TIDMXCAP
RNS Number : 0506G
XCAP Securities PLC
31 May 2013
31 May 2013
XCAP Securities plc
("XCAP" or the "Company" or the "Group")
Interim results for six months ended 28 February 2013
XCAP (AIM: XCAP) is an independent investment banking group
offering full service stockbroking, fund management, corporate
advisory and market making services. It presents its unaudited
results for the six months ended 28 February 2013.
Highlights
-- Revenue of GBP2.9 million (6 months to 29 February 2012:
GBP3.2 million) and reduced operating loss of GBP1.9 million (6
months to 29 February 2012: GBP2.0 million);
-- During the reporting period, underlying business showed a
significant upturn compared to the last 6 months of the year ended
31 August 2012 with overall revenues up 37 per cent. This is
reflected by a 2 per cent increase in Capital Markets revenue and a
64 per cent increase in Wealth Management revenue which is partly
attributable to the acquisition of Hume. Head office administrative
expenses (as stated in note 3 to the accounts) have fallen by 22
per cent over the same period;
-- GBP2.4 million of new equity raised in December 2012 along
with completion of the acquisition of the Hume Capital asset
management trading businesses ("Hume") with full integration now
complete and material cost savings starting to feed through into
the results of the Group post period end;
-- As at the period end and the date of this report the Group
remains debt-free with no short-term or long-term borrowings;
-- Significant investments made in the Group's Corporate and
Distribution teams. A new Head of Corporate has been appointed
along with an increased research and distribution platform offering
a compelling value proposition for clients;
-- Following these new appointments, the Company is looking to
raise up to GBP500,000 via a placing of new shares at 0.3p per
share (being a premium of 33 per cent to the closing mid-price on
30 May 2013) to certain new investors and new members of staff who
are keen to invest into the growth potential of the Group. The
Group already has signed commitments from some investors and will
look to complete the placing now other individuals who have
expressed an interest are outside of a close period. A further
announcement will be made in due course;
-- Subsequent to the interim period end the Group has made
progress in line with its business strategy and the Board can see a
clear path to profitability. The Board has targeted a reduction in
fixed costs across the Group of 30 per cent post-acquisition of
Hume and the Group is well on the way to achieving this; and
-- Net asset position of GBP3.9 million (2012: GBP4.9 million)
with cash balance of GBP0.6 million (2012: GBPnil). The changes to
the operational structure of the Group resulted in significant
operating cash outflow during the period which has been funded
through the capital raised in October 2012. The business has
already been able to reduce this operating cash outflow and is
expected to benefit from a stronger cash position in the near
future.
Commenting on the results, Nitin Parekh, Chief Executive Officer
said: "The last six months have seen a dramatic change in XCAP's
business following its acquisition of the Hume asset management
businesses in the UK and overseas. Our integration and cost cutting
measures have proved far more successful than originally thought
and will continue in the coming year. We have been successful in
attracting very high calibre staff and have a clear strategic
direction focused on providing a one stop service for growth
companies, based upon providing the highest standards of
proactivity, client care and service. Our Wealth Management
business has made our revenue base more stable, thus reducing the
risk in the overall business."
A copy of the half yearly report will be available shortly on
the Company's website www.xcapgroup.com
Enquiries:
XCAP Securities plc
Nitin Parekh (Chief Executive Officer) +44 (0)20 7101 7070
Grant Thornton UK LLP
Philip Secrett/Melanie Frean +44 (0)20 7383 5100
24/7 Communications
Bob Bion +44 (0)7810 692 594
Claritas Communications
Jacqueline O'Mahoney
jomahony@claritas-communications.com +44 (0)20 7166 6090
Deborah Cavanagh
dcavanagh@claritas-communications.com
Chief Executive Officer's Statement
I present the Company's unaudited results for the six months
ended 28 February 2013.
The last six months have been a period of dramatic but necessary
change for the Group. In the period under review the results
reflect continuing difficult conditions not only for the Group's
business but for financial markets as a whole.
The Board believes that the Hume acquisition along with changes
to the operational structure of the Group and a substantial
reduction in the Group's cost base, mean the business is now in a
strong position to grow in line with our expectations. However, the
Board is still very mindful of the risks and uncertainties in the
current financial environment and have outlined these in note 2 to
these accounts.
Any acquisition process followed by a period of integration can
be unsettling but our management team has ensured that the process
has been completed swiftly and with minimal disruption. I can now
report to shareholders that the process is complete and the
businesses are fully integrated.
Inevitably, cost savings have been at the centre of the
integration programme. Our target cost savings of GBP400,000 per
annum identified from our pre-completion synergy analysis have
tripled and already total more than GBP1.2 million on an annualised
basis. I can also report that those savings are now rapidly
beginning to flow through into bottom line improvement.
