agenda as well as reducing further our carbon footprint. We are pleased to have further improved our environment impact, saving over 293k sheets of paper, 32 trees, 117k litres of water, 11.2 tonnes of CO2 and 777kg waste between July 2019 and May 2022.

ESG

Within our client proposition we offer clients a suite of ESG portfolios which consider environmental social and governance issues.

Our objective is not only to produce financial returns, but also to generate a positive impact on the environment and society. We believe strong corporate governance is of key importance to meeting these objectives.

We integrate the United Nations Sustainable Development Goals (UN SDGs) into our process, using them as a framework to guide our idea generation. Whilst we may invest in a fund to target one environmental or societal theme/goal, what is common across each fund in our portfolios is an additional strict focus on governance. We have also begun to integrate ESG into our core portfolios with the environment being one of our core themes.

Our suppliers

As a financial services company, we do not manufacture goods, nor do we have a complex supply chain. We believe in only engaging suppliers who align with our values including for anti-Modern Slavery and Human Trafficking.

Charities and communities

We started a partnership with Matchable volunteering in 2021 where colleagues can choose where they can best match their skills and passions within the charity sector. We provide colleagues with 2 days per year additional leave to be able to do this.

Kingswood US partnered with A Friend's House serving both as a shelter and home to youth in crisis in the Atlanta area. 

We are also increasingly looking at ways to enhance the levels of financial education amongst communities and demographics. We are regularly sharing financial education pieces through our social media channels and our colleagues take time to visit their communities to aid discussions on financial education. We will continue to do more of this on a structured basis through 2022.

Workplace

We are committed to creating a workplace and culture that is welcoming and inclusive for everyone, taking steps to enhance this over 2021. Diversity and inclusion are a cornerstone of our philosophy and culture, and an employee-led Diversity and Inclusion Forum is in place to encourage creative ideas and action to further embed diversity and inclusion as a central tenet of our business corporate culture. We are proud to be an equal opportunity employer committed to recruiting and maintaining a diverse workforce irrespective of race, religion, age, disability, gender or sexual orientation or bias. We are also proud to be participating in the 10,000 black interns' scheme for the second year. Both our UK and US business strongly operate around core behavioural principles for colleagues ensuring there is a high level of integrity, transparency, respect and trust.

Colleagues

We currently have 292 employees:

· Females - 137 (46.9%)

· Males - 155 (53.1%)

Ages:

· Under 30 - 59 (20.2%)

· 30-50 - 131 (44.9%)

· Over 50 - 102 (34.9%)

GOVERNANCE

BOARD OF DIRECTORS

The Directors of Kingswood Holdings Limited recognise the importance of sound corporate governance and have chosen to apply the Quoted Companies Alliance Corporate Governance Code (the QCA Code). The QCA Code takes key elements of good governance and applies them in a manner that is workable for the different needs of growing companies and was developed by the Quoted Companies Alliance as an alternative corporate governance code applicable to AIM companies.

Jonathan Freeman, in his capacity as an independent Non-Executive Director, has assumed responsibility for ensuring that the Group has appropriate corporate governance standards in place and that these requirements are followed and applied within the Group as a whole. The QCA Code corporate governance arrangements that the Board has adopted are designed to ensure that the Group delivers long term value to its shareholders and that shareholders have the opportunity to express their views and expectations for the Group in a manner that encourages open dialogue with the Kingswood Holdings Limited Board.

The Directors have structured the relationship between the Board of the Group holding company, Kingswood Holdings Limited and the individual 'Subsidiary Boards' which represent KW Investment Management Limited and KW Wealth Planning Limited, the operational companies regulated by the FCA, and KW Wealth Group Limited which is the holding company for the Group's US investments.

Kingswood Holdings Limited's Board has the responsibility to set strategy for the Group and to monitor the performance of its operating subsidiaries. The Subsidiary Boards have the responsibility to oversee, govern and direct the operations of the subsidiary entities in line with relevant rules and regulations and overall Group strategy.

The respective Boards have established various committees, each of which has written terms of reference. The principal committees are the Audit and Risk Committee and the Nomination and Remuneration Committee.

The principal methods of communicating the application of the QCA Code are this Annual Report and the Group's website which sets out the 10 QCA Code principles and how Kingswood Holdings Limited complies with those principles and the related disclosures: www.kingswood-group.com/corporate-governance. The Group applies all the QCA principles in full.

Corporate governance structure

The role of Non-Executive Chairman is held by David Hudd. The Board considers that the Non-Executive Directors provide a strong and consistent independence to the Executive members. None of the Non-Executive Directors are involved in the day-to-day management of the Group and are free from any business or other relationship which could materially interfere with their judgement. Biographies of the Non-Executive Directors are contained on pages 26 to 27.

