Source - LSE Regulatory
RNS Number : 5729T
MJ Hudson Group PLC
25 November 2021
 

25 November 2021

 

MJ Hudson Group plc

(the "Company", "Group" or "MJ Hudson")

 

Full year results for the twelve months ended 30 June 2021

 

MJ Hudson Group plc (AIM:MJH), the specialist service provider to the asset management industry, today announces its full year results for the year ended 30 June 2021 ( "FY21").

Financial Highlights

Statutory results^

·      Revenue of £39.8m compared with £22.3m in the year to 30 June 2020 ("FY20")

·      Loss before tax of £(5.3)m (FY20 restated :£(7.3)m)

·      Net debt position of £(6.9)m as at 30 June 2021 (excluding IFRS16 leases)

^ The statutory results include certain passthrough revenues in respect of the Group´s Outsourcing segment. As a result, the Group considers that Underlying Revenue - which excludes these passthrough revenues - is a better guide to the development of the business.

Underlying results

·      Underlying Revenue growth of 26% to £25.5m from £20.3m in the year to 30 June 2020*

·      Underlying EBITDA up 47% to £ 5.6m, (FY20 restated: £ 3.8m)

·      Pre-tax profit more than doubled to £2.4m (FY20 restated: £0.9m)

·      Diluted EPS of 1.3p (FY20: 0.5p)

·      Proposed maiden dividend of 0.125p per share in respect of FY21

 

 

Operational Highlights

 

·      Strong finish to FY21 with gains across all three divisions in the second half and 14% organic revenue growth for the full year as a whole

·      Amongst significant new client activity, five notable client wins, each with potential to be top 10 clients by revenue in 2022

·      Three acquisitions completed in the period: PERACS; Bridge Consulting; and Clarus Risk, each adding additional clients, services, and scale to the Group.

·      Completed the acquisition of the Saffery Champness Funds Limited, post-period-end, following receipt of regulatory approval, adding to the team in Guernsey

·      Total of eight acquisitions made, since 2018; M&A pipeline remains active.

·      Strong trading in current financial year, continuing the momentum established in the last six months of FY21, with good contributions from recent acquisitions in both Outsourcing and Data & Analytics.

 

Financial Summary

 

Statutory results

 

2021 

2020*  

Change 

 

£m 

£m 

 

Revenue 

39.8 

22.3 

78.5% 

Operating loss

(5.1) 

(5.1) 

0% 

Loss before taxation 

(5.3) 

(7.3) 

27.4% 

Loss for the year 

(5.4) 

(7.5) 

28.0% 

 

 

Underlying results

2021 

2020* 

Change 

 

£m 

£m 

 

Underlying Revenue 

25.5 

20.3 

25.6% 

Underlying EBITDA 

5.6 

3.8 

47.3% 

Underlying Operating profit 

3.4 

1.9 

78.9% 

Underlying Profit before taxation 

2.4 

0.9 

166.7% 

Underlying Profit for the year 

2.3 

0.7 

228.6% 

 

 

 

 

Underlying EBITDA margin 

22% 

19%

 

Underlying diluted earnings per share 

1.3p 

0.5p 

 

Net (debt)/ cash excluding IFRS16 leases 

£(6.9)m 

£10.0m 

 

Proposed dividend per share

0.125p 

n/a 

 

 

 

 

 

 

Notes 

1. Underlying Revenue is statutory revenue less direct cost of sales. 

2.Underlying EBITDA is segment profit/(loss) before: share based payments expense (including LTIP); fundraising and acquisition costs;non-recurringcosts; and discontinued businesses losses.This also included unallocated group expenses in 2020.

 

**Certain items have been restated in the results for the financial year to June 2020 as part of the audit for FY21.  These restatements have had, in aggregate, a £0.3m impact on statutory losses in FY20 and relate to changes in the reporting of deferred consideration and a credit loss calculation within administrative and other expenses. A more detailed explanation can be found in note 1 to the financial statements.

Commenting on the results, CEO Matthew Hudson CEO said:

 

"This has been our first full financial year since our IPO, which we completed two weeks before a hard Brexit and two months before a global pandemic took hold. The three major client trends that have supported our growth over the past 11 years are now continuing again on their 30-year upwards trajectory: more money than ever is flowing into funds (and particularly into alternative assets, our speciality); regulation continues to escalate; and there is an increasing need for our clients to outsource. It is thrilling to now see a clearer future for MJ Hudson, with these three major positive secular tailwinds blowing at our backs and at the start of what I see as a significant uptick in activity.

 

Looking beyond FY21, the Board is optimistic as to progress in the current year, encouraged by both the strong trading in the first few months and the potential within our M&A pipeline. As ever, growth is our focus: we continue to look for interesting acquisitions and will invest further into research and development. Our plan is to extend our range of services and our geographical reach, as well as developing and acquiring technology that improves the offering we provide to our clients and helps us operate more efficiently. We have a qualified list of M&A opportunities in Europe, North America and Asia, which we plan to finance through an intelligent mix of debt and equity over time. "

 

The Company will be holding a virtual analyst meeting at 9.00am on 25th November. A copy of the presentation slides will be made available on the company website during the course of today.

 

For further information, please contact:

 

MJ Hudson Group plc

Matthew Hudson, CEO

Peter Connell, CFO

Andrew Walsh, IRO 

 

+44 20 3463 3200

Cenkos Securities (Nomad and Broker)

Giles Balleny

Stephen Keys

Callum Davidson

 

+44 20 7397 8900

Buchanan (PR Adviser)

Stephanie Whitmore

Kim Looringh-van Beeck

Hannah Ratcliff    

 

+44 20 7466 5000

This announcement contains inside information as defined in Article 7 of the Market Abuse Regulation

 

 

 

About MJ Hudson

 

MJ Hudson is a specialist service provider to the US$100 trillion+ asset management industry, with a focus on its fastest growing segment, alternative* investments (which include private equity, venture capital, real estate, infrastructure and hedge funds).

 

As outlined at IPO in December 2019, our growth strategy is to develop and acquire new products and services that are needed by our core customer base of asset managers and institutional investors and to extend this customer base in the key markets of North America, Europe and Asia. Our strategy benefits from the underlying expansion of the alternative assets subsector and the continuing and growing need for outsourcing and specialist advice as regulation and competition makes operating more challenging for our clients. 

 

Founded in 2010 by CEO Matthew Hudson (a lawyer and former alternative assets fund manager), we have grown quickly to now support more than 1,000 clients, including 18 of the FTSE 100. Our business is transatlantic and pan European, with clients clustered around the major asset management centres of Europe and North America. Our team of 288 staff works out of 10 offices in those same centres.

 

For more information, please visit our website: investors.mjhudson.com/ 

 

*Alternative or alternatives - A subsector of the global asset management industry which comprises: private equity funds; real estate funds; hedge funds; infrastructure funds; and alternative credit funds

 

 

 

Chief Executive Statement

MJ Hudson is pleased to report its final results for the12 months to 30 June 2021.

MJ Hudson is at the start of a major uptick in activity. 2020 and the lockdowns saw a freezing of certain activity, such as new fund launches, but these tended to be postponements, not cancellations. Having been in our client sector for over thirty years, I have seen this before. Out of a crisis comes positive change for us, with our three major business trends on the up: firstly, there is growth in private equity and other alternative funds AUM, as investors seek higher returns and yield; secondly, a re-focus on regulation and governance, especially benefitting our market-leading ESG business, that helps clients deal with increased regulation and improve transparency; and, thirdly, the need for outsourcing, driven less by cost and more by the desire to seek the highest qualified technicians and learn from them.

A lot has happened in a year. Before the 2016 UK referendum, we had no employees in continental Europe, and now a third of our staff works from the EU. We are Brexit-proof and, indeed, our fund regulatory platforms in the UK, the Channel Islands, Luxembourg and (newly) Ireland now give clients the same security, with flexibility to structure in any one or combination of the major European fund locations.