We are well on the way to achieving the Board's target of a 30
per cent reduction in Group wide fixed costs compared to December
2012. This has been achieved without any impact on the revenue
generating ability of the Group. Over the coming months, the Board
expect costs to remain well contained and revenues to start
increasing through the selective hires the Board have made.
The principal change in the business has occurred post
integration of Hume. The combined Hume and XCAP Wealth Management
division already accounts for over 60 per cent of revenue and this
has reduced the risk profile of the Group. The higher proportion of
recurrent revenue within this base enables the Group to invest in
areas where it sees significant market opportunities, and the Board
has identified and we are implementing these strategies in each
business division.
The strategy that the Group has adopted clearly focuses on areas
where we believe the highest returns on capital can be generated.
The Group has been repositioned into two synergistic divisions,
Capital Markets and Wealth Management. Capital Markets is focused
on providing high quality corporate advice, and crucially helping
our corporate clients to execute their strategy by meeting their
funding needs. To this end, we have strengthened our advisory,
research and distribution capabilities, by attracting high calibre
industry professionals and incentivising them appropriately. We
intend to invest further in our Market Making team, which has been
consistently profitable during this difficult period.
The second key division is Wealth Management, where we have
restructured the different market segments that the Group services.
Our strategy is to 'ladder' the Wealth Management offering, such
that we not only have better client retention, but are able to
offer a broader product range. With the Hume acquisition, the
Company has in excess of 4,000 high net worth clients, and the
strategy is to grow from this base. The Group now has in excess of
GBP300 million of assets under influence, and we will seek to add
to these both organically and selectively through acquisition.
In the present period there has been continued market
turbulence, and against this background the Group has recorded a
loss before tax and a significant operating cash outflow.
However, with the Hume acquisition, the changes to the
operational structure of the Group, and a substantial reduction in
the Group's cost base, the business has already been able to
significantly reduce this cash outflow and is expected to benefit
from a positive cash position in the months ahead.
The new Company structure is now leaner with a clear focus on
creating value for all our stakeholders. Since the period end, the
Group has continued to execute its strategy of reducing costs and
increasing revenues. After a disappointing period, we believe we
have positioned the business correctly to meet the challenges
ahead. In April this year, the CBI and PwC released a statement
reporting that financial services firms had seen an upturn in
activity. We too are seeing similar upturns in prospects and our
trading conditions, whilst remaining highly volatile with investors
still remaining cautious, do appear to be improving. It is
therefore with cautious optimism that your board looks to the
coming year.
Finally, your Board would like to thank all shareholders and
both our new and old staff for their unstinting commitment and
support during the period.
Nitin B. Parekh
Chief Executive Officer
Independent review report to the members of XCAP Securities
plc
We have been engaged by the Company to review the condensed set
of financial statements in the half-yearly financial report for the
six months ended 28 February 2013 which comprises the income
statement, the balance sheet, the statement of changes in equity,
the cash flow statement and related notes 1 to 11. We have read the
other information contained in the half-yearly financial report and
considered whether it contains any apparent misstatements or
material inconsistencies with the information in the condensed set
of financial statements.
This report is made solely to the Company in accordance with
International Standard on Review Engagements (UK and Ireland) 2410
"Review of Interim Financial Information Performed by the
Independent Auditor of the Entity" issued by the Auditing Practices
Board. Our work has been undertaken so that we might state to the
Company those matters we are required to state to it in an
independent review 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, for our review work, for this
report, or for the conclusions we have formed.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, the directors. The directors are responsible
for preparing the half-yearly financial report in accordance with
the AIM Rules of the London Stock Exchange.
As disclosed in note 1, the annual financial statements of the
Group are prepared in accordance with IFRSs as adopted by the
European Union. The condensed set of financial statements included
in this half-yearly financial report has been prepared in
accordance with International Accounting Standard 34, "Interim
Financial Reporting," as adopted by the European Union.
Our responsibility
Our responsibility is to express to the Company a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review.
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410 "Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity" issued by the Auditing Practices Board for use in
the United Kingdom. A review of interim financial information
consists of making inquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures. A review is substantially less in scope than an
audit conducted in accordance with International Standards on
Auditing (UK and Ireland) and consequently does not enable us to
obtain assurance that we would become aware of all significant
matters that might be identified in an audit. Accordingly, we do
not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 28
February 2013 is not prepared, in all material respects, in
accordance with International Accounting Standard 34 as adopted by
the European Union and the AIM Rules of the London Stock
Exchange.