During the year ended 31 December 2021, the Non-Executive Chairman was responsible for leadership of the Board, creating conditions for the effectiveness of the Board and individual Directors and developing the Group's strategy. The Group Chief Executive Officer (CEO), UK CEO and US CEO were responsible for running the Group's business day to day and, subject to Board agreement, the implementation of strategy.

The minutes of scheduled meetings of the Board are taken by the Company Secretary. In addition to constituting records of decisions taken, the minutes reflect questions raised by Board members in relation to the Group's business and, in particular, issues arising from the reports included in the Board or Committee papers circulated prior to the relevant meeting. Unresolved issues (if any) are recorded in the minutes.

Corporate governance and the management of the Group's resources is achieved by regular review and discussion, through meetings and conference calls, monthly management accounts, presentations and external consultant reports and briefings.

Independence of Board of Directors

The Board considers that all Non-Executive Directors bring an independent judgement. The QCA code recommends that at least two independent Non-Executive Directors sit on the Board. At year-end, the Board had six members, with one Executive and five Non-Executive Directors. David Hudd and Jonathan Freeman are considered 'independent'. Jonathan Massing, Howard Garland and Lindsey McMurray are not considered independent due to the size of shareholding they are directly or indirectly associated with.

During the year under review, the Board comprised:

· Jonathan Freeman (Non-Executive Director)

· Howard Garland (Non-Executive Director)

· David Hudd (Non-Executive Chairman, Legal Consultant)*

· Jonathan Massing (Deputy Non-Executive Chairman)

· Lindsey McMurray (Non-Executive Director)

· Robert Suss (Non-Executive Director)*

· Kenneth 'Buzz' West (Non-Executive Chairman)*

· Gary Wilder (Group Chief Executive Officer)**

*Robert Suss resigned from the board 28 February 2022 and Kenneth 'Buzz' West resigned as Non-Executive Chairman 26 July 2021. David Hudd became Chairman in July 2021.

**In April 2022, Gary Wilder stepped back into a Non-Executive director role and David Lawrence was appointed to the Board as Chief Executive Officer.

The Board has scheduled meetings on a quarterly basis. The Board formally met four times throughout the year. Meetings of the Board are held at the Group's offices in London or via conference call. In person meetings of the Subsidiary Boards take place at least quarterly.

The number of main Board meetings and committees held in 2021 and individual attendance was as follows:

The Board has approved a formal schedule of matters reserved for consideration and decision. These are divided into several key areas, including but not limited to:

· Constitution of the Board, including its various Committees, and succession planning (as recommended by the Nomination and Remuneration Committee).

· Group strategy and transactions.

· Financial reporting (including approval of interim and final financial statements).

· Group finance, banking, and capital structure arrangements.

· Regulatory matters (including the issue of shares, communication, and announcements to the market).

· Group compliance risk management and control processes and decisions (as recommended by the Audit and Risk Committee).

· Approval of remuneration policies (as recommended by the Nomination and Remuneration Committee).

· Approval of Group policies in respect of, inter alia, Health and Safety, Corporate Responsibility, and the environment.

· Human Resource issues or concerns.

Matters requiring Board and Committee approval are generally the subject of a written proposal by the Executive Directors to the Board (or Committee) and circulated prior to the relevant meeting. All Directors receive appropriate information on the Group comprising a financial report and other relevant paperwork from each of the responsible executives and other members of senior management before each scheduled Board meeting. The Executive Directors and other invited members of senior management present reports to each meeting on key issues including strategy, risk & compliance, finance, operations, people, and legal matters.

The Board recognises the importance of on-going professional development and education, particularly in relation to new laws and regulations potentially impacting the business of the Group. Such training may be obtained by Directors individually or through the Group. Directors also maintain knowledge and skills through their day-to-day roles and may additionally obtain independent professional advice at the Group's expense. Third party Directors' and Officers' liability insurance at a level considered appropriate for the size and nature of the Group's business is maintained.

The terms and conditions of each Director's appointment are available for inspection at the Group's head office in London during normal business hours. The letters of appointment of each Non-Executive Director specifies the anticipated level of time and commitment including, where relevant, additional responsibilities in respect of the Audit and Risk, and the Nomination and Remuneration Committees. Details of other material commitments of the Non-Executive Directors are disclosed to the Board and maintained in a register by the Company Secretary.

Subsidiary boards

Each of the Group's UK operating subsidiary companies has a separate Board which meets at least quarterly to discuss key matters pertaining to the subsidiaries' activities. The UK Chief Executive Officer, Group Chief Financial Officer, Group Chief Risk officer and Howard Garland (Non-Executive Director) sit on each of the operating subsidiary boards, with Howard Garland chairing them.

