Tavistock Regulatory News (TAVI)

1 AUGUST 2017

TAVISTOCK INVESTMENTS PLC

RESULTS FOR THE YEAR ENDED 31 MARCH 2017

Tavistock Investments Plc ("Tavistock" or "Company") today announces its financial results for the year ended 31 March 2017. 

Financial Highlights:

· 22% increase in revenue to £36.4m (2016: £29.9m)

· 421% increase in adjusted EBITDA to £537,000 (2016: £103,000)

· 104% increase in net assets to £18.2m (2016: £8.9m), including £4.6m of cash (2016: £3.4m)

Operational Highlights:

· Significant improvement in Group financial performance

o Cash generation of £497,000 in the second half

· Reduction of 88% in loss per share from 1.10p to 0.13p

· Strong growth in Funds Under Management (FUM)

o 332% increase to £769m (2016: £178m)

· Organic and acquisitive growth

o Successfully completed the acquisition and integration of Abacus Associates and PB Financial Planning Limited - both well established, profitable and cash generative advisory businesses contributing strongly to the continued growth of the Company

o Organic growth via dedicated recruitment team

Post-period highlights:

· Launch of new funds

o Enhanced the ACUMEN range by launching three new funds to better equip the investment team in managing risk

· Strengthened management team

o Appointed Mark Evans as Business Development Director to oversee the Group's organic growth strategy

Brian Raven, Group Chief Executive, said: "I am very pleased with our Group performance this year. We have made significant progress across all key areas of the business and established a solid foundation for future success. This is the product of a robust business model and the hard work of a strong operational team. I am confident that this will be another successful year and look forward to the Group continuing its growth." 

For further information:

Tavistock Investments plc Tel: 01753 867000

Oliver Cooke, Chairman

Brian Raven, Group Chief Executive

Arden Partners Plc Tel: 020 7614 5900

William Vandyk

Allenby Capital Limited Tel: 020 3328 5656

Nick Naylor

Nick Athanas

Templars Communications Limited Tel: 020 3642 3140

Kitty Parry

Malika Shermatova

TAVISTOCK INVESTMENTS PLC

CHAIRMAN'S STATEMENT

FOR THE YEAR ENDED 31 MARCH 2017

Tavistock's principal objectives are to continue the growth of its investment management business and to further strengthen the profile and performance of its advisory business. I am pleased to report that the Company made strong progress during the year under review and, in particular, I would like to highlight the following achievements.

Investment Management

Strong growth in Funds Under Management (FUM)

The level of FUM increased by over 332% to £769m with £603m being managed on a discretionary basis. This rate of growth is significantly higher than in the previous financial year when it grew by 29% from £138m at 31 March 2015 to £178m at 31 March 2016.

Launch of new funds

Since the year end, the Company has enhanced its range of risk progressive funds by launching the Acumen Bond Portfolio, the Acumen Equity Portfolio and the Acumen Strategic Portfolio. These additional funds better equip the Tavistock Wealth investment team in managing risk across the entire volatility curve as demonstrated in the diagram which can be found at  https://www.rns-pdf.londonstockexchange.com/rns/6432M_-2017-7-31.pdf

Advisory

Growth through Acquisition

The Company completed the acquisition of two well established, profitable and cash generative advisory businesses, Abacus Associates Financial Services Limited and PB Financial Planning Limited. Both businesses have now been integrated into the Group and are contributing strongly to our continued growth.

Organic Growth

Since acquisition, Abacus and PB Financial Planning have recruited 24 additional advisers, taking their total to 73. A dedicated recruitment team has now been established to build further on this organic growth.

Strong Relationships

The Group has self-employed advisory networks of both Registered Individuals (RIs) and Appointed Representative firms (ARs), as well as employed advisers within PB Financial Planning.

Within the RI operation, the Group exclusively works with advisers whose businesses it is keen to acquire when they retire.

Similarly, the Group has established a new AR operation during the year, The Tavistock Partnership, which works only with firms that we would welcome aboard if the principals decided to sell them. Initially, 39 firms with whom the Group has agreed to develop a closer commercial relationship have transferred out of Tavistock Financial into this new network business.