Deloitte LLP
Chartered Accountants and Statutory Auditor
Manchester, United Kingdom
31 May 2013
XCAP Securities plc
Consolidated Income Statement - Unaudited
For the half year ended 28 February 2013
Half year Half year Year ended
ended 28 February ended 29 February 31 August
2013 2012 2012
Note GBP'000 GBP'000 GBP'000
Revenue 3 2,887 3,187 5,280
Administrative expenses (4,745) (5,078) (9,566)
Share based payments (28) (113) (78)
Operating loss (1,886) (2,004) (4,364)
Fair value gains on investments - - 10
Other income - - (46)
Finance costs (39) (52) (89)
Interest income 2 2 6
Loss before tax (1,923) (2,054) (4,483)
Tax 9 - 368 (229)
Total loss for the period (1,923) (1,686) (4,712)
Total comprehensive loss
for the period (1,923) (1,686) (4,712)
Loss per share
Basic 4 (0.2p) (0.4p) (1.0p)
Diluted 4 (0.2p) (0.4p) (1.0p)
All the Group's revenue and operating loss was derived from
continuing operations.
XCAP Securities plc
Consolidated Balance Sheet - Unaudited
As at 28 February 2013
28 February 29 February 31 August
2013 2012 2012
Note GBP'000 GBP'000 GBP'000
Non-current assets
Fixtures and equipment 505 509 526
Intangible assets and goodwill 1,383 - -
Deferred tax asset 9 792 1,388 792
2,680 1,897 1,318
Current assets
Trade and other receivables 24,574 41,350 16,579
Trading portfolio assets 5 406 1,808 456
Investments 61 8 10
Cash and bank balances 6 560 461 328
25,601 43,627 17,373
Total assets 28,281 45,524 18,691
Current liabilities
Trade and other payables (24,224) (39,387) (16,341)
Trading portfolio liabilities 5 (169) (434) (210)
Bank overdraft 6 - (830) (328)
Total liabilities (24,393) (40,651) (16,879)
Net current assets 1,208 2,976 494
Net assets 3,888 4,873 1,812
Equity
Share capital 7 1,589 2,196 2,196
Share premium account 8 10,453 7,632 7,632
Retained loss (9,911) (4,955) (8,016)
Deferred share reserve 7 1,757 - -
Total equity 3,888 4,873 1,812
XCAP Securities plc has four subsidiaries, EPIC Investment
Partners Limited, Hume Capital Management Limited and Hume Capital
Guernsey Limited and XCAP Nominees Limited. The financial
statements of XCAP Securities plc (registered number 6920660) were
approved by the Board of Directors and authorised for issue on 31
May 2013. They were signed on its behalf by:
Michael Andrew Frame
Finance Director
31 May 2013
XCAP Securities plc
Consolidated Statement of Changes in Equity - Unaudited
For the half year ended 28 February 2013
Share Share Other Retained Total
Capital Premium reserves Earnings
Account
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 31 August
2011 1,939 6,479 - (3,382) 5,036
Loss for the period - - - (1,686) (1,686)
Issue of share capital 257 1,153 - - 1,410
Credit to equity
for equity-settled
share - - 113 113
based payments
Balance at 29 February
2012 2,196 7,632 - (4,955) 4,873
Loss for the period - - - (3,106) (3,106)
Credit to equity
for equity-settled
share based payments - - - 45 45
Balance at 31 August
2012 2,196 7,632 - (8,016) 1,812
Loss for the period - - - (1,923) (1,923)
Issue of share capital 1,150 2,821 - - 3,971
Credit to equity
for equity-settled
share 28 28
based payments
Share capital re-organisation (1,757) - 1,757 - -
Balance at 28 February
2013 1,589 10,453 1,757 (9,911) 3,888
XCAP Securities plc
Consolidated Cash Flow Statement - Unaudited
For the half year ended 28 February 2013
Half year Half year
ended ended Year ended
28 February 29 February 31 August
2013 2012 2012
Note GBP'000 GBP'000 GBP'000
Net cash used in operating activities 10 (1,697) (1,662) (1,385)
Investing activities
Proceeds on disposal of fixtures
and equipment - - 4
Purchases of fixtures and equipment (82) (92) (205)
Net cash used in investing activities (82) (92) (201)
Financing activities
Net proceeds on issue of shares 2,376 1,175 1,409
Finance costs (39) (52) (89)
Interest income 2 2 6
Net cash from financing activities 2,339 1,125 1,326
Net increase/(decrease) in cash
and cash equivalents 560 (629) (260)
Cash and cash equivalents at beginning
of period - 260 260
Cash and cash equivalents at end
of period 6 560 (369) -
XCAP Securities plc
Notes to the Financial Statements
For the half year ended 28 February 2013
1. Basis of preparation
The interim financial information has been prepared in
accordance with International Accounting Standard ("IAS") 34 -
"Interim Financial Reporting". The same accounting policies,
presentation and methods of computation are followed in these
condensed financial statements as were applied in the preparation
of the Group's financial statements for the year ended 31 August
2012 with the exceptional of the additional policies adopted in
relation to the acquisition of Hume as follows:
Business combinations
Acquisitions of subsidiaries and businesses are accounted for
using the acquisition method. The consideration for each
acquisition is measured at the aggregate of the fair values (at the
date of exchange) of assets given, liabilities incurred or assumed,
and equity instruments issued by the Group in exchange for control
of the acquiree. Acquisition-related costs are recognised in profit
or loss as incurred.