The Group's US interests are ultimately held through its subsidiary company KW Wealth Group Limited and to date US investments have been reviewed by the Group Board. In addition, key KHL Board members sit on the US division's advisory board.

Board committees

The Board has established committees including the Audit and Risk, and the Nomination and Remuneration and, each with separate terms of reference. These are available for viewing at Kingswood's London office.

Audit and Risk committee

The Audit Committee is chaired by Jonathan Freeman with David Hudd joining in January 2020 and Jonathan Massing in January 2021. The Audit and Risk Committee is responsible for providing formal, transparent arrangements to the application of suitable financial reporting and internal control principles having regard to good corporate governance. The committee is also responsible for monitoring the external audit function including the independence, objectivity, and cost-effectiveness of the Group's external auditor. The meeting is attended by the Chief Executive Officer, Chief Finance Officer and Chief Risk Officer.

The independence and effectiveness of the external auditor is reviewed annually. The possibility of undertaking an audit tender process is considered on a regular basis. The Audit Committee meets at least twice a year with the auditors to discuss their appointment, independence and objectivity, the issuance of the Interim and Annual Reports and any audit issues arising, internal control processes and any other appropriate matters. Fees in respect of audit services are set out in note 5 of the Notes to the Financial Statements. Fees for non-audit services paid to the auditors are not deemed to be of such significance as to impair independence and therefore the Audit Committee considers the objectivity and independence of the auditors safeguarded.

Internal control

The Board is responsible for establishing and maintaining the Group's system of internal control and for reviewing its effectiveness. The system of internal control is designed to manage, rather than eliminate, the risk of failure to achieve business objectives and can only provide reasonable, but not absolute, assurance against material misstatement or loss.

The Audit Committee monitors and reviews the effectiveness of the system of internal control and reports to the Board when appropriate with recommendations. The annual review of internal control and financial reporting procedures did not highlight any issues warranting the introduction of an internal audit function. It was concluded, given the current size and transparency of the operations of the Group, that an internal audit function was not required at this time. The main features of the internal control system are outlined below:

· A control environment exists through close management of the business by the Executive Directors. The Group has a defined organisational structure with delineated approval limits. Controls are implemented and monitored by the Executive Directors.

· The Board has a schedule of reserved matters expressly for its consideration and this includes approval of acquisitions and disposals, major capital projects, treasury and risk management and approval of business plans and budgets.

· The Group utilises a detailed budgeting and forecasting system. Detailed budgets are prepared annually by the Executive Directors and senior management and submitted to the Board for approval. Forecasts are regularly updated to reflect changes in the business including cash flow projections and are monitored by the Board. Actual results are monitored against budgets and variances reviewed by the Board.

· Financial risks are identified and evaluated for consideration by the Board and senior management; and

· Standard financial control procedures are operated throughout the Group to ensure assets are safeguarded and proper accounting records maintained.

Nomination and Remuneration committee

The Nomination and Remuneration Committee is responsible for the consideration of Board appointments, the review of Board structure, its size and composition and the identification of future Board requirements by reference to the balance of skills, knowledge and experience present on the Board and the scale and direction of the Group. It is chaired by Jonathan Freeman as an independent Non-Executive Director and David Hudd, Group Chairman is also a member.

The Committee is also responsible for establishing a formal and transparent procedure for executive remuneration policy and to determine the remuneration packages of individual Directors. This includes agreeing with the Board the framework for remuneration of the Group Chief Executive Officer, other Executive Directors, the Company Secretary, and such other members of the executive management of the Group as it is designated to consider.

It is also responsible for recommending to the Board the total individual remuneration packages of each Director including, where appropriate, bonuses, incentive payments and share options. No Director is involved in a decision regarding their personal remuneration. The Board considers the current composition of the Nomination and Remuneration Committee appropriate given the size of the Group. There was one Nomination and Remuneration Committee meetings held during the financial year ended 31 December 2021.

Remuneration policy

The Board retains responsibility for overall remuneration policy. Executive remuneration packages are designed to attract and retain executives with the necessary skill and experience to hold a senior management role in the Group. The Committee recommends to the Board the remuneration packages by reference to individual performance and uses the knowledge and experience of the Committee members, published surveys relating to AIM companies, the financial services industry and market changes generally. The Committee has responsibility for recommending any long-term incentive schemes.

The Board determines if Executive Directors are permitted to serve in roles with other companies. Such permission would be granted on a strictly limited basis, where there are no conflicts of interest or competing activities and providing there is not an adverse impact on the commitments required to the Group. Earnings from such roles would be required to be disclosed to the Committee Chairman.

There are four main elements of the remuneration package for Executive Directors and executive staff:

1. Basic salaries and benefits in kind: Basic salaries are recommended to the Board by the Committee, based on the performance of the individual and the compensation for similar positions in comparable companies. Benefits in kind including death in service cover are available to all staff and Executive Directors. Benefits in kind are non-pensionable.