Group Performance

There is a direct relationship between the Group's profitability and the level of funds being managed within its own portfolios. In addition, the fees earned by certain third parties diminish on an incremental basis as the level of such funds rise, which in turn leads to improved margins.

There has been a marked improvement in the Group's financial performance as a consequence of the sharp rise in discretionary FUM that was achieved during the year under review. As the Group has a very high level of FUM retention, this positive impact will continue to be reflected in future years' results.

The reported level of Adjusted EBITDA has risen from £103k for the year to 31 March 2016 to £537k, and in the final quarter of the year under review the Group achieved profitability at the pre-tax level for the first time. The loss per share fell by 88% from 1.1p per share for the previous year to 0.13p in the current year.

During the second half of the financial year, the Group succeeded in generating some £497k of cash from operations. Of this amount, some £96k was generated in the third quarter of the year and £401k was generated in the fourth quarter. This positive trend was in marked contrast to the first half of the year, during which period Group operations absorbed over £950k of cash. The Group has continued to generate cash from its operations, albeit at a lower rate, since the balance sheet date.

As the Group's investment management business has a comparatively fixed cost base and is already trading profitably, further increases in the level of FUM will have an increasingly positive impact on the Group's profitability.

Investing for Growth

Our initial focus on establishing the Group was to acquire advisory businesses that would recommend the use of Tavistock's investment management business where appropriate to the needs of their clients. Once Tavistock Wealth had achieved a successful track record, and with it a recognition for excellent investment management, we began marketing to advisory firms outside of the Group. This has required significant investment in a specialist business development team and whilst still at an early stage, results are most encouraging.

The introduction of funds from clients outside the Group has the benefit of increasing revenues without the risks and costs associated with acquiring additional advisory businesses and providing financial advice. We are also now investing in the creation of an international operation.

The Group has also strengthened its operational management team with the focus being on the achievement of greater levels of organic growth.

Whilst these investments are in the best long-term interests of the business, in the short term, they inevitably have an adverse impact on the level of reported performance.

Financial Performance

As stated above, the Group's financial performance showed a marked improvement in the second half of the year, reflecting the contribution made by the two acquired businesses and the sharply increased level of FUM.

Adjusted EBITDA is highlighted in the table below, and is considered to be the most appropriate measure of the Group's performance as it removes the distorting effect of one-off gains and losses that arise on acquisitions and the impact of non-cash items.

The Group's financial performance during the year can be summarised as follows:

The Group's financial performance during the past two years can be summarised as follows.

Future Prospects

Much remains to be done, but a great deal has been achieved over the last year through the hard work and dedication of the management team, with the support of our excellent staff. I would like to acknowledge the significant contribution that they have all made and to thank them for it.

Recent political events in the UK, the USA and elsewhere, as well as the uncertainties surrounding Brexit have done much to unsettle markets. However, our disciplined approach to global diversification across asset classes, our cautious approach to the UK bond market and the use of currency hedging has enabled our investment portfolios to continue to perform well.

The Group has now reached an inflection point, with the growth in FUM leading to increased margins, a continuing improvement in adjusted EBITDA performance and the generation of cash from operations. This can be seen in the charts at

http://www.rns-pdf.londonstockexchange.com/rns/6432M_-2017-7-31.pdf

http://www.rns-pdf.londonstockexchange.com/rns/6432M_1-2017-7-31.pdf

The benefit of our investments in organic growth may not be seen until the 2018/19 financial year. However, even modest levels of benefit, together with continued hard work from the management team, will enable the Company to report improved results in the year to come. I look forward to updating you further.

Oliver Cooke

Chairman

31 July 2017

STRATEGIC REPORT

FOR THE YEAR ENDED 31 MARCH 2017

The Company's prime objective is to continue the growth of its investment management business and to improve the profile and performance of its advisory business.

During the period under review, the Board's focus was on enhancing the investment management business through the achievement of significant growth in the level of FUM, the development and launch of three new Acumen funds to better equip the investment management team in managing risk across the entire volatility curve and the offering the Group's investment management services to firms outside of the Group.

The Board's focus was also on the development of the Group's advisory business through the acquisition of two well established, profitable, cash generative advisory businesses, Abacus Associates and PB Financial Planning, and the recruitment of additional advisors into these businesses.

