Kingswood H. Regulatory News (KWG)

10 February 2017

European Wealth Group Limited

("European Wealth", the "Company" or the "Group")

Trading update

Financial Highlights for the year ended 31 December 2016*:

· Revenue expected to be significantly higher than 2015

· 21.5 per cent. increase in Funds Under Management (FUM) over the year to £1.5 billion (at 31 December 2016)

· Anticipated boost of further £110 million of funds under management from Towry acquisition

· Discussions ongoing regarding repayment of convertible loan note due in June 2017

Operational Highlights:

· Strong organic growth

· Acquisition of CIMCO

· Purchase of significant book of business from Towry opens opportunities in South Africa

· Encouragingly strong performance of investment management and dealing businesses post-Brexit vote

* Subject to audit and based on management information

During the last 12 months, the Company has enjoyed strong organic growth which together with the acquisition of CIMCO, announced on 13 September 2016, will result in a significant increase in revenue for the Group. Total revenue for the full year is expected to exceed £9.3 million (2015: £7.6 million), a 24 per cent. increase year on year. During the same period, the Company completed the acquisition of CIMCO and a book of business from Towry. 

Group funds under management (FUM) ended the year at £1.46 billion (2015: £1.2 billion) representing an increase of 21.7 per cent. Since the year end, FUM have increased a further £80 million to £1.53 billion. This figure excludes the Towry book of business which we anticipate will result in a further £110 million of FUM coming into the Group over the next six months.

In contrast to a very difficult trading period in the second half of 2015, the improved performance in the first half of 2016 has been maintained throughout the year and the Group continues to successfully integrate acquisitions whilst also delivering organic growth. The increased revenue is a result of acquisitions but also strong performance within our investment management and dealing business particularly in the aftermath of the Brexit vote. 

In what is a rapidly changing industry, the Board's focus remains on broadening the distribution reach both in the UK and internationally. Continuing changes within the industry particularly those covered by MiFID II are likely to throw up an increased number of acquisition opportunities all of which will be carefully analysed by the Board. However, the noticeable increase in the valuation of investment management and financial planning businesses has resulted in the Board's focus shifting towards accelerating organic growth in the shorter term. 

The recent growth has resulted in an increased need for working capital and the Company continues to monitor its cash position closely ahead of its loan note obligations which fall due in June this year. The working capital cycle is causing some liquidity constraints at this time and the Board is in a constructive dialogue with the holders of the loan notes regarding the timing of the payment of interest due before repayment in June. The Board remains confident that it can find an acceptable funding solution which meets the needs of its shareholders.

John Morton, Group Chief Executive of European Wealth, said:

"I am encouraged by the strong growth in both our turnover and funds under management over the last 12 months. European Wealth continues to make selective acquisitions whilst continuing to invest in resources into the organic development of the business. 

Whilst further progress needs to be made in the financial performance of the Group, it is very pleasing to see the increased turnover resulting in an improved financial performance.

The Board remains committed to building a diversified wealth management business that delivers a highly professional service to clients both within the UK and internationally. 

It is clear that the introduction of MiFID II together with continued pressure on investment management fees, will create a challenging environment over the coming 12 months. However, being a relatively young company with modern systems, we will be able to expand our margin as the business grows and funds under management increase. The Group remains well placed to grow both organically and through highly selective acquisitions. 

As with any growing business, it is important that we continue to invest both in our infrastructure and staff. With the ongoing commitment of both our staff and shareholders, we look forward to being able to continue the development of the Group." 

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