Arden Partners plc

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

 

Preliminary results for the year ended 31 October 2012

 

Arden Partners plc (AIM: ARDN), the institutional stockbroking company, today announces preliminary results for the year ended 31 October 2012.

 

Financial highlights

·     Revenue £9.8 million (2011: £12.4 million)

·     Underlying profit before tax* £1.0 million (2011: £1.2 million)

·     Profit before tax £0.2million (2011: £0.6million)

·     Basic earnings per share 0.6p (2011: 2.2p)

 

*             Profit before tax as adjusted for the effect of share based payments and reorganisation costs

 

Operational highlights

·     Total funds raised for clients £166m

·     Fifteen transactions during the year, comprising five secondary fundraisings and ten M&A.

·     Corporate client list extended from 32 to 36

 

Commenting on the results and Arden's outlook, Peter Moon, Chairman, said:

 

"I am pleased to report that Arden has remained profitable over the last financial year……….Markets have been tough and only brokers who have made substantial changes to their business models have survived in good shape.  Arden has changed by reducing overheads significantly year-on-year for the past two years and is now in a more positive position of expected revenues against its overhead base…"

 

 

Arden Partners plc                                         James Reed-Daunter - Chief Executive Officer Steve Wassell - Chief Operating Officer	020 7614 5900
Altium                                                             Phil Adams / Sam Fuller	020 7484 4040
Buchanan Communications                            Mark Edwards	020 7466 5000

 

 

Chairman's Statement

It gives me great pleasure to set down my first statement as Chairman of Arden Partners plc.  My appointment as Chairman in January 2013 was alongside a number of other Board changes. James Reed-Daunter was appointed Chief Executive Officer and Jonathan Keeling took the post of Deputy Chairman with direct responsibility for developing international relationships to broaden Arden's existing global franchise.  These Board changes are somewhat reflective of a continually changing environment for Arden's peer group of small and mid-cap brokers and the difficult economic conditions that have prevailed over the last few years.

 

Markets have been tough and only brokers who have made substantial changes to their business models have survived in good shape.  Arden has changed by reducing overheads significantly year-on-year for the past two years and is now in a more positive position of expected revenues against its overhead base.

 

I am pleased to report that Arden has remained profitable over the last financial year.  For the year to 31 October 2012, profit before tax was £0.2m compared to a profit before tax of £0.6m in 2011.  Underlying profit before tax in 2012 was £1.0m before deducting share based payments and reorganisation costs of £0.8m.  Whilst turnover was some 21% down on 2011, cost savings have significantly reduced the impact on the bottom line.  This Board is committed to challenge overhead levels generally and is adamant that costs be maintained at the appropriate level compared with projected revenues.  The model now allows stakeholders within the business and shareholders to benefit equally in profits that accrue to the business.

 

The strong balance sheet has allowed the Board to make a significant investment in buying-back its own shares and over the last two years some £2.25m has been spent on share purchases.  These buy-backs and subsequent cancellation of shares in treasury have led to 17% reduction in total share capital.  An interim dividend of 0.65p per share was paid this year representing £0.2m.

 

I wish to express my gratitude to Lord Flight, who retired from the Board at the end of December 2012, and Trevor Norris who retires today.  Trevor was one of the original founding partners in 2002 and his enthusiasm will be missed.

 

I would like to thank all of our staff, clients and shareholders for their continuing support.

 

Peter Moon

Chairman

 

 

 

Chief Executive's Statement

In presenting my first statement since taking over as Chief Executive on 1^st January 2013, I am pleased to report that the Group made a profit for the year. As stated in previous announcements, the Board had implemented an overhead reduction strategy to protect operational cash outflows, and over the year, this has ensured overall profitability, despite lower revenues than the previous year. Cost reductions effected in the latter part of the financial year will further reduce the overhead base in 2013 and my focus going forward will be on cost management as well as performance delivery.

 

The market sectors in which we operate have continued to contract and pressures from reduced volumes and commission rates are likely to impact further, however we feel the steps we have taken will mitigate the effect on Arden. The balance sheet remains strong and is key to our ability to attract and retain corporate clients.

 

Strong cash generation enabled the Board to declare an interim dividend and purchases of own shares into Treasury were effected both in the latter stages of the year and into the current year.

 

Trading in the first two months of the year has been satisfactory. The pipeline of corporate transactions is reasonable but as ever delivery remains dependent on market conditions. We are recruiting, very selectively, into key areas of strategic development and are encouraged at both the pool of labour available to us as well as a new realism by candidates with regard to remuneration expectation.

 

Financial review

Revenues during the year ended 31 October 2012 were £9.8m compared to £12.4m in 2011. Administrative expenses for the year totalled £9.6m (2011: £11.8m) including restructuring costs of £0.6m (2011: £0.1m). Underlying profit before tax was £1.0m (2011: £1.2m) after allowing for restructuring costs and share-based payments.  Profit before tax was £0.2m (2011: £0.6m).