In addition, the Board took steps to strengthen the management team and to invest in future growth. The Chairman's Statement contains further details on the progress and performance of the Group. In the current financial year, the Board's focus will be on the following areas:

· continuing the growth in FUM,

· continuing the provision of the Group's investment management services to firms outside of the Group,

· developing an overseas operation,

· continuing organic growth through the recruitment of additional advisers, and

· potentially, through further selective acquisitions.

Risks and Uncertainties:

The principal risks facing the business are the continued growth in the level of FUM and continued recruitment within the advisory business.

There can be no certainty that the rapid pace at which FUM grew in the year under review will continue into the future or that the business will continue to attract new advisers at the same pace. However, a great deal has been achieved by the management team over the last year, including the strengthening of the team itself in areas of particular focus. The Board remains confident that good progress will continue.

Political uncertainty in the UK, as well as in Europe and in the US, together with the uncertainties surrounding BREXIT, will continue to unsettle markets. However, the Board is confident that the Group's disciplined approach to global diversification across asset classes and the use of currency hedging will continue to serve the investment business well.

The Company continues to face the usual risks of operating within a regulated environment, but to mitigate these risks the Board actively promotes an ethos and culture in which the client is placed at the centre of everything that the Company does.

The Board considers that the Company has sufficient working capital for its current needs.

Future Prospects:

The Company has reached an inflection point in its development and has begun to generate cash as well as report operating profits, which leads the Board to anticipate the reporting of improved performance over the coming year. This is a time of great opportunity for the Company and I look forward to reporting to you in the near future on the next milestones that our Company achieves.

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

Oliver Cooke

Chairman

31 July 2017

DIRECTORS' REPORT

FOR THE YEAR ENDED 31 MARCH 2017

The Directors are pleased to present their report on the audited financial statements of the Group for the year ended 31 March 2017.

Principal Activities, Review of the Business and Future Developments

The principal activities of the Group during the period were the provision of support services to a network of financial advisers and the provision of investment management services. The key performance indicators recognised by management are operating profit, as represented by EBITDA, and the level of funds under management by the Group.

An overall review of the Group's trading performance and future prospects is given in the Chairman's Statement and in the Strategic Report. The Group is not materially impacted by environmental matters and as a consequence does not offer comment on them.

Substantial shareholdings

The Company has been advised of the following interests in more than 3% of its ordinary share capital as at 24 July 2017:

Directors

The Directors of the Company during the period were:

Executives:

Oliver Cooke

Brian Raven

Non - Executives:

Roderic Rennison

Philip Young

Oliver Cooke

Chairman, aged 62

Oliver has over 35 years of financial and business development experience gained in a range of quoted and private companies including over fifteen years' experience as a public company director. He has considerable experience in the fields of strategic transformation, acquisitions, disposals and fundraisings. Oliver is a Chartered Accountant and a Fellow of the Chartered Association of Certified Accountants.

Brian Raven

Group Chief Executive, aged 61

Brian has been involved in the financial services sector since 2010. He has a wide range of business experience, having held many sales and general management posts at senior management and board level, including running public companies on both AIM and the Official List. Most notably, in 1991 Brian founded Card Clear Plc, subsequently renamed Retail Decisions plc, a business engaged in combating the fraudulent use of plastic payment cards. He led the company until 1998 by which time it was an international group, listed on AIM, with a market capitalisation of some £100 million. As a principal, Brian has been responsible for identifying, negotiating and integrating numerous acquisitions, as well as for delivering organic growth.

Roderic Rennison

Non-Executive Director, Chairman of Remuneration Committee, aged 62

Roderic has more than 40 years of experience in financial services encompassing a variety of roles including sales, strategy, product development, proposition, operations and latterly acquisitions, mergers, and integrations together with corporate affairs, risk and regulatory matters. He provides consultancy services in the sector to a range of providers, fund managers and intermediaries and particularly specialises on RDR, for which he chaired the professionalism and reputation work stream.