Where applicable, the consideration for the acquisition includes
any asset or liability resulting from a contingent consideration
arrangement, measured at its acquisition-date fair value.
Subsequent changes in such fair values are adjusted against the
cost of acquisition where they qualify as measurement period
adjustments (see below). All other subsequent changes in the fair
value of contingent consideration classified as an asset or
liability are accounted for in accordance with relevant IFRSs.
Changes in the fair value of contingent consideration classified as
equity are not recognised.
Where a business combination is achieved in stages, the Group's
previously-held interests in the acquired entity are remeasured to
fair value at the acquisition date (i.e. the date the Group attains
control) and the resulting gain or loss, if any, is recognised in
profit or loss. Amounts arising from interests in the acquiree
prior to the acquisition date that have previously been recognised
in other comprehensive income are reclassified to profit or loss,
where such treatment would be appropriate if that interest were
disposed of.
The acquiree's identifiable assets, liabilities and contingent
liabilities that meet the conditions for recognition under IFRS
3(2008) are recognised at their fair value at the acquisition date,
except that:
-- deferred tax assets or liabilities and liabilities or assets
related to employee benefit arrangements are recognised and
measured in accordance with IAS 12 Income Taxes and IAS 19 Employee
Benefits respectively;
-- liabilities or equity instruments related to the replacement
by the Group of an acquiree's share based payment awards are
measured in accordance with IFRS 2 Share-based Payment; and
-- assets (or disposal groups) that are classified as held for
sale in accordance with IFRS 5 Noncurrent Assets Held for Sale and
Discontinued Operations are measured in accordance with that
Standard.
If the initial accounting for a business combination is
incomplete by the end of the reporting period in which the
combination occurs, the Group reports provisional amounts for the
items for which the accounting is incomplete. Those provisional
amounts are adjusted during the measurement period (see below), or
additional assets or liabilities are recognised, to reflect new
information obtained about facts and circumstances that existed as
of the acquisition date that, if known, would have affected the
amounts recognised as of that date.
The measurement period is the period from the date of
acquisition to the date the Group obtains complete information
about facts and circumstances that existed as of the acquisition
date, and is subject to a maximum of one year.
Goodwill
Goodwill arising in a business combination is recognised as an
asset at the date that control is acquired (the acquisition date).
Goodwill is measured as the excess of the sum of the consideration
transferred, the amount of any non-controlling interest in the
acquiree and the fair value of the acquirer's previously held
equity interest (if any) in the entity over the net of the
acquisition-date amounts of the identifiable assets acquired and
the liabilities assumed.
If, after reassessment, the Group's interest in the fair value
of the acquiree's identifiable net assets exceeds the sum of the
consideration transferred, the amount of any non-controlling
interest in the acquiree and the fair value of the acquirer's
previously held equity interest in the acquiree (if any), the
excess is recognised immediately in profit or loss as a bargain
purchase gain.
Goodwill is not amortised but is reviewed for impairment at
least annually. For the purpose of impairment testing, goodwill is
allocated to each of the Group's cash-generating units expected to
benefit from the synergies of the combination. Cash-generating
units to which goodwill has been allocated are tested for
impairment annually, or more frequently when there is an indication
that the unit may be impaired. If the recoverable amount of the
cash-generating unit is less than the carrying amount of the unit,
the impairment loss is allocated first to reduce the carrying
amount of any goodwill allocated to the unit and then to the other
assets of the unit pro-rata on the basis of the carrying amount of
each asset in the unit. An impairment loss recognised for goodwill
is not reversed in a subsequent period.
Impairment of tangible and intangible assets excluding
goodwill
At each balance sheet date, the Group reviews the carrying
amounts of its tangible and intangible assets to determine whether
there is any indication that those assets have suffered an
impairment loss.
If any such indication exists, the recoverable amount of the
asset is estimated to determine the extent of the impairment loss
(if any). Where the asset does not generate cash flows that are
independent from other assets, the group estimates the recoverable
amount of the cash-generating unit to which the asset belongs. An
intangible asset with an indefinite useful life is tested for
impairment at least annually and whenever there is an indication
that the asset may be impaired.