2. Share options: The Company operates approved share option schemes for key personnel to incentivise performance through equity participation. Exercise of share options under the schemes is subject to defined exercise periods and compliance with the AIM Rules. The schemes are overseen by the Nomination and Remuneration Committee which recommends to the Board all grants of share options based on the Committee's assessment of personal performance and specifying the terms under which eligible individuals may be invited to participate. The AIM rules refer to the requirement for performance related elements of remuneration to form a significant proportion of the total remuneration package of Executive Directors and should be designed to align their interests with those of shareholders. The Nomination and Remuneration Committee currently considers that the best alignment of these interests is through the continued use of performance incentives through the award of share options in the Company's existing LTIP awards scheme.

3. Bonus scheme: The Group has a discretionary bonus scheme for Executive Directors and staff which is specific to each individual and their role within the Group.

4. Pension contributions: The Group pays a defined contribution to the pension schemes of Executive Directors and staff. The individual pension schemes are private, and assets are held separately from those of the Group.

No Director has a service contract for longer than 12 months.

Policy on non-executive remuneration

All Non-Executive Directors, except Pollen Street Capital's representatives to the Board, receive a fee for their services as a Director which is approved by the Board, mindful of their time commitment and responsibilities and current market rates for comparable organisations and roles. Non-Executive Directors are also reimbursed for travelling and other incidental expenses incurred on Group business.

The Board encourages the ownership of shares in the Company by Executive and Non-Executive Directors and in normal circumstances does not allow Directors to undertake dealings of a short-term nature.

Ownership of the Company's shares by Non-Executive Directors is considered a positive alignment of interest with shareholders. The Board periodically reviews the shareholdings of Non-Executive Directors and seeks guidance from its advisors if, at any time, it is concerned that the shareholding of any Non-Executive Director may, or could appear to, conflict with their duties as an independent Non-Executive Director of the Company. Directors' remuneration, including Directors' interests in share options over the Company's share capital, are set out in the Directors' Report (page 29) and the Directors' Remuneration Report (page 31).

Re-election

Under the Company's articles of association, all Directors are subject to election by shareholders at the AGM immediately following appointment. All Directors formally retire by rotation at intervals of no more than three years, requiring re-election by shareholders.

Performance evaluation

The composition of the Board is regularly reviewed to ensure it maintains the necessary depth and breadth of skills to sustain the delivery of the Group's long-term strategy. The Board is committed to ensuring it maintains the necessary combination of skill, experience, and gender balance.

Evaluations of the Board, the Committees and individual Directors are undertaken on an annual basis in the form of peer appraisal, questionnaires, and discussions to determine effectiveness and performance. This includes a review of success in achieving annual objectives set by the Board. The Board may utilise the results of the annual evaluation process to identify training and development needs and succession planning.

Relationship with shareholders and dialogue with institutional shareholders

The Chairman, the Group Chief Executive Officer and the Group Chief Financial Officer maintain dialogue with key shareholders in relation to strategy and corporate governance issues.

All shareholders receive the Annual Report incorporating audited financial statements and are welcome to attend the Company's AGM. The Directors attend the meeting and are available to answer questions both formally during the meeting and informally afterwards.

The collection and analysis of shareholder proxy votes is handled independently by the Group's registrars. The Chairman announces the results of the proxy votes lodged after shareholders have voted on a show of hands. All Committee chairmen are, where possible, available at the AGM. The Non-Executive Directors are available to shareholders and may be contacted through the Group Chief Executive Officer's office.

The Group's website at www.kingswood-group.com is an important source of information for investors, including information required in compliance with AIM Rule 26, and is updated regularly.

Corporate culture and social responsibility

The Board seeks to maintain the highest standards of integrity in the conduct of the Group's operations. An open culture is encouraged within the Group with regular communications and meetings with staff where open dialogue and feedback is sought.

The Group is committed to conducting its business in a socially responsible manner and to respect the needs of employees, investors, customers, suppliers, regulators, and other stakeholders. The Group is also committed to being a responsible employer and to promoting values, standards and policies designed to assist our employees in their conduct, working and business relationships.

The most significant impact on the environment from the Group's activities is the emission of greenhouse gases as a result of running the Group's offices, associated travel, and the recycling of waste. The Group is committed to minimising the amount of travel employees undertake and to recycling as much of the Group's waste as possible. The Group will continue to look at ways to act in a socially responsible manner.