 

After adjusting for the effect of restructuring costs and share based payments, underlying basic earnings per share were 3.4p compared to 4.7p in 2011. Basic earnings per share were 0.6p (2011: 2.2p).

 

In June 2012 the Company cancelled 2,372,768 shares which it held in Treasury at the end of the previous financial year. During October 2012 and November 2012 the Company has purchased in aggregate 2,301,529 ordinary shares to be held, for the time being in Treasury, for consideration of £1.1m.

 

Cash generation from operational activities was positive at £0.4m (2011: Outflow of £2.6m) but the impact of the shares acquired into Treasury meant that overall cash balances reduced by £0.3m.

 

Equities Division

Revenues fell from £7.6m to £6.4m. This is generally reflective of market conditions which have seen trading volumes fall by some 20%.

 

Corporate Finance Division

During the year we were involved in 15 transactions compared to 12 in 2011. In aggregate we placed £166m for our corporate clients. Since the year end we have placed a further £96m for our clients.

 

Including retainer income, corporate revenues were down from £4.7m to £3.4m. This reflects the lack of IPO activity during the year.

 

I am pleased to report that we extended our corporate client list during the year, with the addition of companies operating in the UK, Continental Europe and the Indian sub-continent.

 

Finally, I would like to take this opportunity to thank our staff and other stakeholders for their continued support.

 

James Reed-Daunter

Chief Executive Officer

 

 

 

Consolidated Statement of Comprehensive Income

For the year ended 31 October 2012

		2012	2011
	Note	£'000	£'000
Revenue	2	9,785	12,381
Administrative expenses		(9,634)	(11,826)
Profit from operations		151	555
Finance income		64	60
Finance costs		(4)	(3)
Profit before taxation		211	612
Income tax expense		(70)	(106)
Profit after taxation		141	506
Other comprehensive income for the year   Decrease in fair value on available for sale financial assets		(10)	-
Total comprehensive income for the year attributable to equity shareholders		131	506
Earnings per share
Basic	3	0.6p	2.2p
Diluted	3	0.6p	2.0p

 

 

 

Consolidated Statement of Financial Position

At 31 October 2012

 

			2012	2012	2011	2011
			£'000	£'000	£'000	£'000
Assets
Non-current assets
Property, plant and equipment				191		394
Deferred tax asset				134		125
Total non-current assets				325		519
Current assets
Trading investments			5,058		5,920
Available for sale financial assets			490		-
Trade and other receivables			9,943		23,872
Stock borrowing collateral			107		-
Cash and cash equivalents			4,882		5,201
Total current assets				20,480		34,993
Total assets				20,805		35,512
Current liabilities
Trade and other payables			(9,068)		(23,369)
Corporation tax liability			(130)		(126)
Total current liabilities				(9,198)		(23,495)
Total non-current liabilities				-		-
Total liabilities				(9,198)		(23,495)
Net assets				11,607		12,017

 

Shareholders' equity
Called up share capital			2,501		2,700
Capital redemption reserve			237		-
Share premium account			2,933		2,933
Employee Benefit Trust reserve			(607)		(612)
Available for sale reserve			(10)		-
Retained earnings			7,214		8,189
Total equity before deduction of own shares			12,268		13,210
Own shares			(661)		(1,193)
Total equity			11,607		12,017

 

 

 

Consolidated Statement of Cash Flows

For the year ended 31 October 2012

		2012	2011
	Note	£'000	£'000
Operating activities before taxation
Net profit before tax		211	612
Adjustments for:
Fair value adjustments		(548)	(34)
Depreciation		249	214
Net interest receivable		(60)	(57)
Share based payments		233	512
Operating cash flow before changes in working capital		85	1,247
Decrease/(increase) in trade and other receivables		13,941	(17,629)
Decrease/(increase) in trading investments		1,349	(2,679)
Increase in stock borrowing collateral		(107)	-
(Decrease)/increase in trade and other payables		(14,247)	16,477
Purchase of available for sale investment		(500)	-
Cash generated from operations		521	(2,584)
Income taxes paid		(75)	(49)
Cash flows from operating activities		446	(2,633)
Investing activities
Purchases of property, plant and equipment		(46)	(207)
Net interest received		60	57
Net cash from investing activities		14	(150)
Financing activities
Purchase of own shares		(661)	(1,193)
Issue of shares		38	163
Dividends paid to equity shareholders		(156)	-
Net cash from financing activities		(779)	(1,030)
Decrease in cash and cash equivalents		(319)	(3,813)
Cash and cash equivalents at the beginning of the year		5,201	9,014
Cash and cash equivalents at the end of the year		4,882	5,201

 

 

 