Recoverable amount is the higher of fair value less costs to
sell and value in use. In assessing value in use, the estimated
future cash flows are discounted to their present value using a
pre-tax discount rate that reflects current market assessments of
the time value of money and the risks specific to the asset for
which the estimates of future cash flows have not been
adjusted.
If the recoverable amount of an asset (or cash-generating unit)
is estimated to be less than its carrying amount, the carrying
amount of the asset (or cash-generating unit) is reduced to its
recoverable amount.
An impairment loss is recognised immediately in profit or loss,
unless the relevant asset is carried at a revalued amount, in which
case the impairment loss is treated as a revaluation decrease.
Where an impairment loss subsequently reverses, the carrying amount
of the asset (or cash-generating unit) is increased to the revised
estimate of its recoverable amount, but so that the increased
carrying amount does not exceed the carrying amount that would have
been determined had no impairment loss been recognised for the
asset (or cash-generating unit) in prior years.
A reversal of an impairment loss is recognised immediately in
profit or loss, unless the relevant asset is carried at a revalued
amount, in which case the reversal of the impairment loss is
treated as a revaluation increase.
The information for the period ended 28 February 2013 does not
constitute statutory accounts as defined in section 434 of the
Companies Act 2006. A copy of the statutory accounts for that year
has been delivered to the Registrar of Companies. The auditor's
report on those accounts was not qualified, did not include a
reference to any matters to which the auditors drew attention by
way of emphasis without qualifying the report and did not contain
statements under section 498(2) or (3) of the Companies Act 2006.
However, the information for the period ended 28 February 2013 has
been reviewed by the Company's auditors, Deloitte LLP and their
report appears above.
Going concern
As outlined in the Chief Executive Officer's statement, overall
economic and trading conditions have remained poor in the period
resulting in executive management's prior and continuing actions in
reducing overall costs, both from an operational and staffing
perspective. In addition, the Group is looking to raise up to
GBP500,000 via a placing of new shares at 0.3p per share to certain
new investors and new members of staff who are keen to invest into
the growth potential of the Group. The Group already has signed
commitments from some investors and will look to complete the
placing now other individuals who have expressed an interest are
outside of a close period. This has provided a much firmer base in
which to move forward to profitability and the Board remains
committed to its strategic development.
As a result, having considered the liquidity position of the
Group and its cash flows and forecasts for the next 12 months
together with the uncertainties impacting those areas and the
broader business and market, as well as the options that are
available to the Group for ways to bring working capital back to
the business and other external capital raising methods, the
directors are satisfied that the Group has sufficient resources to
continue in operational existence for the foreseeable future.
Accordingly they continue to adopt the going concern basis in
preparing the condensed financial statements.
2. Key risks affecting the business
There are a number of potential risks and uncertainties that
could have an impact on the performance of the Group. Whilst there
are others identified (and approved by the Group's Risk and
Compliance Committee (comprising only non-executive directors) and
subsequently the Board in terms of their management through its
systems and controls) in the Group's documented risk management
framework, the key risks include:
Market conditions
The Group's business is inherently subject to the risk of market
fluctuations, which could materially, adversely affect its
operating results, financial condition and prospects. The Group's
businesses are subject to inherent risks arising from general and
sector-specific economic conditions. Adverse developments, such as
the current and ongoing crisis in the global financial markets,
recession, and further deterioration of general economic conditions
would adversely affect the Group's earnings and profits.
In mid-2008 the global economy entered a severe recession which
has been and is expected to be prolonged and could be exacerbated
even further by deflationary forces or failure of monetary measures
to combat deflation.
The Group has been particularly affected by this factor
demonstrated by volatile trading volumes with associated
deteriorating revenue performance. The Group has sought,
proactively and at all times, to significantly reduce its cost base
and focus on non-trading based revenue streams to insulate itself
as far as practicable from this volatility but it should be noted
that any business of this nature requires a fixed cost base below
which it is impossible to provide the full range of services on
which its business depends and on that basis, closure of business
divisions (with associated revenue impact) to protect the
continuing operation is always a possibility. Further specific
mitigants the Group has identified are detailed below.
Whilst the Group does have a predominantly fixed cost base which
potentially could require time to adjust, the Group has
significantly reduced this and continues to increase the proportion
of variable cost to total costs in order to limit the impact of any
further market downturn on the profitability and to maximise the
flexibility and responsiveness of the Group.