Philip Young

Non-Executive Director, Chairman of Audit Committee, aged 43

Philip began his career in 1996 at a small financial consultancy business specialising in complex regulatory issues, CCL, in Macclesfield. Philip moved to Bankhall Investment Associates Ltd in 1998, where he worked initially in the compliance area, then moved to become Commercial Manager for Bankhall's e-commerce department. In 2003, he co-founded threesixty services LLP and threesixty support LLP, with a number of colleagues, and became an equity partner. threesixty has grown to become one of the most significant forces in adviser support in the UK, providing professional business services to over 700 firms with more than 7,000 advisers. threesixty was acquired by Standard Life Plc in 2010, after which Philip was appointed Managing Director.

Corporate Governance

The Board confirms that the Group has had regard, throughout the accounting period, to the provisions set out in the UK Corporate Governance Code which was issued by the Financial Reporting Council in April 2016. Whilst not required to do so the Directors, as a matter of best practice, have voluntarily endeavoured to comply with those of the provisions which they consider to be relevant to a company of this size.

The Board does not consider the Group to be sufficiently large to warrant the establishment of a dedicated internal audit function.

Diversity

Tavistock is an equal opportunities employer and does not discriminate against staff on the basis of disability, gender, ethnicity or sexual orientation.

The Board of Directors

The Board currently comprises two executive Directors and two non-executive Directors.

The non-executive Directors have a strong compliance background and are considered to be independent. All Directors are required to stand for re-election at least once in every three years.

All members of the Board are equally responsible for the management and proper stewardship of the Group. The non-executive Directors are independent of management and free from any business or other relationship with the Company or Group and are thus able to bring independent judgment to issues brought before the Board.

The Board meets at least ten times per year and more frequently where necessary to approve specific decisions. Directors may take independent professional advice at the Company's expense.

The Audit Committee

The Audit Committee is comprised of the Chairman, who is a Chartered Accountant and has been a partner in a public practice, and the independent non-executive Directors and determines the terms of engagement of the Company's auditors and, in consultation with the auditors, the scope of the audit. The Audit Committee receives and reviews reports from management and the Company's auditors relating to the interim and annual accounts and the accounting and internal control systems in use throughout the Company. The Audit Committee has unrestricted access to the Company's auditors.

During the year under review the Audit Committee met twice.

The Nomination Committee

The Directors do not consider it necessary for a company of this size to have a separate Nomination Committee.

Communication with shareholders

The Chairman and the Chief Executive are available to meet with institutional shareholders and to answer questions from private shareholders. The Board is open to receiving constructive input from shareholders. Each shareholder receives the annual report, which contains the Chairman's Statement. The annual and interim reports, together with other corporate press releases are made available on the Company's website www.tavistockinvestments.com. The Annual General Meeting provides a forum for shareholders to raise issues with the Directors. The Notice convening the meeting is issued with 21 clear days' notice. Separate resolutions are proposed on each substantially separate issue.

Going concern

The Directors confirm that they are satisfied the Group has adequate resources to continue its business for the foreseeable future and on this basis; they continue to adopt the going concern basis in preparing the accounts.

Financial instruments

Details of the use of financial instruments by the Group are contained in Note 14 of the financial statements.

Share capital

Changes to share capital during the period are given in Note 15 to the accounts onwards.

Charitable and Political Donations

The Group did not make any political donations in the period but made charitable donations totalling £13,843 (2016: £5,000).

Dividends

The Directors do not propose a final dividend (2016: £Nil)

Auditors

A resolution reappointing haysmacintyre will be proposed at the Annual General Meeting in accordance with S489 of the Companies Act 2006.

Supplier payment policy

The Group's policy is to agree terms of payment with suppliers when entering into a transaction; ensure that those suppliers are aware of the terms of payment by including them in the terms and condition of the contract and pay in accordance with contractual obligations. Trade creditors at 31 March 2017 represented 14 days' purchases (2016: 7 days).

Internal control

The Directors are aware of the UK Corporate Governance Code which was issued by the Financial Reporting Council in April 2016. The key elements of the systems, which have regard to the size of the Group, are that the Board meets regularly and takes the decisions on all material matters, the organisational structure ensures that responsibilities are defined and authority only delegated where appropriate, and that regular management accounts are presented to the Board to enable the financial performance of the Group to be analysed.