In addition to the agility and flexibility our clients enjoy from our services, they benefit from our deep and broad market intelligence and our analytical abilities. We have built, and continue to enhance, an extremely rich set of data on private funds and their investors, from fees and terms through to ESG and performance. The analytical tools we have built and acquired help our clients measure, benchmark, and enhance performance, costs, risk and sustainability. As well as providing a huge amount of value to our clients, this gives us a significant advantage over our competition. Private markets are private for a reason, but as transparency increases, MJ Hudson and its clients are in the vanguard.

MJ Hudson is a growth company, focussed on a global growth sector. Including the benefit of acquisitions, the Group has grown by more than 50% in two years, on an Underlying Revenue basis

In addition to our results for the financial year, the Company is pleased to announce the completion of the acquisition of Saffery Champness Funds Limited (´SCFL´), following the receipt of regulatory approval. First announced in July 2021, SCFL is a Guernsey-based fund administration business. The acquisition adds strength and depth to the Group´s Guernsey operations, as well as additional expertise and technology. We have already been working with the team, and we are encouraged as to the prospects for our combined group in Guernsey.

 

1 Group growth

In FY21, revenue was £39.8m (FY20: £22.3m), an increase of 78%. Revenue has recovered after being suppressed in FY20, due to the Covid-19 lockdowns. As highlighted in previous reporting, the Outsourcing segment contains significantpass-throughrevenue, reflected in direct cost of sales.

 

The following table analyses the Underlying Revenue for the Group. 

 

   

Advisory 

 Outsourcing 

Data & Analytics 

Established

Organic Investments1 

Consolidated 

£ millions 

 

 

Total  

 

Total 

FY21   

 

 

 

 

 

 

Underlying Revenue 

9.5 

7.1 

6.6 

23.2 

2.3 

25.5 

Growth 

(5%) 

54% 

43% 

20% 

130% 

26% 

Underlying EBITDA2  

1.8 

2.1 

2.0 

5.9 

(0.3) 

5.6 

Margin 

19% 

30% 

30% 

25% 

(13)% 

22% 

 

 

 

 

 

 

   

FY20   (Restated)

 

 

 

 

 

   

Underlying Revenue 

10.0 

4.7 

4.6 

19.3 

1.0 

20.3

Underlying EBITDA 

1.4 

2.0 

1.4 

4.8 

(1.0) 

3.8

Margin 

14% 

43% 

30% 

25% 

(100)%

19% 

 

1. Organic investments represent investment into start-up AIFM operations in Luxembourg, fund administration and regulatory consulting (see glossary for more detail). 

2. Underlying EBITDA is segment profit/(loss) before: share based payments expense (including LTIP), unallocated group expenses and discontinued business losses. 

 

 

 

 

Underlying Revenue represents gross revenue, less direct cost of sales, and is analysed below. The Group considers that Underlying Revenue is a better guide to the development of the business, as it excludes these passthrough revenues. In FY21, underlying revenue was £25.5m (FY20: £20.3m), an increase of 26%. Organic growth for continuing operations was 14% (FY20: 4%), for the full year (up from 3.6% in first half). Organic growth relates to businesses that have been fully owned by the Group for the whole of FY20 and FY21. 

 

At the Group level,UnderlyingEBITDA grew to £5.6m,in FY21, compared with £3.8m (restated) in FY20, with associated margins for the period increasing from 19% in FY20 to 22.4% in FY21. Excluding the impact of Organic Investments, the EBITDA margin remained at 25%.

 

2 Segmental performance

The performance by individual segments or divisions was as follows:  

 

Advisory- accounted for 37% of Group Underlying Revenue in FY21 (FY20: 49%)   

 

·      This segment comprises the Group's Law and Investment Advisory business units. Underlying revenue was £9.5m (FY20: £10.0m). Advisory revenue saw a 5% contraction in the year (FY20: 7% reduction) which was due to reduced law revenues. Part of this reduction was due to delays in fund launches and closings in the year but also from internal reorganisations, including the cessation of a small loss-making hedge fund practiceandthe closure of the Switzerland branch office. Investment Advisory revenue continueditsrecovery from FY20 and saw revenue growth of 31% in the second half of the financial year. The underlying EBITDA margin increased to 19% from 14% in FY20 due to a focus on margin improvement in the Law business.

 

Outsourcing- accounted for 28% of Group Underlying Revenue (FY20: 23%) 

 

·      Through this segment, the Group provides ongoing operational and regulatory support for fund managers and funds. This segment achieved 51% (FY20: 49%) underlying revenue growth in the year. This was largely due to Bridge Consulting Limited (Ireland), which was acquired on 12 February. In 2021 organic growth reduced slightly, albeit with an improving second half trend, owing to reduced revenues in the UK AIFM business. Total underlying revenue for this segment was £7.1m (FY20: £4.7m) and Underlying EBITDA margin reduced from 43% to 30%. FY20 margins were inflated due to the Covid salary deductions applied across the Group from April to June 2020. We also saw a margin squeeze due to delays in integrating the Jersey administration business, acquired in FY20, with our established Guernsey administration business. This is improving now, and the Jersey administration business is currently rebuilding its new business pipeline as revised travel arrangements make it easier to visit prospective clients outside the Channel Islands.   

 

Data & Analytics- accounted for 26% of the Group's underlying revenues (FY20 :23%). 

 

·  This segment comprises the Group's analytical platform, with a suite of services and products such as ESG,benchmarking,IR & Marketing, Performance Analytics (acquired December 2020) and Quantitative Solutions (acquired June 2021). Organic revenue growth in the segment of 30% (FY20 - was all acquisition led) was driven by the growth of the ESG business, where revenue grew by 84%, in the year.Including acquisitions, Underlying Revenue in the segment grew to £6.6m in FY21, from £4.6m in FY20. Underlying EBITDA increased to £2.1m, in FY21, from £1.4m in FY20 and relevant margin was 30% (FY20: 30%). FY20 margins were inflated by Covid groupwide salary deductions.

 

Organic investments- accounted for 9% of the Group's underlying revenue (FY20:5%) 

 

·      The Group´s three investments within Organic investments (AIFM, fund administration and regulatory solutions) are to be moved to the Outsourcing segment in FY22, which is their natural home. Their collective revenue improved in the year to £2.3m from £1.0m, driven primarily through expanded offerings within the Luxembourg AIFM business, which was offset by a strengthening of teams in each of the three businesses.  Losses at the Underlying EBITDA level fell from £1.0m to £0.3m, in the period.

 

The result of this is that the balance of the Group is changing. In particular, the EBITDA contributions from the three divisions are now comparable in scale, for the first time. One important driver of this is the organic growth within ESG. This rebalancing effect has other consequences: the recurring revenue profile of the Group has increased, with 86% of revenues in the year to 30 June 2021 (FY20: 84%) coming from repeat or recurring clients. 

 

3. Clients and markets

MJ Hudson is well-positioned for long term growth. By the end of the 2020/2021 financial year, the Company saw a rebound in fund launches, and private equity (the largest asset class we serve), continues its constant march upwards in AUM. Similarly, private debt grows, as more traditional banks withdraw from risk and clients seek yield, in a super low-yield market. This thirst for yield has also led to more investment in real estate and infrastructure, only enhanced by western governments' desire to dig their way out of a crisis. In a similar vein, renewables are also seeing a boost, driven by concerns around climate change and ESG.

As these markets grow and the need for services and tools in these markets increases, MJ Hudson is well-positioned to satisfy these needs.