Significantly higher unemployment in the UK and elsewhere,
reduced corporate profitability, reduced personal non-salary income
levels, increased corporate insolvency rates, increased personal
insolvency rates, increased tenant defaults and/or increased rates,
may also affect the Group's business.
The Group mitigates this risk by diversifying the operations so
that it does not rely on any individual business stream to be able
to continue to operate. In addition, the Board has focused heavily
on increasing the percentage of retained revenue in the Group
through both the acquisition of Hume and also the focus on growing
the corporate department and the number of retained clients.
Market risk
As with other firms in our sector, XCAP is vulnerable to adverse
movements in the value of financial instruments. The Group's market
making team takes long and short positions in equities. To mitigate
this risk, limits apply to the overall long and short positions
that the market making team are permitted to commit to. These
limits are monitored in accordance with policies approved by the
Board.
Furthermore, market risk is calculated daily as part of the
firms monitoring of its regulatory capital.
Liquidity risk
Any business operating in the sector in which the Group does is
dependent upon maintaining sufficient regulatory and working
capital to continue operations. The Group has sufficient capital in
place to meet its regulatory and working capital needs. However, if
this was found not to be possible, the Group's risk framework
includes plans for ways to bring working capital back to the
business and other external capital raising methods to enable the
business to meet its capital requirements across the business.
Dependence on key personnel
The Group is a relatively new business with a small number of
employees. The failure to recruit or loss of the services of
certain key employees, particularly to competitors, could have a
material adverse effect on the Group's operating results, financial
condition and prospects.
In addition, as the Group's businesses develop, the future
success will depend on the ability to attract and retain highly
skilled and qualified personnel, which cannot be guaranteed. To
seek in part to mitigate this risk, the Group has implemented,
"keyman" insurance on terms considered prudent by the Board in
respect of each executive Director.
Furthermore, the majority of staff currently participate in the
Group's share option scheme. This will be reviewed during 2013 to
ensure that options continue to be attractive and act as incentive
to all employees.
Credit risk
Credit risk is the risk that the Group suffers a financial loss
following a client or counterparty failing to meet their
contractual settlement obligations. The Group's market making
business contracts with other market counterparties. Counterparties
and the level of credit that they are granted are reviewed on a
regular basis and the Group is never materially exposed at any time
to any one particular counterparty.
XCAP does not extend credit to its retail clients and these
clients are expected to trade within predetermined credit and
collateral limits. These limits are monitored by the Group's
compliance team and any adverse findings are notified to the firm's
executive management for immediate action. The Group has suffered
no bad debts in terms of its retail clients in its three-year
history.
Additionally, risk assessments are performed on an ongoing basis
during the year on banks and custodians.
Operational risk
This is defined as the risk of loss arising from inadequate or
failed internal processes, people, systems or external events. The
Group has embedded a risk management framework that identifies and
assesses risks in order to manage and mitigate them in an efficient
manner.
Regulatory risk
Regulatory risk is the risk that the Group fails to comply with
any of the regulations set by the various regulatory bodies that
the Group operates under. Regulatory risk is best achieved by
managing all other risks satisfactorily. Key to this is:
1. adopting a robust "top down" system of corporate governance
headed by the non-executive Risk and Compliance committee which is
Chaired by the Group's senior non-executive director. The committee
meets in person every two months and on an ad-hoc basis in between.
The Group's head of risk and compliance attend all meetings of the
committee day with senior members of the firm's finance function
and its Chief Operating Officer;
2. a non-executive board of 3 directors bringing significant
business expertise in the financial services sector and seeking to
enhance an independent and balanced decision making process,
particularly around regulatory matters; and
3. an effective risk and compliance team handling day to day
management of regulatory risk for the Group and monitoring of its
business to ensure compliance with the standards set out in the FCA
Handbook and the AIM Rules for Companies.
3. Business and geographical segments
Products and services from which reportable segments derive
their revenues
Information reported to the Group's Chief Executive Officer for
the purposes of resource allocation and assessment of segment
performance is focussed on the category of customer for each type
of activity. The Group's reportable segments under IFRS 8 are as
follows:
-- Capital Markets
-- Wealth Management*
Information regarding the Group's operating segments is reported
below. The following is an analysis of the Group's revenue and
results by reportable segment for the 6 months to 28 February
2013:
Capital Markets Wealth Management Consolidated
Half year Half year Half year
ended 28 ended 28 ended 28
February February February
2013 2013 2013
GBP'000 GBP'000 GBP'000
Revenue
External sales 902 1,985 2,887
Result
Segment result 47 (501) (454)
Central administrative
expenses (1,432)
-------------
Operating loss (1,886)
Finance costs (39)
Interest income 2
Loss before tax (1,923)
Tax -
Loss after tax (1,923)
=============
Geographical information
The Group's revenue is materially generated within the UK.