The Directors acknowledge that they are responsible for the system of internal control which is established in order to safeguard the assets, maintain proper accounting records and ensure that financial information used within the business or published is reliable. Any such system of control can, however, only provide reasonable, not absolute, assurance against material misstatement or loss.

In preparing the financial statements, the Directors are required to:

· select suitable accounting policies in accordance with IAS 8 Accounting Policies, changes in Accounting Estimates and Errors and then apply them consistently;

· 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 is 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

· state that the Group has complied with IFRSs, subject to any material departures disclosed and explained in the financial statements, and make judgments and estimates that are reasonable and prudent.

Directors' responsibilities

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

Company law requires the Directors to prepare financial statements for each financial period. Under that law the Directors have elected to prepare the Group financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union and the Company financial statements in accordance with United Kingdom Generally Accepted Accounting Practice United Kingdom Accounting Standards and applicable law. Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and Company and of the profit or loss of the Group for that period.

The Directors are also required to prepare financial statements in accordance with the rules of the London Stock Exchange for companies trading securities on the Alternative Investment Market.

In preparing these financial statements, the Directors are required to:

· select suitable accounting policies and then apply them consistently;

· make judgments and estimates that are reasonable and prudent;

· for the Group financial statements, state whether they have been prepared in accordance with IFRSs as adopted by the European Union;

· for the parent company financial statements, state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements; and

· prepare the financial statements on the going concern basis unless it is inappropriate to presume that the group and the parent company will continue in business.

The Directors are responsible for keeping adequate 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 requirements of the Companies Act 2006. They are also responsible for safeguarding the assets of the Group and for taking reasonable steps for the prevention and detection of fraud and other irregularities.

Website publication

The Directors are responsible for ensuring the annual report and the financial statements are made available on a website. Financial statements are published on the Company's website in accordance with legislation in the United Kingdom governing the preparation and dissemination of financial statements, which may vary from legislation in other jurisdictions. The maintenance and integrity of the Company's website is the responsibility of the Directors. The Directors' responsibility also extends to the ongoing integrity of the financial statements contained therein.

Directors' interests

The Directors beneficial interests in the Ordinary Share Capital and options to purchase such shares were as follows:

Research and Development

The Group is developing a software system for use by its advisers but has not undertaken any other any research and development activities

Directors' statement as to disclosure of information to auditors

The Directors have taken all of the steps required to make themselves aware of any information needed by the Group's auditors for the purposes of their audit and to establish that the auditors are aware of that information.

The Directors are not aware of any audit information of which the auditors are unaware.

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

Oliver Cooke

Chairman

31 July 2017

REMUNERATION REPORT

FOR THE YEAR ENDED 31 MARCH 2017

Compliance

Described below are the principles that the Group has applied in relation to Directors' remuneration.

The Remuneration Committee

The Remuneration Committee comprises the non-executive Directors. Mindful of the need to attract, retain and reward key staff, the Committee reviews the scale and structure of the executive Directors' and senior employees' remuneration and the terms of their service or employment contracts, including share option schemes and other bonus arrangements.

The remuneration of, and the terms and conditions applying to, the non-executive Directors are determined by the entire Board.

During the year under review, the Remuneration Committee met three times and all members attended.

Share options

The share options granted to the Directors under the Company's EMI (Enterprise Management Incentive) Share Option Scheme are as follows.

The market price of the shares at 31 March 2017 was 2.625 pence (2016: 4.625 pence) and the range during the financial period was 2.60 pence to 7.75 pence.

During the year both Oliver Cooke and Brian Raven exercised the options, granted to them under the terms of the Company's EMI Scheme, over 50,000 G Ordinary Shares, which as a class were then converted with the approval of Shareholders into 45,854,034 Ordinary Shares.

After the balance sheet date, on 13 April 2017, the Company announced that it had inter alia, granted options over an additional 10,000,000 shares to each of Oliver Cooke and Brian Raven with an exercise price of 5.25p per share, which represented a premium of 86.2% over the Company's then share price. In each case, the vesting of 5,000,000 of the shares is conditional upon the achievement by the Group of £5 million of pre-tax profit in a single year and the vesting of the other 5,000,000 shares is conditional upon the growth of the funds managed by the group to £1.5 billion.