Operating growth highlights 

FY21 

FY20 

Total operating locations 

10

11 

Total staff 

288 

206 

Total clients 

1,094 

943 

Total Multi-Service clients (services from > 1 division)

68 

91 

% Group revenues from Multi-Service clients

29%

14%

Total Underlying Revenue growth 

26% 

22% 

% organic growth in Underlying Revenue 

14% 

4% 

% Underlying Revenue from top 10 clients 

16% 

17% 

 

In terms of operating highlights, we added a new office in Dublin, via the acquisition of Bridge Consulting. Total staff members across the Group grew by 40%, (including those brought in through acquisitions). The total number of multi-Service clients - those taking services from more than one division or segment - was 68 compared with 91 last time. However, the bigger change here is that these multi-service clients accounted for 29% of Group revenue in FY21, compared with 14% in FY20. Within the top 10 clients in FY 2021, six came from outside the Advisory segment, compared with three in FY20. 

 

4 M&A and investing

We completed three acquisitions during FY21, with a further deal announced after the period end.

 

As an update on the integration of each of these acquisitions:

·    PERACS (now MJ Hudson Fund Performance Analytics) - The Company completed the deal at the end of last calendar year, and, by Easter, it had secured its biggest ever client contract

·      Bridge Consulting (now MJ Hudson Bridge) - The regulated Irish acquisition, Bridge Fund Management Limited (BFML), has won a significant number of new clients off the back of regulatory changes in Ireland and has seen significant growth. Consolidated from February, there has been good collaboration and the revenue run rate has already exceeded expectations set during deal due diligence. 

·    Clarus Risk (now MJ Hudson Quantitative Solutions) - The incoming team has already landed new clients on a cross-sell basis from within the MJ Hudson Group, despite being consolidated for only a few months.

·      SCFL - As discussed above, this completed after the end of FY21. MJ Hudson has been working with the team and is encouraged by the prospects for a combined group in Guernsey.

 

When the Company came to the AIM market at the end of 2019, MJ Hudson Group had historic EBITDA of £ 2.7m and one dominant division (Advisory). Through a number of judicious acquisitions and organic growth, both the Outsourcing and Data & Analytics divisions are expected to exceed this, on a pro forma basis, in the current financial year. That transformation has been made possible by the funds raised at the IPO and the industry of the Group's staff in the UK, continental Europe, and North America.

 

MJ Hudson is now in its second year as a quoted company and the eight acquisitions made since 2018 contributed, in aggregate, £10.4m to Group revenues, in the full year to June 2021. Most of the M&A in FY21 was completed in the final six months. Looking at this same group in the periods immediately prior to their acquisition, we have increased revenues on consolidation by a healthy 31%, on average. A key contributor to that is the ESG business in Data & Analytics, which has grown revenues by over 130%, since consolidation in July 2019, with staff numbers up from 12 to more than 40, in Amsterdam and London, combined.

 

The incubated businesses form the Organic Investments business segment. The Company has incubated three businesses: Luxembourg services; the regulatory solutions team, in London; and fund administration. Collectively, these businesses had operating losses of £0.3m, in the year to June 2021, following £1.0m loss, in the prior year. Pleasingly, a series of new client wins, and organic growth have combined to push them further along the path to profitability. Going forward, these incubated businesses will be reported in our Outsourcing division, which is their natural home.

 

Since listing the Group in December 2019, the Company has been investing heavily in technology. This includes:  investment in the IT infrastructure; our application development capabilities (including machine learning); and acquisitions of businesses that centre on technology. We expect to continue this investment strategy.

 

5 Reconciliation of statutory to Underlying operating profit

 

 

FY21 

FY20 

Statutory operating loss 

 

(5.1)

(5.1)

Underlying adjustments

 

 

 

Share based payments and LTIP expense

 

1.8

0.6

Fundraising and acquisition costs

 

3.2 

4.0 

Non- recurring costs

 

1.8

0.9

Discontinued business losses

 

0.9

0.5

Group expenses 

 

0.0 

0.6 

Amortisation of acquired intangible assets 

 

0.8 

0.4

Underlying operating Profit

 

3.4 

1.9 

 

 

 

 

Significant drivers of this improvement in Underlying operating profits were: 

 

·           adjustment to administration expenses is the addback of share-based payments and LTIP expenses;

·           fundraising/acquisition costs of £3.2m(FY20 - £4.0m), including£0.7m in respect of payments to former shareholders of Tower Gate Capital;

·           non-recurring costs of £1.8m(FY20 - £0.9m), which are one-off in nature and include consultancy costs, in respect of the UK regulated entities, totalling £0.3m; reorganisation costs in UK law, investment advisory, and fund management solutions business units of £0.5m; new product development and launch costs; 

·          discontinued business losses, representing the loss from individual entities, which have either been wound up in the year, or which management has concluded will be discontinued in the near future, due to lack of profitability;

·           Group expenses relating to FY20, including central costs not passed on to segments, in respect of improving business integration processes and dedicated IT infrastructure; and,

·           depreciation and amortisation, including £0.8m, in respect of amortisationofacquiredintangibles.

 

6 Cashflow and conversion

Statutory net cash generated from operating activities for FY21 was an outflow of £3.0m before tax (FY20 - 4.8m). After adjusting for the cash impact of the factors listed in section 5 above, the Underlying Operating Cashflow of the Group is a positive inflow of £5.2m (FY20: £1.9m). 

 

Cash balances at the end of FY21 were £9.8m (FY20 - £13.4m). 

 

 

 

7 Debt and debt financing

As at 30 June 2021 the Group had net debt (excluding lease liabilities) of £6.9m (FY20: £10.0m of net cash).   

 

During FY21, the Group refinanced its debt facilities and entered into a five-year financing agreement with Santander UK PLC. The financing comprises a facility of up to £17.5m, with repayment due in 2026. There is an option to extend this amount over time, on an uncommitted basis. The facility is to be used to finance the Group´s M&A pipeline, regulatory capital requirements, and general corporate needs. Existing loans totalling approximately £4 million were repaid in May and June 2021.

   

The regulated Irish acquisition, Bridge Fund Management Limited (BFML), has won a number of new clients on the back of regulatory changes in Ireland and has seen significant growth. With that growth has come an accelerated regulatory capital need. €5.5 million was placed in the BFML regulatory capital deposit account in June and a further €2.8 million has been paid in September, taking this entity's regulatory capital up to the cap of €10 million.

 

8 Dividend

The Board has recommended a maiden dividend of 0.125p per share in respect of the year ended 30 June 2021, payable on 25th January 2022 for shareholders on the register as at 17th December 2021. As previously communicated, for the purpose of comparison with any future dividends, investors should consider this a payment for the six-month period to end June 2021. The Group's intention in the short to medium term is to introduce a progressive dividend policy. The Group's primary focus is on delivery of capital growth for shareholders.

 

9 Board and Staff

Our people remain at the heart of the business. With the benefit of both organic growth and acquisitions, the Group now has 288 staff, an increase of 40% over the prior year. This has been a challenging period for all and, as the Company welcomes its teams back into the office environment, it is very aware that Covid-19 remains a threat. The Company would like to thank its staff once again for the hard work and efforts over the year, which have generated excellent financial results.

 

10 Current trading and outlook

Trading has been strong in the current financial year, continuing the momentum established in the last six months of FY 21 and with good contributions from recent acquisitions.

 

MJ Hudson is in a strong financial position and there are good prospects for the industry it serves. While coronavirus continues to pose a risk, management has witnessed the resilience of the sector in which the Company operates. As MJ Hudson builds on the strength of these results and on the early advances that it has made in valuable secular growth trends such as ESG and outsourcing in private markets, the Board is optimistic as to growth in the current year, encouraged by both the trading in the first few months and the potential within its M&A pipeline.