*This division includes the XCAP stockbroking division from
previous reporting periods
The following is an analysis of the Group's revenue and results
by reportable segment for the 6 months ended 29 February 2012:
Capital Markets Wealth Management Consolidated
Half year Half year Half year
ended 29 ended 29 ended 29
February February February
2012 2012 2012
GBP'000 GBP'000 GBP'000
Revenue
External sales 1,082 2,105 3,187
Result
Segment result (332) (110) (442)
Central administrative
expenses (1,562)
-------------
Operating loss (2,004)
Finance costs (52)
Interest income 2
Loss before tax (2,054)
Tax 368
Loss after tax (1,686)
=============
The following is an analysis of the Group's revenue and results
by reportable segment for the year to 31 August 2012:
Capital Wealth Management Consolidated
Markets
Year ended Year ended Year ended
31 August 31 August 31 August
2012 2012 2012
GBP'000 GBP'000 GBP'000
Revenue
External sales 1,968 3,312 5,280
Result
Segment result (402) (567) (969)
Central administrative expenses (3,395)
-------------
Operating loss (4,364)
Fair value gains on investments 10
Other (losses)/income (46)
Finance costs (89)
Interest income 6
Loss before tax (4,483)
Tax (229)
Loss after tax (4,712)
=============
4. Earnings per share
The calculation of the basic and diluted loss per share is based
on the following data:
Half year Half year Year ended
ended 28 February ended 29 February 31 August
2013 2012 2012
GBP'000 GBP'000 GBP'000
Loss for the purposes of basic loss
per share being net loss attributable
to owners of the Group (1,923) (1,686) (972)
Number of shares '000 '000 '000
Weighted average number of ordinary
shares for the purposes of basic
loss per share 884,841 422,021 377,834
Effect of dilutive potential ordinary
shares:
Share options 66,300 70,600 75,100
Ordinary shares issued post period
end - - 51,465
Weighted average number of ordinary
shares for the purposes of diluted
(loss) / profit per share 951,141 492,621 504,399
Share options and ordinary shares issued post period end are
antidilutive and therefore are disregarded in the calculation of
diluted loss per share.
5. Trading Investments
Trading portfolio assets
Half year Half year
ended 28 ended 29 Year ended
February February 31 August
2013 2012 2012
GBP'000 GBP'000 GBP'000
Long positions in market
making and dealing operations 406 1,808 456
The long trading portfolio assets are shares listed on LSE
Official List and AIM markets.
Trading portfolio liabilities
Half year ended Half year Year ended
28 February ended 29 February 31 August
2013 2012 2012
GBP'000 GBP'000 GBP'000
Short positions in market making
and dealing operations 169 434 210
The short trading portfolio assets are shares listed on LSE
Official List and AIM markets.
6. Cash, cash equivalent and bank overdraft
Half year Half year
ended 28 ended 29 Year ended
February February 31 August
2013 2012 2012
GBP'000 GBP'000 GBP'000
Cash at bank and in hand 560 461 328
Bank overdraft - (830) (328)
560 (369) -
Client Money
Client money, held in segregated accounts not included in the
balance sheet, was GBP2.53 million (29 February 2012 - GBP5.21
million, 31 August 2012 - GBP2.68 million).
7. Share capital
Half year Year ended
ended 28 Half year 31
February ended 28 February August
2013 2012 2012
GBP'000 GBP'000 GBP'000
Authorised, allotted, issued:
1,589.324 million of 0.1 pence
each (29 February 2012 439.176
million ordinary shares of 0.5
pence each) 1,589 2,196 2,196
The Company has one class of ordinary shares which carries no
right to fixed income.
On 14 December 2012 XCAP announced that it received regulatory
approval to allow the acquisition of the Hume Capital companies,
together with a placing to raise approximately GBP2.4 million. All
conditions have now been satisfied and the Acquisition and Placing,
as defined in the announcement on 3 October 2012, have
completed.
Accordingly, on 14 December 2012 the Company applied for
439,176,582 new ordinary shares of 0.1 pence each in the Company
("Ordinary Shares") issued pursuant to the Acquisition and
678,783,514 Ordinary Shares issues pursuant to the Placing. The
shares were admitted to trading on AIM on 20 December 2012.
As the Placing Price was less than the current nominal value of
the Existing Ordinary Shares, to enable the Placing to proceed it
was necessary to reorganise the Company's share capital by
sub-dividing and re-designating each Existing Ordinary Share into
one New Ordinary Share of 0.1 pence nominal value and one Deferred
Share of 0.4 pence nominal value (as set out in the table
below).