Service contracts

The term of the Directors' service contracts can be summarised as follows:

Directors' remuneration

Details of each Director's remuneration are provided in Note 5 to the financial statements entitled Staff Costs.

On behalf of the Board

Oliver Cooke

Chairman

31 July 2017

We have audited the financial statements of Tavistock Investments Plc for the year ended 31 March 2017 which comprise the consolidated statement of comprehensive income, the Group and parent company statements of financial position, the Group and parent company statements of changes in equity, the Group and parent company cash flow statements and the related notes. The financial reporting framework that has been applied in the preparation of the Group financial statements is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union and, as regards the parent company financial statements, UK Generally Accepted Accounting Principles ("UK GAAP") including Financial Reporting Standard 102, the Financial Reporting Standard applicable in the UK and Republic of Ireland and the provisions of the Companies Act 2006.

This report is made solely to the Company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company's members those matters we are required to state to them in an auditors' 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 Company and the Company's members as a body, for our audit work, for this report, or for the opinions we have formed.

Respective responsibilities of Directors and auditors

As explained more fully in the statement of Directors' responsibilities, the Directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board's (APB's) Ethical Standards for Auditors.

Scope of the audit of the financial statements

A description of the scope of an audit of financial statements is provided on the APB's website at www.frc.org.uk/apb/scope/private.cfm.

Opinion on financial statements

In our opinion:

• the financial statements give a true and fair view of the state of the Group's and the parent company's affairs as at 31 March 2017 and of the Group's loss for the year then ended;

• the financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union;

• the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.

Opinion on other matters prescribed by the Companies Act 2006

In our opinion, based on the work undertaken in the course of the audit, the information given in the Strategic Report and Directors' Report for the financial year for which the financial statements are prepared is consistent with the financial statements and such reports have been prepared in accordance with applicable legal requirements.

In light of our knowledge and understanding of the Group parent company and its environment obtained in the course of the audit, we have not identified material misstatements in the Strategic Report and the Directors' Report.

Matters on which we are required to report by exception

We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion:

• adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or

• the parent company financial statements are not in agreement with the accounting records and returns; or

• certain disclosures of Directors' remuneration specified by law are not made; or

• we have not received all the information and explanations we require for our audit.

Simon Wilks (Senior Statutory Auditor)

For and on behalf of haysmacintyre

26 Red Lion Square

London

WC1R 4AG

31st July 2017

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31 MARCH 2017

The notes below form part of the group financial statements.

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 31 MARCH 2017

The financial statements were approved by the Board and authorised for issue on 31st July 2017.

Oliver Cooke

Chairman

The notes below form part of the group financial statements.

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31 MARCH 2017

The notes below form part of the group financial statements.

CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 31 MARCH 2017

The notes below form part of the group financial statements.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 MARCH 2017

1. ACCOUNTING POLICIES

Principal accounting policies

The Company is a public company incorporated and domiciled in the United Kingdom. The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all the periods presented, unless otherwise stated.

Basis of preparation

The financial statements have been prepared in accordance with International Financial Reporting Standards, International Accounting Standards and Interpretations (collectively IFRS) issued by the International Accounting Standards Board (IASB) as adopted by the European Union ("adopted IFRSs") and those parts of the Companies Act 2006 which apply to companies preparing their financial statements under IFRSs.

Changes in accounting policies

Standards issued but not yet effective at the date of issuance of the Group's financial statements are listed below:

IFRS 15 Revenue from Contracts with Customers (effective from 1 April 2018)

The implementation of this standard is not expected to have any material effect on the Group's financial statements.

The Group comprises a holding company and a number of individual subsidiaries and all of these have been included in the consolidated financial statements in accordance with the principles of acquisition accounting as laid out by IFRS 3 Business Combinations.

Revenue recognition

Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured. All such revenue is reported net of discounts and Value Added Tax. Revenue represents either gross Independent Financial Adviser ("IFA") income or investment management fees receivable in respect of the period. This revenue is recognised as and when it is earned and is calculated on a monthly basis.

Intangible assets

Intangible assets include goodwill arising on the acquisition of subsidiaries and represents the difference between the fair value of the consideration payable and the fair value of the net assets that have been acquired. The residual element of Goodwill is not being amortised but is subject to an annual impairment review.