 

 

25th November 2021

 

 

Consolidated statement of comprehensive income

 

For the year ended 30 June 2021

 

Note

2021

2020

 

£'000

£'000

(restated)

Revenue

 

39,823

22,284

Direct cost of sales

(14,285)

(1,973)

Other cost of sales

(1,026)

(1,209)

Gross profit

24,512

19,102

Administrative and other expenses

 

(29,201)

(23,717)

Expected credit loss on trade receivables and contract assets

 

(788)

(585)

Other operating income

331

65

Operating loss

(5,146)

(5,135)

Finance expense

4

(973)

(1,134)

Fair value movements

5

835

(1,053)

Share of profit of a joint venture

 

6

-

Loss before taxation

(5,278)

(7,322)

Tax expense

 

(122)

(214)

Loss for the year

(5,400)

(7,536)

Attributable to:

 

 

Equity holders of the parent

 

(5,380)

(7,536)

Non-controlling interest

 

(20)

-

Loss for the year

(5,400)

(7,536)

Earnings per share attributable to the ordinary equity holders of the parent

 

 

Basic and diluted EPS

6

(0.032)

(0.056)

Other comprehensive income

 

 

May be reclassified to profit or loss in subsequent periods and attributable to equity holders of the parent:

 

 

Exchange differences arising on translation of foreign operations

(116)

77

Total comprehensive loss for the year

(5,516)

(7,459)

         

 

 

 

Consolidated statement of financial position

As at 30 June 2021

 

 

 

 

Note

2021

£'000

2020

£'000

(restated)

ASSETS

 

 

Non-current assets

 

 

Intangible assets

7

46,935

32,689

Tangible assets

 

2,067

2,196

Right-of-use asset

9

7,056

7,578

Investments

10

2,568

1,308

Other receivables

11

416

398

Total non-current assets

59,042

44,169

Current assets

 

 

Trade and other receivables

11

14,857

10,988

Income tax receivables

 

150

-

Cash and cash equivalents

9,785

13,388

Total current assets

24,792

24,376

Total assets

83,834

68,545

LIABILITIES AND EQUITY

 

 

Non-current liabilities

 

 

Borrowings

12

16,658

873

Deferred consideration

12

5,120

5,719

Lease liabilities

9

6,377

6,497

Other payables

 

405

497

Total non-current liabilities

28,560

13,586

Current liabilities

 

 

Trade and other payables

 

8,027

5,831

Income tax liabilities

 

396

114

Deferred tax liabilities

 

182

203

Borrowings

12

12

2,538

Deferred consideration

12

8,556

4,758

Lease liabilities

9

897

798

Total current liabilities

18,070

14,242

EQUITY

 

 

Issued share capital

13

-

-

Share premium account

13

56,023

55,527

Owned shares

13

(928)

-

Other reserves

14

2,828

509

Retained loss

(20,699)

(15,319)

Total equity

37,224

40,717

Non-controlling interest

 

(20)

-

Total equity

37,204

40,717

Total liabilities and equity

83,834

68,545

           
 

 

 

Consolidated statement of changes in equity

For the year ended 30 June 2021

 

 

Share

Capital

£'000

Share

Premium

£'000

Owned

Shares

£'000

Other

Reserves

£'000

Retained

Loss

£'000

 

Total

£'000

 

NCI

£'000

Total

Equity

£'000

Balance as at 30 June 2019

20

15,344

-

1,443

(9,027)

7,780

-

7,780

Share based payments

-

-

-

437

-

437

-

437

Exercise of options

1

1,506

-

(565)

565

1,507

-

1,507

Convertible loan note options exercised

-

11,826

-

(883)

883

11,826

-

11,826

Loss for the year (restated)

-

-

-

-

(7,536)

(7,536)

-

(7,536)

Other comprehensive income

-

-

-

77

-

77

-

77

Net shares issue (note 22)

-

28,861

-

-

-

28,861

-

28,861

Cost of shares issued through IPO

-

(2,232)

-

-

-

(2,232)

-

(2,232)

Group restructure

(21)

21

-

-

(204)

(204)

-

(204)

B shares issued

-

201

-

-

-

201

-

201

Balance as at 30 June 2020

-

55,527

-

509

(15,319)

40,717

-

40,717

Share based payments

-

-

-

2,446

-

2,446

-

2,446

Exercise of options

-

(82)

236

(11)

-

143

-

143

Loss for the year

-

-

-

-

(5,380)

(5,380)

(20)

(5,400)

Other comprehensive income

-

-

-

(116)

-

(116)

-

(116)

Shares issued (note 22)

-

578

-

-

-

578

-

578

Shares repurchased

-

-

(1,164)

-

-

(1,164)

-

(1,164)

Balance as at 30 June 2021

-

56,023

(928)

2,828

(20,699)

37,224

(20)

37,204

 

 

Consolidated statement of cash flows

 

For the year ended 30 June

 

Note

2021

£'000

2020

£'000

(restated)

Cash flows from operating activities:

 

 

Loss for the financial year before taxes

(5,278)

(7,322)

Adjustments for:

 

 

Depreciation and impairment of fixed assets and right-of-use assets

9

1,499

1,134

Amortisation and impairment of intangible assets

7

1,504

1,271

Loss on disposal of tangible and intangible assets

 

126

198

Revaluation (gain)/ loss on investments

5

(1,644)

(139)

Fair value (gain)/loss on deferred consideration

5, 12

809

(856)

Fair value loss on convertible loan notes

5

-

543

Share based payments expense

 

1,998

437

Interest payable

 

973

2,639

(Increase)/decrease in trade and other receivables

(2,329)

(861)

Decrease in trade and other payables

(79)

(1,729)

Foreign exchange gains and losses

(582)

(45)

Cash from operations

(3,003)

(4,730)

Taxation paid

(54)

(85)

Net cash used in operating activities

(3,057)

(4,815)

Cash flows from investing activities:

 

 

Purchases of tangible assets

 

(241)

(2,084)

Purchase of intangible assets

9

(1,887)

(127)

Purchase of subsidiary undertaking

 

(1,524)

(4,995)

Payment of deferred consideration related to acquisitions

(9,236)

(3,350)

Purchase of financial instruments

(173)

-

Proceeds from sale of financial instruments

575

-

Net cash used in investing activities

(12,486)

(10,556)

Cash flows from financing activities:

 

 

Interest paid

(837)

(1,124)

Equity subscription

496

28,133

Owned shares purchased

(928)

-

Proceeds from issue of bank loan

12

18,191

1,023

Finance costs on bank loans

12

(760)

-

Repayment of bank loan

12

(3,590)

(964)

Repayment of loan notes

12

-

(600)

Repayment of loans to directors

 

(18)

(386)

Payment of lease liabilities

 

(614)

(422)

Net cash generated from financing activities

11,940

25,660

Net (decrease)/increase in cash and cash equivalents

(3,603)

10,289

Cash and cash equivalents at beginning of year

13,388

3,099

Cash and cash equivalents at end of year

9,785

13,388

Cash and cash equivalents comprise:

 

 

Cash at bank and in hand

9,785

13,388

Cash and cash equivalents at end of year

9,785

13,388

 

 

 

 

Notes to the financial statements

 

1.  General information

 

This document does not constitute the Group's statutory accounts for the years ended 30 June 2020 or 30 June 2021 but is derived from those accounts. Statutory accounts for 30 June 2020 have been delivered to the Registrar of Companies, and those for 2021 will be delivered to the Registrar of Companies following the Group's annual general meeting.

 

MJ Hudson Group plc (the "Company") is a company incorporated in Jersey, Channel Islands under the Companies (Jersey) Law 1991. The address of the registered office is P.O. Box 264, Forum 4, Grenville Street, St Helier, Jersey JE4 8TQ. The financial statements consolidate the financial statements of the company and its subsidiary undertakings (together the "Group").

 

The principal activity of the Group is acting as an independent advisory and infrastructure business, serving fund managers, investors, and advisers active in private equity, venture capital, hedge, credit, real estate and infrastructure. The group owns two full scope AIFM management platform to fund managers, one in the UK and another in Luxembourg.