DAVID HUDD

Non-Executive Chairman and, Legal Consultant

David joined the executive team as Legal Consultant on 1 July 2020 having previously been a non-executive director of the Company since June 2018. David is responsible for all legal affairs of the Group. David trained as a solicitor with Linklaters and after a successful career as an investment banker in structured finance joined Hogan Lovells, the international law firm, as a partner in 1994. He was consistently ranked as a market-leading lawyer for over 25 years. From 2005 David led the firm's global finance practice before assuming the role of Deputy CEO in 2014. He retired from this position and as a partner in June 2020 but continues to serve as Senior Counsel at Hogan Lovells. David earned his MA Jurisprudence (Oxon) in 1980 and qualified as a solicitor in 1983.

David joined the Board in June 2018 as a non-executive director, became an executive director on 1 July 2020 and subsequently became Chairman in July 2021.

JONATHAN MASSING

Non-Executive Deputy Chairman

Jonathan is Non-Executive Deputy Chairman and, since 1 January 2021, is a member of the Audit Committee. He brings wide ranging experience to the Board, in particular in corporate finance and acquisitions. He has a strong background in commercial and corporate finance advisory, buyouts, venture capital, shareholder dispute advisory, and private businesses valuation. Jonathan is a Chartered Accountant and has extensive experience in the sale and acquisition of private companies and provides advice on debt structures and working capital facilities. In 1998 he set up Kingswood Investment Partners Limited as a private equity investor. He is also a founder of Kingswood Property Finance Limited Partnership and founded a City-based advisory firm Kingswood in 1993.

Jonathan joined the Board in October 2017.

GARY WILDER

Non-Executive Director

Gary is a Chartered Accountant and a graduate of the Cass Business School, University of London. He has over 30 years' experience in pan-European private equity and real estate, particularly in investment, capital raising, structuring, debt financing and asset management. He is the co-founder of Kingswood Property Finance Limited Partnership where he made a series of long-term strategic investments in financial services. Gary's key responsibilities include building strategic relationships with new and existing investors, bankers, financial advisers and directing capital raising efforts to the growth and expansion of the platform.

Gary joined the Board in October 2017. In April 2022, Gary stepped back into a Non-Executive director role.

JONATHAN FREEMAN

Non-Executive Director

Jonathan is a Non-Executive Director and chairs the Audit Committee and the Risk and Compliance Committee. He is also a member of the Nomination and Remuneration Committee. He is a seasoned corporate financier and company director with extensive experience of listed companies, financial services and FCA regulated entities. This experience is important to the Group as it is quoted on AIM and subsidiary entities are regulated by the Financial Conduct Authority in the UK. Jonathan was also the senior independent non-executive director of Futura Medical plc during the year under review.

Jonathan joined the Board in June 2018.

HOWARD GARLAND

Non-Executive Director

Howard holds a First-Class Honours degree in Mathematics from University College London. Howard is a partner at Pollen Street Capital and a member of its private equity and credit investment committees. Howard re-joined Pollen Street Capital in 2015 having been a Principal at RBS until 2012. Prior to re-joining Pollen Street Capital as Partner in 2015, Howard assisted the Swedish credit institution Hoist Finance in entering the UK debt collecting and NPL debt purchasing sector, supporting the acquisition of a number of UK companies and debt portfolios in both structuring and operational roles. Howard is also on the Board of Punkta.

Howard joined the Board in December 2019.

LINDSEY McMURRAY

Non-Executive Director

Lindsey holds a First-Class Honours degree in Accounting and Finance and holds an MPhil in Finance from Strathclyde University. Lindsey has been a private equity and credit investor for more than 26 years with a focus on the financial and business services sector. Alongside Kingswood, Lindsey sits on the Boards of Shawbrook Bank, CashFlows, 1st Stop Group and BidX1. Lindsey co-founded Pollen Street Capital in 2013 and serves as Managing Partner. Lindsey is the Chairman of the Pollen Street Capital's private equity and credit investment committees. Prior to Pollen Street Capital, Lindsey worked at RBS and spent six years at Cabot Square Capital, where she was a Partner focused on investments in the financial services sector.

Lindsey joined the Board in December 2019.

DAVID LAWRENCE

Chief Executive Officer

David was appointed as UK CEO of Kingswood in December 2020 and has over 30 years' experience in financial services, predominantly with Lloyds Banking Group where he held numerous executive leadership roles in distribution and functional areas across its Retail, Commercial and Insurance divisions. In 2014, David became the Commercial Director and then Chief Operating Officer for Lloyds' Private Banking and Wealth businesses with additional responsibility for its Mass Affluent proposition and strategy. He played a lead role in the establishment of Schroders Personal Wealth, a joint venture wealth management business between Lloyds Banking Group and Schroders, becoming Chief Commercial Officer for this business in March 2019. 

David joined the Board in April 2022 as Chief Executive Officer.

DIRECTORS' REPORT

The Directors present their annual report on the affairs of the Group, together with the audited financial statements, for the year to 31 December 2021. The Corporate Governance Statement is set out from page 20 onwards. All financial information given in this Directors' Report is taken solely from the statutory results prepared in accordance with UK adopted international accounting standards.