Consolidated Statement of Changes in Equity

For the year ended 31 October 2012

	Share capital	Share Premium account	Capital Redemption Reserve	Own shares	Employee Benefit Trust Reserve	Available  for sale  Reserve	Retained earnings	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 31 October 2011	2,700	2,933	-	(1,193)	(612)	-	8,189	12,017
Profit for year	-	-	-	-	-	-	141	141
Revaluation of available for sale assets	-	-	-	-	-	(10)	-	(10)
Total comprehensive income for the year	-	-	-	-	-	(10)	141	131
Share based payments	-	-	-	-	-	-	233	233
Issue of shares	38	-	-	-	-	-	-	38
Purchase of own shares	-	-	-	(661)	-	-	-	(661)
Own shares cancelled	(237)	-	237	1,193	-	-	(1,193)	-
Sale of shares held by Employee Benefit Trust	-	-	-	-	5	-	-	5
Dividends paid to equity shareholders	-	-	-	-	-	-	(156)	(156)
Balance at 31 October 2012	2,501	2,933	237	(661)	(607)	(10)	7,214	11,607

 

 

 

Consolidated Statement of Changes in Equity

For the year ended 31 October 2011

	Share capital	Share Premium account	Own shares	Employee Benefit Trust Reserve	Retained earnings	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 31 October 2010	2,544	2,926	-	(648)	7,171	11,993
Profit for year	-	-	-	-	506	506
Total comprehensive income for the year	-	-	-	-	506	506
Share based payments	-	-	-	-	512	512
Issue of shares	156	7	-	-	-	163
Purchase of own shares	-	-	(1,193)	-	-	(1,193)
Sale of shares held by Employee Benefit Trust	-	-	-	36	-	36
Balance at 31 October 2011	2,700	2,933	(1,193)	(612)	8,189	12,017

 

Notes

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

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

3.    The capital redemption reserve is due to the cancellation of 2,372,768 ordinary shares in June 2012.  It represents the nominal value of shares that have been cancelled that were previously held as Treasury Shares.

 

 

 

NOTES

 

1)         Basis of preparation

The financial information set out in this announcement has been prepared in accordance with the recognition and measurement principles of IFRS as endorsed for use in the European Union.

 

The financial information set out in this announcement does not constitute the Group's statutory accounts for the year ended 31 October 2012 or year ended 31 October 2011 under the meaning of s434 Companies Act 2006, but is derived from those accounts.

 

Statutory accounts for the years ended 31 October 2012 and 31 October 2011 have been reported on by the Independent Auditors. 

 

The Independent Auditors' Report on the Annual Report and Financial Statements for the years ended 31 October 2012 and 31 October 2011 was unqualified, did not draw attention to any matters by way of emphasis, and did not contain a statement under 498(2) or 498(3) of the Companies Act 2006.

 

Statutory accounts for the year ended 31 October 2011 have been filed with the Registrar of Companies. The statutory accounts for the year ended 31 October 2012, prepared under IFRS, will be delivered to the Registrar in due course.

 

2)         Revenue

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

 

		2012	2011
		£'000	£'000
Equities Division		6,424	7,638
Corporate Finance Division		3,361	4,743
Total revenue		9,785	12,381

 

Included within revenue of the Equities Division is an amount of £486,000 (2011: £304,000) relating to the fair value adjustment of derivatives held within trading investments that are fair valued through profit or loss.

 

The Directors are of the opinion that there are only two operating segments and while segment revenues are reviewed internally business resources are not allocated to segments for the purposes of deriving either profit or assets.  In 2012 none of the Group's customers contributed more than 10% of the Groups revenue. In 2011, two of the Group's customers each contributed more than 10% of the Group's revenue. The amounts were £1,572,000 which is reflected in the Corporate Finance division revenue and £1,425,000 which is reflected in the Equities Division revenue.

 

3)        Earnings per Share

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

 

	Year ended         31 October 2012			Year ended             31 October 2011
	Pence per Share	Numerator £'000	Pence per Share		Numerator £'000
Basic earnings per share	0.6	141	2.2		506
Add:  IFRS2 share-based payments	1.0	233	2.2		512
Add: Reorganisation payments	1.8	425	0.3		90
Underlying basic earnings	3.4	799	4.7		1,108
Diluted earnings per share	0.6	141	2.0		506
Add: IFRS2 share-based payments	0.9	233	2.0		512
Add: Reorganisation payments	1.7	425	0.3		90
Underlying diluted earnings	3.2	799	4.3		1,108

 

	Year ended  31 October 2012		Year ended  31 October 2011
	Number		Number
Denominator
Weighted average number of shares in issue for Basic Earnings calculation	23,741,595		23,354,081
Weighted average dilution for outstanding share options	951,788		1,821,144
Weighted average number for diluted earnings calculation	24,693,383		25,175,225

The weighted average dilution for outstanding share options was 951,788 (2011: 1,821,144).  The 974,838 (2011: 997,576) shares held by the Arden Partners Employee Benefit Trust and the 1,512,928 (2011: 2,372,768) shares held in Treasury have been treated as cancelled and excluded from the denominator.

 

4)         Annual Report and Accounts

            Copies of the 2012 Report and Accounts will be posted to shareholders in due course.  Copies will also be available from the Company's registered office and from the Company's website.