Also included within intangible assets are various assets separately identified in business combinations (such as FCA permissions, established systems and processes, adviser and client relationships and brand value) to which the Directors have ascribed a commercial value and a useful economic life. The ascribed value of these intangible assets is being amortised on a straight-line basis over their estimated useful economic life, which is considered to be between 5 and 10 years.

Internally generated intangible assets

Internally generated assets are capitalised when the technical feasibility of completing the asset so that it will be available for use is confirmed, there is a demonstrable ability to use the asset and probable future economic benefits will flow from it. Internally generated intangible assets are measured at cost and amortised over a useful life of 5 years.

Financial assets

Loans and receivables: These assets are deemed to be non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They arise principally through the provision of goods and services to customers (trade receivables), but also incorporate other types of contractual monetary asset. They are carried at amortised cost using the effective interest rate method.

Cash and cash equivalents: These include cash in hand and deposits held at call with UK banks.

Financial liabilities

Other financial liabilities include trade payables and other short-term monetary liabilities, which are initially recognised at fair value and subsequently carried at amortised cost using the effective interest method.

Share based payments

Where share options are awarded to employees, the fair value of the options at the date of grant is charged to the statement of comprehensive income on a straight-line basis over the vesting period. Non-market vesting conditions are taken into account by adjusting the number of options expected to vest at each statement of financial position date so that, ultimately, the cumulative amount recognised over the vesting period is based on the number of options that eventually vest. Market vesting conditions are factored into the fair value of the options granted. The cumulative expense is not adjusted for failure to achieve a market vesting condition.

Fair value is calculated using the Black-Scholes model, details of which are given in Note 16.

Property, plant and equipment

Property, plant and equipment are stated at cost net of accumulated depreciation and provision for impairment. Depreciation is provided on all property plant and equipment, at rates calculated to write off the cost less estimated residual value, of each asset on a straight-line basis over its expected useful life. The residual value is the estimated amount that would currently be obtained from disposal of the asset if the asset were already of the age and in the condition expected at the end of its useful economic life.

The method of depreciation for each class of depreciable asset is:

Computer equipment - 3 - 4 years straight line

Office fixtures, fittings & equipment - 4 - 7 years straight line

Impairment of Assets

Impairment tests on goodwill are undertaken annually at the balance sheet date. The recoverable value of goodwill is estimated on the basis of value in use, defined as the present value of the cash generating units with which the goodwill is associated. When value in use is less than the book value, an impairment is recorded and is irreversible.

Other non-financial assets are subject to impairment tests whenever circumstances indicate that their carrying amount may not be recoverable. Where the carrying value of an asset exceeds its estimated recoverable value (i.e. the higher of value in use and fair value less costs to sell), the asset is written down accordingly. Where it is not possible to estimate the recoverable value of an individual asset, the impairment test is carried out on the asset's cash-generating unit. The carrying value of property, plant and equipment is assessed in order to determine if there is an indication of impairment. Any impairment is charged to the statement of comprehensive income. Impairment charges are included under administrative expenses within the consolidated statement of comprehensive income.

Taxation and deferred taxation

Corporation tax payable is provided on taxable profits at prevailing rates.

Deferred tax assets and liabilities are recognised where the carrying amount of an asset or liability in the balance sheet differs from its tax base, except for differences arising on:

· the initial recognition of goodwill; and

· the initial recognition of an asset or liability in a transaction which is not a business combination and at the time of the transaction affects neither accounting nor taxable profit.

Recognition of deferred tax assets is restricted to those instances where it is probable that future taxable profit will be available against which the asset can be utilised. The amount of the asset or liability is determined using tax rates that have been enacted or substantively enacted by the balance sheet date and are expected to apply when the deferred tax liabilities/(assets) are settled/(recovered).

Deferred tax assets and liabilities are offset when the Group has a legally enforceable right to offset current tax assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority on either:

· the same taxable Group company; or

· different Group entities which intend either to settle current tax assets and liabilities on a net basis, or to realise the assets and settle the liabilities simultaneously, in each future period in which significant amounts of deferred tax assets or liabilities are expected to be settled or recovered.

2. CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS

The preparation of these financial statements has required management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. These judgments and estimates are based on management's best knowledge of the relevant facts and circumstances, having regard to prior experience, but actual results may differ from the amounts included in the financial statements. Information about such judgments and estimations is contained below, as well as in the accounting policies and accompanying notes to the financial statements.

Impairment of goodwill and intangible assets

The Group is required to test, on an annual basis, whether goodwill has suffered any impairment. Other intangible assets are tested whenever circumstances indicate that their carrying value may not be recoverable. The recoverable amount is determined based on value in use calculations. The Group has not impaired any goodwill or intangible assets during the year (2016: £Nil).

3. SEGMENTAL INFORMATION

A segmental analysis of revenue and expenditure for the period is:

The segmental analysis above reflects the parameters applied by the Board when considering the Group's monthly management accounts. The Directors do not consider a division of the balance sheet to be appropriate or useful for the purposes of understanding the financial performance and position of the Group.

During the period under review the Group operated, and earned revenue exclusively within the UK.

The remuneration of the highest paid director was £192,391 (2016: £151,325). The total remuneration of key management personnel was £933,259 (2016: £828,766).

Directors' Detailed Emoluments

Details of individual Directors' emoluments for the year are as follows:

*Denotes non-executive Director

All pension contributions represent payments into defined contribution schemes.

The tax assessed for the period differs from the standard rate of corporation tax in the UK applied to loss before tax.

The tax assessed for the period differs from the standard rate of corporation tax in the UK applied to loss before tax.

Loss per ordinary share has been calculated using the weighted average number of shares in issue during the relevant financial periods. IAS 33 requires presentation of diluted EPS when a company could be called upon to issue shares that would decrease earnings per share, or increase the loss per share. For a loss-making company with outstanding share options, net loss per share would be decreased by the exercise of options. Therefore, as per IAS33 the antidilutive potential ordinary shares are disregarded in the calculation of diluted EPS.

Customer and Adviser Relationships relate to identifiable relationships between acquired companies, their adviser network and the associated client bases.

Regulatory Approvals and Systems relate to the estimated costs incurred by acquired companies in obtaining authorisations to carry on their relevant business and in putting in place the appropriate staffing and information structures.

Amortisation is charged over a period between 5 and 10 years.

ACQUISITIONS DURING THE PERIOD

Abacus Associates Financial Services Limited

In April 2016, the Group acquired 100% of the issued share capital of Abacus Associates Financial Services Limited, an independent financial advisory company, for a fixed initial consideration of £5.165m, of which £2.535m was settled at completion in cash, £0.13m through the adoption of a debt obligation, £1.5m through the issue to the vendor of 20m new ordinary shares of 1p each at an issue price of 7.5p per share and a further £1 million to be settled in cash on the first anniversary. In addition, the vendor is also entitled to potentially receive a performance-related deferred consideration, payable in cash in July 2018 subject also to certain other conditions relating to quality of service and customer satisfaction. The fair value of this consideration has been estimated to be £1.4m.

Included in the Consolidated Statement of Comprehensive Income is gross revenue of £5,873,000 and profit of £557,000 arising from Abacus Associates Financial Services Limited. The primary reason for the acquisition was to increase the scale of the advisory business.

Price Bailey Financial Services Limited

In November 2016, the Group acquired 100% of the issued share capital of Price Bailey Financial Services Limited, an independent financial advisory company, for an initial consideration of £2.95m, of which £2.0m was settled at completion in cash and £0.95m through the issue to the vendor of 21,263,462 new Ordinary Shares of 1p each at an issue price of 4.4678p per share. In addition, a second fixed payment in cash is due upon the first anniversary of completion of £150,000 together with a variable payment of up to £500,000 in cash which will be reduced in the event of upheld complaints during the intervening period and so the total fair value of the consideration payable at the acquisition date was assessed as £3.6m. A final deferred payment will be made upon the third anniversary of completion of the acquisition if the highest average closing price per Ordinary Share over any five-consecutive business day period in the three months prior to the third anniversary date is below 7.5 pence per share. In such an event the payment may be made either in cash or through the issue of additional Ordinary Shares. The adjustment payment is only applicable to 16 million of the consideration shares and accordingly the maximum adjustment will be £440,000.