 

Correction of errors

 

Three errors have identified in relation to the FY 2020 financial statements which have been corrected as prior year misstatements in these financial statements. They are described below:

 

An error was identified in the expected credit loss calculation for the prior year.  This has resulted in an additional £334,000 charge to administrative and other expenses (notes 5 & 7) with an associated decrease in trade debtors (note 11).   This resulted in the basic and diluted loss per share increasing from (0.053) to (0.056) (note 6)

 

As described in note 16, Deferred consideration includes payments which is dependent upon the results of the acquired businesses and are accounted for at fair value through profit or loss. The fair value movement of £649,000 was previous disclosed within Finance expenses in error and therefore have been reclassified as fair value movements in note 5.

 

In considering the completeness of related party disclosures (note 17) the directors have identified certain related parties and associated disclosures that were omitted from the 2020 financial statements.  These include information pertaining to directors' interests in other companies in which transactions had occurred, associated outstanding balances and deferred consideration loans from directors of subsidiaries of the Group.

 

2.  Basis of preparation and consolidation
 

2.1 Basis of Preparation

 

The financial statements of the Group have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union ("IFRS").

 

The financial statements are prepared on a going concern basis, under the historical cost convention, except for certain financial assets and liabilities, which are revalued and measured at fair value through profit or loss. The financial statements are presented in pounds sterling and all values are rounded to the nearest thousand (£000), except when otherwise indicated.

 

The preparation of the financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group's accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in note 4 of the Annual Report.

 

2.2 Going concern

 

The financial statements have been prepared on a going concern basis. In adopting the going concern basis, the Directors have considered the group's operations and principal risks and uncertainties, along with the impact of the COVID-19 pandemic.

 

As described in note 13 the Group's objectives when managing capital are to safeguard its ability to continue as a going concern, so that it can provide returns for shareholders and benefits for other stakeholders and to maintain an optimum capital structure to reduce the cost of capital. In determining if the Group is a going concern, the Directors have considered the group's operations and principal risks and uncertainties, along with the impact of the COVID-19 pandemic.

 

During FY21 the Group refinanced its debt facilities and entered into a five-year financing agreement with Santander UK PLC. The financing comprises a facility of up to £17.5m, with repayment due in 2026 (see note 12). There is an option to extend this amount over time, on an uncommitted basis. The facility is to be used to finance the Group´s M&A pipeline including deferred consideration, regulatory capital requirements and general corporate needs. The previous loans totalling approximately £4 million, were repaid in May and June 2021.

 

The regulated Irish acquisition, Bridge Fund Management Limited (BFML), has won a significant number of new clients off the back of regulatory changes in Ireland and has seen significant growth. With that growth, has come an accelerated regulatory capital need. £4.7 million (€5.5 million) was placed in the BFML regulatory capital deposit account in June and a further £2.4 million (€2.8 million) has been paid in September which has taken this entity's regulatory capital up to the cap of £8.6 million (€10 million). As reported previously, we have also seen an increase in trade debtors and accrued income due to remote working and lockdown impacts in extending the timing required for clients to complete transactions. This has begun to ease in June with record law firm billing in the month and cashflow patterns are expected to return to previous levels over the next few months.

 

In order to compensate for this accelerated regulatory capital need and also the increased lockup of working capital a further drawdown of £7 million was finalised in August 2021. This facilitated the expansion of the regulated Irish business and restored the working capital buffer. £24.5 million of the facility has been drawn down to date.

 

To assess going concern the Directors have prepared 'Base case' financial forecasts for the period to 31 December 2022. The base case budget data is derived from granular bottom-up data which was produced in conjunction with Business Unit Heads.

 

In addition, the Directors have considered the impact COVID-19 could have on the Group and assessed that impact on the business has diminished considerably since the beginning of 2021 with strong levels of growth returning. In considering a 'Worst case' scenario the Group have reviewed the ability of the business to withstand reductions in revenue as set out in the table below:

 

 

Jul 2021 to

Dec 2021

Jan 2022 to

Dec 2022

Business units with primarily project based revenue

(Advisory and part of Data & Analytics)

15%

10%

Business units with 12 months contracted revenue

(Outsourcing and part of Data & Analytics)

10%

10%

 

In addition to the above 'Worst case' revenue assumptions this scenario assumes that debtor days do not recover from current levels until 2022 across all business units. This is to reflect slowdown in cash collection as a result of a prolonged COVID-19 and slow wider economic recovery. This is assumed to be mitigated by suspension of recruitment and reductions (assumed halved) in FY22 salary reviews and bonuses.

 

The Directors 'Worst case' financial modelling showed that the Group could withstand these revenue reductions, if combined with a 50% reduction in budget salary review and bonus levels and meet ongoing covenants as well as still operate within existing borrowing facilities to enable the Group to meet its liabilities as they fell due. In the event that the 'Worst case' scenario arose the Directors could also take further cost mitigating actions not currently included within the 'Worst case' forecast. It is estimated that cost mitigating factors could generate further savings in excess of £2 million in FY22. In addition, non-essential spending could be deferred e.g. continued delay in launch of US Law operations. If cost mitigation factors are necessary, they may include reductions in recruitment, further reduction in holiday pay accrual as highlighted in 2.3 below and restructuring. Group funds are not specifically earmarked for transactions. Further information on borrowing and deferred consideration payments in respect of acquisitions are included in note 12 and 13 to the financial statements.

 

Based on the Group's trading through to 31 October 2021 and the financial forecasts together with the possible cost mitigating actions available the Board has a reasonable expectation that the Group has adequate financial resources to continue in operational existence for the foreseeable future, and for a period to 31 December 2022 from the date of signing of these financial statements. Accordingly, the Group continues to adopt the going concern basis in preparing its financial statements.

 

2.3 COVID-19 impact

 

As reported in our June 2020 Annual Report & Accounts, the COVID-19 pandemic has impacted the Group in a number of ways. Operationally all of our offices have been subject to lockdowns of varying lengths and severity. In lockdown, all of the offices have been made COVID compliant and are currently in a transitional phased return period, which will see a gradual return to normal working patterns. Some increase in flexible working is part of a move to the 'new normal' and the Group is well placed to support this.

 

As at October 2021 the current status is that all our offices are open and we are currently phasing staff back to the office over the remainder of the year and assessing flexible working opportunities on a case by case basis. We remain ready to adapt should another lockdown occur in any of our jurisdictions.

 

In response to the COVID-19 pandemic the Group took swift and decisive action as a result of the anticipated reduction in revenue and put in place a series of cost saving measures in April 2020 in order to preserve cash and liquidity to create a cash buffer cushion in the event of a possible protracted downturn. We have adopted some of these measures again in FY21 with senior executive management taking salary cuts for the first 3 months of 2021, scrapping of general bonuses re FY21 and reduction in holiday pay accrual by requiring staff to take accrued leave by 30 June 2021. Other factors including reduced travel and entertainment costs, office costs and marketing events costs also assisted and these remain suppressed compared to pre-pandemic levels. The Group took advantage of the UK HMRC VAT deferral scheme in June 2020 but has not taken any additional government funding to support the operation. No staff have been furloughed at any time.

 

The revenue shortfall experienced by the Advisory division from March 2020 to June 2020 was due to the temporary suspension of client new fund launches and M&A activity. Since then we have seen a strong recovery in organic growth, particularly in the second half of our financial year and new business pipelines are strong in most of our business units.

 

 

 

3.  Segment information
 

For management purposes, the Group is organised into business units based on its products and services and has three established reportable segments plus organic investments as follows:

 

·      Advisory: the provision of legal and investment consultancy services for alternative asset management and investors across all areas of the alternative investment industry. This includes legal services to alternative asset managers, corporate entities and institutional investors to advise on M&A and establishing investment funds along with support for primary fund investments, co-investments and secondaries. This segment also includes consulting services and the provision of individual independent investment advisers and professional trustees to corporate pension schemes, local government pension schemes and charitable organisations.