Principal activities

The principal activities of the Group are the operation of a financial planning and investment management business.

Financial risk management objectives and policies

Information about the Group's risk management is included in the Strategy section under Risks & Uncertainties.

Results and dividends

The Group's performance during the year is discussed in the Strategy section on pages 2 to 19. The results for the year are set out in the audited Consolidated Statement of Comprehensive Income on page 41. The Directors do not recommend the payment of a dividend for the year ended 31 December 2021 (31 December 2020: £nil).

Capital structure

Details of KHL's issued share capital, together with details of the movements in the number of shares during the year, are shown in notes 23 and 24.

Capital management

The primary objective of the Company's capital management strategy is to maintain a strong capital structure in order to support the development of its business, to maximise shareholder value and to provide benefits for its other stakeholders. Details of the management of this risk can be found in the Strategy section under Risks & Uncertainties.

All of the regulated entities within the Group must also comply with the FCA capital adequacy rules.

Kingswood US has majority ownership interests in four US regulated entities - two are subject to regulatory oversight by FINRA and two come under the SEC's regulatory regime for Registered Investment Advisers (RIAs) - and must comply with certain capital adequacy requirements.

Directors

The names and a short biography of the Directors of the Company are set out on pages 26 to 27.

The appointment and replacement of Directors is governed by the Company's Articles of Association, The Companies (Guernsey) Law, 2008 and related legislation. The Company's Articles of Association themselves may be amended by special resolution of the Company's shareholders. The Group also applies the Quoted Companies Alliance Corporate Governance Code.

The Company's Articles of Association provide that generally one third (rounded down to the nearest whole number) of the Board of Directors are required to retire by rotation, save for Directors who are appointed during the year, who must stand down and offer themselves for re-election at the next occurring Annual General Meeting (AGM) of the Group. The Directors who offer themselves for re-election will be announced in conjunction with the AGM announcement, which is expected to be held in the latter part of the year.

Directors' interests

Directors who held office during 2021 had the following beneficial interests in the ordinary shares of the Company as of 31 December 2021:

** Gary Wilder and Jonathan Massing's shares relate to KPI (Nominees) Limited's holding as both have a beneficial interest in that entity.

Employees

It is the Company's policy to involve employees in the day-to-day operation of the Group's business and ensure that matters which could concern them, including the Group's strategic objectives and performance are communicated in an open and timely fashion. The Directors seek to achieve this through executive committee meetings, subsidiary Board meetings, e-mail communication and informal staff communication.

The Group is committed to an equal opportunity policy for all prospective and existing employees such that selection takes place based on ability, qualifications and suitability for the job, irrespective of background, age, race, gender or sexual orientation. The Group's executives, senior management and employees are required to support and implement all such policies in their daily work ethic to maximise the potential of its entire workforce. A Diversity and Inclusion Forum comprising employees from across team has recently been formed to further encourage diversity and inclusion across the Group and make it a central tenet of Kingswood's culture.

Employees who become disabled during their employment with the Group will be retained and re-trained where possible.

Future developments and events after the statement of financial position date

A review of the Group's business and an indication of likely future developments are contained in the Strategy section of this report.

Substantial shareholdings

The Group had been notified, in accordance with Chapter 5 of the Disclosure and Transparency Rules, of the following voting rights of shareholders holding 3% or more of the issued share capital of the Company as of 31 March 2022:

All Shareholdings stated are beneficial. KPI (Nominees) Limited is owned and controlled by Gary Wilder and Jonathan Massing

The Company had issued 77,428,443 irredeemable, convertible preference shares at £1 per share to HSQ INVESTMENT LIMITED, a wholly owned indirect subsidiary of funds managed and/or advised by Pollen Street Capital at 31 December 2021.

The preference shares are convertible into Kingswood Holdings Limited ordinary shares at 16.5p per share on or before 31 December 2023.

Directors' indemnities

During the year the Group made qualifying third-party indemnity provisions for the benefit of its Directors and these remain in force at the date of this report.

Going concern

In accordance with Financial Reporting Council guidance all companies are required to provide fuller disclosures regarding the Directors' assessment of going concern. The Group's business activities, together with the factors likely to affect its future development and liquidity and capital position, are reviewed under the key risks affecting the business section as set out in the Strategy section on pages 15 to 17.

The Directors have reviewed the cash flow forecast for the next 12 months and are satisfied that the Group can continue to prepare its financial statements on the going concern basis. As part of the Directors' consideration of the appropriateness of adopting the going concern basis in preparing the Annual Report, a range of scenarios have been considered, including a central scenario and a severe downside scenario, based on a number of macroeconomic assumptions. The Company and Group continue to operate with sufficient levels of liquidity and capital for the next 12 months in all modelled scenarios. The Group operates centralised treasury arrangements and shares banking arrangements between the parent and its subsidiaries.