Pre Capital Reorganisation Post Capital Reorganisation
--------------------------- ----------------------------------------------
Existing Ordinary Shares Number of New Ordinary Number of Deferred
of 0.5 pence each Shares of 0.1 pence Shares of 0.4 pence
each each
--------------------------- ----------------------- ---------------------
1 1 1
--------------------------- ----------------------- ---------------------
The Capital Reorganisation has had no material impact on the
rights of the holders of Existing Ordinary Shares, which will
continue to carry the same voting rights and rights to dividends
and capital as previously. The New Ordinary Shares will continue to
be admitted to trading on the AIM market as currently. The New
Ordinary Shares will reflect the same proportion of the Company's
value as the Existing Ordinary Shares and therefore their intrinsic
value will be the same.
The Deferred Shares have very limited rights (contained in the
New Articles) such that, in practical terms they have no value and,
in the same way, nor do they carry any rights to voting, dividends
or a return on capital (otherwise than on a winding up). No
application has been made for admission of the Deferred Shares to
trading on AIM. It is envisaged that at a convenient time the
Deferred Shares will be purchased by or on behalf of the Company
and cancelled in accordance with the provisions of the New
Articles.
8. Share premium account
Expenses of issue of equity shares relate to fees in connection
with fundraising for the IPO subscription.
Share
premium
GBP'000
Balance at 31 August 2011 6,479
Premium arising on issue of equity
shares 1,158
Less expenses of issue of equity
shares (5)
Balance at 29 February 2012 and
31 August 2012 7,632
Premium arising on issue of equity
shares 2,821
Balance at 28 February 2013 10,453
=========
9. Tax
Half year Half year
ended 28 ended 29 Year ended
February February 31 August
2013 2012 2012
GBP'000 GBP'000 GBP'000
Current tax:
UK Corporation tax - - -
- - -
Deferred tax:
Current period - 368 (229)
The deferred tax asset recognised in the balance sheet is
consistent with the balance as at 31 August 2012. This is due to
the bases and forecasts on which the asset is calculated remaining
consistent with the year-end calculation.
10. Notes to the cash flow statement
Half year Half year
ended 28 ended 29 Year ended
February February 31 August
2013 2012 2012
GBP'000 GBP'000 GBP'000
Loss for the period (1,923) (1,686) (4,712)
Adjustments for:
Finance costs 39 52 89
Interest income (2) (2) (6)
Deferred tax asset - (367) 229
Depreciation of fixtures and equipment 103 84 176
Share-based payment expense 28 113 78
Shares issued for non-cash consideration 366 - -
Operating cash flows before movements
in working capital (1,389) (1,806) (4,146)
Net assets acquired on acquisition of
Hume (154) - -
(Increase)/decrease in receivables (7,995) (21,983) 2,553
Decrease in net long and short positions 9 70 1,198
Increase in investments (51) - (2)
Increase/(decrease) in payables 7,883 22,057 (988)
Net cash from operating activities (1,697) (1,662) (1,385)
11. Acquisition of subsidiaries
On 14 December 2013, XCAP acquired 100 per cent of the issued
share capital of EPIC Investment Partners Limited and 100 per cent
of the issued share capital of Hume Capital Guernsey Limited,
obtaining control of both companies. EPIC Investment Partners
Limited owns 100 per cent of the issued share capital of Hume
Capital Management Limited.
These companies were the trading or fund management companies
within the Hume Capital LLP group of companies. They are
multi-asset, multi-disciplinary firms with a focus on equities,
fixed income, absolute return strategies and multi-manager products
with total assets under management in excess of GBP250 million.
The Company believes that the financial stability that this
transaction provides will create opportunities for the enlarged
group to gain critical mass and to increase both assets under
management and the level of trading and corporate advisory work we
undertake.
XCAP has recognised goodwill in respect of the Hume acquisition
as per the table below. The factors that make up the goodwill
recognised include but are not limited to, the greater P/E ratio
valuations placed on firms with assets under management compared to
pure trading houses and assisting in delivering the benefits of
recurring and non-trading dependent revenue.
The goodwill calculated is provisional since the Company is
currently finalising the valuation of intangible assets and
associated deferred tax balances. In line with the requirements
under IFRS 3, the Company may also reassess the acquisition
balances during the measurement period of up to 12 months if new
facts and circumstances arise that existed at the acquisition
date.
The amounts recognised in respect of the identifiable assets
required and liabilities assumed are as set out in the table
below:
GBP'000
Financial assets
Net assets 154
Identifiable intangible assets 451
Total identifiable assets 605
Goodwill 932
--------
Total consideration 1,537
========
Satisfied by:
Ordinary shares of XCAP Securities
plc 1,537
========
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR LLFSVETILVIV
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