·      Outsourcing: a multi-service platform providing regulatory cover and support via a variety outsourced services to asset managers and advisers. This includes the provision of all key front, middle and back office functions, including portfolio management, risk management, fund and corporate administration, accounting and fiduciary services.

·      Data & Analytics: research, consulting, benchmarking services underpinned by data and software tools to support sustainable investment, tax-advantaged investing, risk monitoring and investor relations. These services are designed to help investor and asset manager clients make better strategic choices, improve investment performance and investor communications, and obtain better value from their service providers.

·      Organic investments: incubated businesses form the organic investments business segment. This includes three separate businesses including Luxembourg services, regulatory consulting team in London and international fund administration business. This has been presented separately from the other segments to increase the transparency of the profitability of the group before these activities. Going forward, these incubated businesses will be reported in our Outsourcing division.

 

No operating segments have been aggregated to form the above reportable operating segments. Key management are the Chief Operating Decision Makers (CODM) and they monitor the operating results of the business units separately for the purpose of making decisions about resource allocation and performance assessment. Segment performance is evaluated based on adjusted operating profit or loss. The adjustments include unallocated central costs, organic investments, fundraising and acquisition costs, non-recurring items, and depreciation and amortisation. Unallocated central costs (Group expenses) are items incurred centrally which are neither directly attributable nor can be reasonably allocated to individual segments but are considered recurring in nature. The organic investments are newly formed businesses which are still considered to be in their start-up phase. Fundraising and acquisition costs are professional fees incurred relating to new debt or equity issuances and acquisition of new entities. Non-recurring costs are one-off in nature such as office relocation costs, and other one-off costs.

 

Business unit performance is not driven from assets given the nature of business being primarily the provision of services. For this reason, the CODM does not regularly obtain the split of asset and liabilities by reporting segment, which are monitored on a Group basis. The Group's depreciation and amortisation, financing costs (including finance costs, finance income and other income), fair value movements and income taxes are also managed on a Group basis and are not allocated to operating segments.

 

 

 

Year ended 30 June 2021

 

Advisory

£'000

Outsourcing

£'000

Data & Analytics

£'000

Established Segments

total

£'000

Organic investments

£'000

Consolidated

£'000

Revenue

9,541

9,360

6,599

25,500

14,323

39,823

Direct cost of sales

-

(2,229)

-

(2,229)

(12,056)

(14,285)

Revenue less direct cost of sales

9,541

7,131

6,599

23,271

2,267

25,538

Other cost of sales

(520)

(171)

(313)

(1,004)

(22)

(1,026)

Gross profit

9,021

6,960

6,286

22,267

2,245

24,512

Administrative and other expenses

(8,354)

(5,550)

(4,786)

(18,690)

(3,263)

(22,953)

Other operating income

179

49

71

299

3

302

Segment profit/(loss)

846

1,459

1,571

3,876

(1,015)

2,861

Group income/(expenses)

36

Fundraising and Acquisition costs

(3,166)

Non-recurring costs

(1,874)

Depreciation and amortisation

(3,003)

Operating loss

(5,146)

Finance expenses

(973)

Fair value movements

835

Share of profit in a joint venture

6

Tax

(122)

Loss for the year

(5,400)

 

Year ended 30 June 2020 (restated)

 

Advisory

£'000

Outsourcing

£'000

Data & Analytics

£'000

Established Segments

total

£'000

Organic investments

£'000

Consolidated

£'000

(restated)

Revenue

10,022

6,708

4,566

21,296

988

22,284

Direct cost of sales

-

(1,973)

-

(1,973)

-

(1,973)

Revenue less direct cost of sales

10,022

4,735

4,566

19,323

988

20,311

Other cost of sales

(967)

-

(242)

(1,209)

-

(1,209)

Gross profit

9,055

4,735

4,324

18,114

988

19,102

Administrative and other expenses

(8,182)

(2,962)

(3,313)

(14,457)

(1,910)

(16,367)

Other operating income

18

15

-

33

3

36

Segment profit/(loss)

891

1,788

1,011

3,690

(919)

2,771

Group expenses

(660)

Fundraising and Acquisition costs

(3,990)

Non-recurring costs

(853)

Depreciation and amortisation

(2,403)

Operating loss

(5,135)

Finance expenses

(1,783)

Fair value movements

(404)

Share of profit in a joint venture

-

Tax

(214)

Loss for the year

(7,536)

 

 

 

4.  Finance income and costs (restated)

 

2021

£'000

2020

£'000

(restated)

Bank loan interest

628

704

Interest on lease liabilities

345

223

Deferred consideration fair value loss

-

207

Total finance costs

973

1,134

 

June 2020 Finance costs have been restated to move the unwind of discount on deferred consideration totalling £649,000 to Fair value movements shown in note 5.

5.  Fair value movements (restated)


During the year the Group recorded the following fair value adjustments:

 

2021

£'000

2020

£'000

(restated)

Investments fair value gain (Note 10)

1,644

139

Deferred consideration fair value loss (note 16)

(809)

(649)

Convertible bonds fair value loss

Total fair value movements

835

(1,053)

 

June 2020 Fair value movements have been restated to move the unwind of discount on deferred consideration totalling £649,000 from Finance income and costs shown in note 4.

 

6.  Earnings per share (EPS) (restated)

 

Basic EPS is calculated by dividing the profit for the year attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the year.

 

Diluted EPS is calculated by dividing the profit attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the year plus the weighted average number of ordinary shares that would be issued on conversion of all the dilutive potential ordinary shares into ordinary shares.

 

The following table reflects the income and share data used in the basic and diluted EPS calculations:

 

 

2021

£'000

2020

£'000

(restated)

Loss for the year attributable to equity holders of the Group

(5,380)

(7,536)

Weighted average number of ordinary shares for basic EPS (Thousands)

170,281

134,308

Basic loss per share attributable to the ordinary equity holders of the parent

(0.032)

(0.056)

 

The following instruments are not included in the diluted EPS calculation because they would have an antidilutive effect on EPS. The number of instruments outstanding is as follows:

 

 

2021

Thousands

2020

Thousands

Share options

14,569

11,845

Total of antidilutive instruments not included

14,569

11,845

 

 

7.  Intangible assets

 

 

 

Software

Customer relationships

 

Goodwill

 

Total

£'000

£'000

£'000

£'000

Cost or valuation

 

 

 

 

At 1 July 2019

2,752

2,305

18,587

23,644

Additions

127

-

113

240

FX translation adjustments

-

24

32

56

Acquisition of subsidiaries

-

4,318

6,634

10,952

At 30 June 2020

2,879

6,647

25,366

34,892

Additions

1,887

-

92

1,979

Disposals

(918)

-

-

(918)

FX translation adjustments

(17)

(81)

(111)

(209)

Acquisition of subsidiaries (note 16)

570

7,243

6,275

14,088

At 30 June 2021

4,401

13,809

31,622

49,832

Amortisation

 

 

 

 

At 1 July 2019

795

133

-

928

Charge for the year

707

409

-

1,116

Impairment

-

-

155

155

FX translation adjustments

-

4

-

4

At 30 June 2020

1,502

546

155

2,203

Charge for the year

747

757

-

1,504

Disposals

(799)

-

-

(799)

FX translation adjustments

(1)

(10)

-

(11)

At 30 June 2021

1,449

1,293

155

2,897

Net book value

 

 

 

 

At 30 June 2020

1,377

6,101

25,211

32,689

At 30 June 2021

2,952

12,516

31,467

46,935

 

8.  Goodwill and intangibles with indefinite useful lives

 

At each statement of financial position date non-financial assets not carried at fair value are assessed to determine whether the asset may be impaired. The assessment is performed annually or more frequently if there is an indication of impairment. For the assessment the recoverable amount of the asset is compared to the carrying amount of the asset.