The Directors, having made appropriate enquiries, have no reason to believe that a material uncertainty exists that may cast significant doubt regarding the ability of Kingswood Holdings Limited and its subsidiaries to continue as a going concern or its ability to continue with the current banking arrangements.

On the basis of their assessment of the Group's financial position and of the enquiries made of the Directors of Kingswood Holdings Limited, the Directors have a reasonable expectation that the Group will be able to continue in operational existence for the foreseeable future. Thus, they continue to adopt the going concern basis of accounting in preparing the annual financial statements.

Auditor

Each of the persons who are Directors of Kingswood Holdings Limited at the date of approval of this annual report confirms that:

· So far as the Director is aware, there is no relevant audit information of which the Group's auditor is unaware; and

· The Director has taken all the steps that he/she ought to have taken as a Director in order to make himself/herself aware of any relevant audit information and to establish that the Group's auditor is aware of that information.

This confirmation is given and should be interpreted in accordance with the provisions of Section 249 of The Companies (Guernsey) Law, 2008.

Approved by the Board of Directors and signed on behalf of the Board.

David Hudd

Chairman

Date: 29 June 2022

DIRECTORS' REMUNERATION REPORT

Signed on behalf of the Board:

David Hudd

Chairman

Date: 29 June 2022

DIRECTORS' RESPONSIBILITY STATEMENT

Responsibility Statement

The Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulations.

The Companies (Guernsey) Law, 2008 requires the Directors to prepare financial statements for each financial year. Under that law the Directors have prepared the Group financial statements in accordance with UK adopted international accounting standards. The Directors must not approve the annual financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and of the Consolidated Statement of Comprehensive Income for the year. In preparing these financial statements, International Accounting Standard 1 requires that Directors:

· Properly select and apply accounting policies

· Present information, including accounting policies, in a manner that provides relevant, reliable, comparable, and understandable information

· Provide additional disclosures when compliance with the specific requirements in IFRSs are insufficient to enable users to understand the impact of particular transactions, other events and conditions on the entity's financial position and financial performance; and

· Make an assessment of the Group's ability to continue as a going concern

The Directors are responsible for keeping proper accounting records that are sufficient to show and explain the Group's transactions and disclose with reasonable accuracy at any time the financial position of the Group and enable them to ensure that the financial statements comply with The Companies (Guernsey) Law, 2008. They are also responsible for safeguarding the assets of the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Group's website www.kingswood-group.com. Legislation in the United Kingdom and Guernsey governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Responsibility statement

We confirm that to the best of our knowledge:

· The annual financial statements, prepared in accordance with UK adopted international accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole

· The Strategy includes a fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face; and

· The Annual Report and financial statements, taken as a whole, are fair, balanced, and understandable and provide the information necessary for shareholders to assess the Group's position and performance, business model and strategy.

Signed on behalf of the Board: 

David Hudd

Chairman

Date: 29 June 2022

KINGSWOOD HOLDINGS LIMITED

INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF KINGSWOOD HOLDINGS LIMITED

FOR THE YEAR ENDED 31 DECEMBER 2021

Opinion on the financial statements

In our opinion the financial statements:

· give a true and fair view of the state of the Group's affairs as at 31 December 2021 and of the Group's loss for the year then ended;

· have been properly prepared in accordance with UK adopted international accounting standards; and

· have been properly prepared in accordance with the requirements of the Companies (Guernsey) Law, 2008.

We have audited the financial statements of Kingswood Holdings Limited (the 'Parent Company') and its subsidiaries (the 'Group') for the year ended 31 December 2021 which comprise the Consolidated statement of comprehensive income, the Consolidated statement of financial position, the Consolidated statement of changes in equity, the Consolidated statement of cash flows and notes to the financial statements, including a summary of significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and UK adopted international accounting standards.

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the financial statements section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Independence

We remain independent of the Group in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC's Ethical Standard as applied to listed entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements.

Conclusions relating to going concern

In auditing the financial statements, we have concluded that the Directors' use of the going concern basis of accounting in the preparation of the financial statements is appropriate. Our evaluation of the Directors' assessment of the Group's ability to continue to adopt the going concern basis of accounting included:

· Assessing and challenging the inputs and assumptions within the forecast that forms the basis of the Directors' assessment of the going concern by agreeing to supporting documentation, historical results and our knowledge of the Group and the industry;

· Performing sensitivity analysis and stress testing considering downside scenarios and assessing the impact on the Company's liquidity position;

· Reviewing the future commitments of the Group and checking they have been appropriately incorporated into the forecast; and

· Reviewing the amount of headroom in the forecasts of both base case and downside scenarios.

Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the Group's ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.

Our responsibilities and the responsibilities of the Directors with respect to going concern are described in the relevant sections of this report.

Overview

An overview of the scope of our audit

Our Group audit was scoped by obtaining an understanding of the Group and its environment, including the Group's system of internal control, and assessing the risks of material misstatement in the financial statements. We also addressed the risk of management override of internal controls, including assessing whether there was evidence of bias by the Directors that may have represented a risk of material misstatement.

As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the financial statements. In particular, we looked at where the Directors made subjective judgements.

We performed an assessment to determine which components were significant to the Group. All components which financially contributed greater than 15% of the Group's and UK's revenue were identified as significant and subject to a full scope of their complete financial information.

Five components were considered to be financially significant to the Group, with four being located in the United Kingdom and one located in the United States of America. All audit work was performed by the Group audit team.

For components that we considered to be non-significant, these components were principally subject to analytical review procedures performed by the Group audit team, together with additional testing over audit risk areas.

Key audit matters

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we identified, including those which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit, and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

Our application of materiality

We apply the concept of materiality both in planning and performing our audit, and in evaluating the effect of misstatements. We consider materiality to be the magnitude by which misstatements, including omissions, could influence the economic decisions of reasonable users that are taken on the basis of the financial statements.

In order to reduce to an appropriately low level the probability that any misstatements exceed materiality, we use a lower materiality level, performance materiality, to determine the extent of testing needed. Importantly, misstatements below these levels will not necessarily be evaluated as immaterial as we also take account of the nature of identified misstatements, and the particular circumstances of their occurrence, when evaluating their effect on the financial statements as a whole.

Based on our professional judgement, we determined materiality for the financial statements as a whole and performance materiality as follows:

Component materiality

We set materiality for each component of the Group at a lower level of materiality, dependent on the size and our assessment of the risk of material misstatement of that component. Component materiality ranged from £85,000 to £2,084,000 (2020: £84,000 to £1,261,000). In the audit of each component, we further applied performance materiality levels of 65% or 70% of the component materiality to our testing to ensure that the risk of errors exceeding component materiality was appropriately mitigated.

Reporting threshold 

We agreed with the Audit Committee that we would report to them all individual audit differences in excess of £44,000 (2020: £31,000). We also agreed to report differences below this threshold that, in our view, warranted reporting on qualitative grounds.

Other information

The Directors are responsible for the other information. The other information comprises the information included in the annual report other than the financial statements and our auditor's report thereon. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.

We have nothing to report in this regard.

Other Companies (Guernsey) Law, 2008 reporting

Responsibilities of Directors

As explained more fully in the Responsibility statement, the Directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the Directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, the Directors are responsible for assessing the Group's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so.

Auditor's responsibilities for the audit of the financial statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

Extent to which the audit was capable of detecting irregularities, including fraud

Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below:

· We gained an understanding of the legal and regulatory framework applicable to the Group and considered the risk of acts by the Group which were contrary to applicable laws and regulations, including fraud. These laws and regulations included but were not limited to compliance with the Companies (Guernsey) Law, 2008, AIM Rules for Companies, those resulting from being authorised by the Financial Conduct Authority to undertake regulated activities and UK adopted international accounting standards.

· We considered compliance with laws and regulations that could give rise to a material misstatement in the Group's financial statements. Our tests included, but were not limited to:

o  Agreement of the financial statement disclosures to underlying supporting documentation;

o  Enquiries of management;

o  Sample testing of journal postings made during the year and post year end to identify potential management override of controls;

o  Review of meeting minutes throughout the period; and

o  Assessment of the susceptibility of the financial statements to material misstatement, including how fraud might occur. This includes areas that are subject to a high degree of management's estimates and judgements as covered by the key audit matters above.

· We communicated relevant identified laws and regulations and potential fraud risks to all engagement team members and discussed how and where these might occur and remained alert to any indications of fraud or non-compliance with laws and regulations throughout the audit.

Our audit procedures were designed to respond to risks of material misstatement in the financial statements, recognising that the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, for example, forgery, misrepresentations or through collusion. There are inherent limitations in the audit procedures performed and the further removed non-compliance with laws and regulations is from the events and transactions reflected in the financial statements, the less likely we are to become aware of it.

A further description of our responsibilities is available on the Financial Reporting Council's website at:

https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor's report.

Use of our report

This report is made solely to the Parent Company's members, as a body, in accordance with Section 262 of the Companies (Guernsey) Law, 2008. Our audit work has been undertaken so that we might state to the Parent Company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Parent Company and the Parent Company's members as a body, for our audit work, for this report, or for the opinions we have formed.

BDO LLP

Chartered Accountants

London, UK

29 June 2022

BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).