 

The goodwill as summarised by the operating segments to which its CGU belongs is as follows:

 

 

 

Advisory

Business

Outsourcing

Data &

Analytics

 

Total

£'000

£'000

£'000

£'000

At 30 June 2020

5,714

9,203

10,294

25,211

At 30 June 2021

5,714

10,288

15,465

31,467

 

The goodwill allocated to each CGU is tested annually for impairment. The VIU calculations use pre-tax cash flow projections covering a three year period. Cash flows beyond the three year period are extrapolated using long term average growth rates.

 

The key assumptions in the discounted cash flow projections for the CGU's are as follows:

 

·      the future level of revenue - which is based on past performance and expected changes based on management knowledge of the business;

·      long term growth rate - which has been assumed to be 2.0% (2020 - 2.0%) per annum based on the average historical growth in gross domestic product in the United Kingdom over the past fifty years; and

·      the discount rate - which is the Group's pre-tax weighted average cost of capital and has been assessed at 12.1% (2020 - 12.1%) and has been assessed for any country specific risk factors. The range for the Group allocated to individual CGU's is between 12.1% - 14%.

 

Based on the discounted cash flow projections, the value in use exceeds recoverable amount. The Group performed sensitivity analysis by adjusting the discount rate and reducing revenues. The decrease in future forecast revenues was performed without a corresponding reduction in costs for each of the CGUs. The recoverable amount and sensitivity analysis are provided below:

 

 

 

Advisory

Outsourcing

 

Data & Analytics

Compound annual growth rate (CAGR) of revenue over three years

17.9%

24.5%

24.1%

Estimated excess over carrying values

150.7%

53.4%

58.2%

Decrease in forecasted revenues to trigger an impairment

10.4%

8.9%

8.8%

Increase in discount rate required for impairment

13.3%

5.3%

7.3%

 

The percentage decrease in future forecast revenues and the increase in the discount rate noted above are the amounts that would be required for the carrying amounts to exceed the recoverable amount under the VIU calculation. Management believes that the carrying value of goodwill remains recoverable given the conservative nature of the underlying forecasts prepared.

 

Within the reportable segment totals above there are four CGU's which have a reasonably possible risk of impairment The CGU's at risk of potential impairment are: MJH Investment Advisors and MJH Services Jersey CGU's within the Advisory segment; MJH Fiduciaries Jersey CGU within the Outsourcing segment, and Amaces CGU within the Data & Analytics segment the headroom and sensitivities are outlined in the following table:

 

 

MJH

Investment   Advisors

£'000

MJH Services Jersey

£000

MJH

Fiduciaries Jersey

£'000

Amaces

£'000

Goodwill

1,458

770

3,264

6,800

Total carrying value

2,841

974

7,137

10,119

Headroom based on forecast, as a percentage of carrying value

29.4%

3.2%

18.3%

1.5%

CAGR forecasted

21.1%

20.5%

17.6%

14.2%

CAGR required to trigger an impairment

19.8%

20.0%

16.0%

13.8%

Discount rate required to trigger an impairment

14.9%

12.7%

13.9%

12.5%

 

The changes to CAGR and discount rate to trigger an impairment have been evaluated independently of each other. The percentages stated above would result in the CGU's headroom being completely eliminated and therefore are considered to be sensitive input assumptions. Management concludes there are sufficient cashflow projections to support the carrying value and associated goodwill but continues to monitor as the threshold for impairment is reasonably close to being breached.

 

9. Leases

 

Nature of leasing activities

 

The Group leases a number of assets including buildings and office equipment in the jurisdictions from which it operates in. Leases generally have lease terms between 3 and 10 years. The Group's obligations under its leases are secured by the lessor's title to the leased assets. Generally, the Group is restricted from assigning and subleasing the lease. The majority of lease payments fixed are over the lease term or are linked with an inflation index.

 

2021

2020

Number of active leases

17

15

 

There are several lease contracts that include extension and termination options, which have been taken into consideration upon recognition of the right-of-use asset and reassessed annually. On a case-by-case basis, the Group will consider whether the absence of a break clause would expose the Group to excessive risk. Typically, factors considered in deciding to negotiate a break clause include:

 

·      the length of the lease term;

·      the economic life of assets purchased for the fit out of the lease if applicable;

·      the economic stability of the environment in which the property is located; and

·      whether the location represents a new area of operations for the Group.

 

Each individual lease is assessed as to whether or not management expects to exercise the break clause. Where we have concluded it is reasonably certain to be exercised the carrying amounts of lease liabilities are reduced by the amount of payments that would be avoided from exercising break clauses. During the year, one of the Group's leases was terminated in respect of its London property. This termination did not result in the recognition of any accelerated depreciation of the right of use asset or amendment to the accounting for the lease liability since the Group originally made the assessment that the Group would take advantage of the early termination option on this lease.

 

The Group also has certain leases with lease terms of 12 months or less and leases of office equipment with low value. The Group applies the 'short-term lease' and 'lease of low-value assets' recognition exemptions for these leases. The short-term and low-value leases portfolio at 30 June 2021 and 2021 is materially consistent with the ongoing costs of the leases as seen below during the year of £61k (2020: £54k).
 

Right-of-use assets

 

 

Leasehold
 property

Office
equipment

 

Total

 

£'000

£'000

£'000

At 1 July 2019

507

48

555

Additions

7,730

171

7,901

Depreciation charge for the year

(850)

(28)

(878)

At 30 June 2020

7,387

191

7,578

Additions

485

106

591

Depreciation charge for the year

(1,035)

(78)

(1,113)

At 30 June 2021

6,837

219

7,056

 

Lease liability and movements during the period

 

 

 

 

 

2021

£'000

2020

£'000

At 1 July

7,295

554

Additions

591

7,104

Interest expense

345

223

Lease payments

(957)

(586)

At 30 June

7,274

7,295

 

 

 

Current

897

798

Non-current

6,377

6,497

 

Amounts recognised in profit or loss

 

 

2021

£'000

2020

£'000

Depreciation of right-of-use assets

1,113

878

Interest on lease liabilities

345

223

Expenses relating to low value and short term-leases (included in administrative expenses)

61

54

 

1,519

1,155

 

 

10. Investments

 

2021

£'000

2020

£'000

Listed investments

1,970

586

Unlisted investments

572

722

Investment in joint venture

26

-

Total investments

2,568

1,308

 

In February 2020, the Group's investment in Making Science Group ("Making science") listed on the Spanish stock exchange. During the year ended 30 June 2021, the Group disposed of 23,525 shares in Making science at a value of £589,000. The fair value as at 30 June 2021 is based on the listed priced of EUR5.7 per share.

 

Valuation of unlisted investments is based on the management's estimate of the value of investments that will be realised, which is dependent on the investments performing as expected. The primary significant unobservable input into valuation of the fair value of unlisted investments is the share value from the most recent funding rounds for the related company that the Group holds and investment in. Management performed a sensitivity analysis over the unlisted investment at the end of the year and the fair value would need to be increased or decreased by 58-88% (2020 - 56-85%) in order to have a significant impact on the financial statements.

 

The Group has a 50% interest in Bridge Independent Risk Solutions Ltd, a joint venture brought on as part of the Bridge Group acquisition. The Group's interest is accounted for using the equity method.

 

 

2021

£'000

2020

£'000

Fair value

 

 

At 1 July

1,308

707

Additions during the year

180

462

Acquisition of joint venture

26

-

Disposal

(589)

-

Fair value gain/(loss) during the year

1,643

139

At 30 June

2,568

1,308

 

11. Trade and other receivables (restated)

 

The following table summarises the current trade and other receivables:

 

 

2021

£'000

2020

£'000

(restated)

Current trade and other receivables

 

 

Trade receivables

7,013

4,109

Prepayments

1,578

1,239

Contract assets

4,979

3,902

Other receivables

1,287

1,738

Total current

14,857

10,988

Non-current trade and other receivables

 

 

Other receivables

416

398

Total trade and other receivables

15,273

11,386

 

 

The June 2020 trade receivables balance has been decreased by £334,000 to reflect additional expected credit loss as discussed in note 1.

 

The primary decrease to current other receivables for the year ended 30 June 2021 is from repayments of amounts receivable from directors of £426,000 (2020 - £888,000), refer to note 17. The balance within non-current other receivables relates to the lease rental deposit for the lease of 1 Frederick's place with a fair value of £416,000 (2020 - £398,000) which is expected to be returned after a minimum of three years subject to meeting specific financial performance criteria. The deposit and amounts receivable from directors do not have expected credit loss allowances booked against them as they are expected to be repaid in full to the business.

 

Analysis of trade receivables and contract assets based on age of invoices

 

 

 

Trade Receivables

 

30 June 2021

Contract

assets

< 30

£'000

31-60

£'000

61-90

£'000

91-120

£'000

> 120

£'000

Total

£'000

Expected credit loss rate

8.63%

0.77%

1.83%

10.88%

12.50%

63.83%

 

Gross carrying amount

5,425

4,242

867

298

739

2,877

9,023

Expected credit loss

(468)

(33)

(16)

(32)

(92)

(1,837)

(2,010)

Net receivable

4,957

4,209

851

266

647

1,040

7,013

 

 

 

Trade Receivables

 

30 June 2020 (restated)

Contract

assets

< 30

£'000

31-60

£'000

61-90

£'000

91-120

£'000

> 120

£'000

Total

£'000

Expected credit loss rate

15.45%

1.14%

4.01%

8.70%

22.22%

51.37%

 

Gross carrying amount

4,615

2,488

222

476

267

1,633

5,086

Expected credit loss

(713)

(28)

(9)

(41)

(59)

(840)

(977)

Net receivable

3,902

2,460

213

435

208

793

4,109

 

The Group applies the IFRS 9 simplified approach to measuring expected credit losses (ECL) which uses a provision matrix to calculate a lifetime expected loss allowance for all trade receivables. The provision rates are based on days past due for groupings of various customer segments that have similar loss patterns. The balances are segmented by age for the entire Group as there is no sector or client type within the Group that has a disparate loss rate compared to the other sectors in the Group.

 

The provision matrix and ECL rates have been determined based on historical loss data available to management in addition to forward looking information utilising management knowledge. For instance, if forecast economic conditions (i.e., gross domestic product) are expected to deteriorate over the next year which can lead to an increased number of defaults, the historical default rates are adjusted. At every reporting date, the historical observed default rates are updated and changes in the forward-looking estimates are analysed. An asset is written off when there is no reasonable expectation of recovering the contractual cash flows.

 

The assessment of the correlation between historical observed default rates, forecast economic conditions and ECLs is an estimate. The amount of ECLs is sensitive to changes in circumstances and of forecast economic conditions. The Group's historical credit loss experience and forecast of economic conditions may also not be representative of customer's actual default in the future.

 

For the forward looking element this is evaluated on a client by client basis and an additional provision is recorded for any specific debtors that are considered to be individually doubtful. As at 30 June 2021 included within the ECL for trade receivables is a provision of £1,009,000 (2020 - £532,000 one debtor) related to two specific debtors that were added after considering their current financial status and other forward looking factors.

 

Management performed a sensitivity analysis over contract assets and trade receivables at the end of the year. If the full ECL provision noted above was increased or decreased by 10% this would have a £247,000 impact on the provision and related expense (2020 - £169,000).

 

Set out below is the movement in allowance for expected credit losses of trade receivables and contract assets:

 

 

2021

£'000

2020

£'000

(restated)

As at 1 July

1,690

1,105

Provision for expected credit losses

2,430

1,662

Write-offs

(1,642)

(1,077)

As at 30 June

2,478

1,690

 

12. Borrowings and deferred consideration

 

Borrowings

 

2021

£'000

2020

£'000

Current borrowings

 

 

Bank loans

12

2,538

Non-current borrowings and other liabilities

 

 

Bank loans

16,658

144

Other loans

-

729

Total non-current

16,658

873

Total borrowings and other liabilities

16,670

3,411

 

Bank loans

 

In April 2021 the Group secured a five-year loan facility with Santander for a mix of Sterling and Euros of which £8,573,000 and £8,932,000 (€10,301,000) were drawn down at an interest rate of 3.5% above Bank of England and EURIBOR, respectively, payable quarterly in arrears. The loan facility is subject to specific debt covenants, the covenants are monitored to ensure that the Group remains in compliance. There have been no breaches to these covenants for the year ended 30 June 2021. Management has performed a sensitivity analysis over the debt balances and if there was a 1.0% increase to the interest rate the total interest expense and related payable would increase by £110,000. Since there is a minimum interest rate, as noted above, the amount of interest expense will not decrease from current rates.

 

This loan facilitated the repayment of £2,000,000 from Bermuda Commercial Bank (interest of 7% was previously payable 6-monthly in arrears), Metro bank secured loan (interest at fixed rate of 4.25% plus an additional floating charge on the assets of that company, which was 0.5% at the commencement of the loan balance at 2020 - £214,000) and a majority of the capital loans to facilitate cashflow management. The remaining loan balances of £12,000 (2020 - £1,200,000) have now been repaid (2020 - length of the loans varied from 3 months to 5 years and the interest rates are between 0.6% - 1.9%).

 

Deferred consideration

 

 

2021

£'000

2020

£'000

Current deferred consideration

8,556

4,758

Non-current deferred consideration

5,120

5,719

Total deferred consideration

13,676

10,477

 

Deferred consideration relates to outstanding payments due on acquisitions. This includes payments that are due after the passage of time with no other conditions attached to payments and contingent consideration which is dependent upon the results of the acquired business.

 

Deferred consideration is initially recognised at an estimated fair value amount where the contingent consideration is probable and can be measured reliably. Where settlement of any part of cash consideration is deferred, the amounts payable in the future are discounted to their present value as at the date of exchange. The discount rates used are selected on the basis of the assessed risks and expected returns. A market rate, on cash flows of high certainty, is assumed to be at a risk-free rate, while cash flows contingent on business performance are discounted based on the acquiree's weighted average cost of capital.

 

The contingent consideration based on business performance is estimated based on forecasts for the respective business acquired and linked to achieving certain performance thresholds. If these performance thresholds are not met the total consideration will decrease, or if the thresholds initially considered to not be probable are met or exceeded the total consideration may increase.

 

During the year ended 30 June 2021 a net fair value loss of £809,000 (2020 restated- £649,000) was recorded in profit and loss (note 9) resulting in a corresponding decrease to the deferred consideration. This fair value adjustment was due to revisions in the consideration agreements and changes in the expected performance of the businesses acquired.

 

Key assumptions in calculating the fair value of deferred consideration can be summarised as follows:

 

·      future business performance - which is based on past performance and expected changes based on management knowledge of the business;

·      risk-free rate - range used between 1.0% - 2.5%

·      discount rate adjusted for the risk associated with the acquired business - range used between 10.6% - 25.0%

 

Included in the above total deferred consideration is £2,243,000 (2020 - £1,979,000) that is due after the passage of time. The remaining £11,433,000 deferred consideration is linked to the achievement of future performance criterion by the businesses acquired. If these performance thresholds are not met the total consideration will decrease, or if the thresholds initially considered to not be probable are met or exceeded the total consideration may increase.

 

For those acquisitions that have a cap on the maximum amount of consideration this could result in an additional £2,414,000 of undiscounted consideration in addition to the amounts currently recognised. For other acquisitions there are no caps on the amount of consideration as the subsequent amounts paid out are set at a percentage of financial performance metrics. Management performed a sensitivity analysis over the various expected pay outs for a range of possible outcomes. Changing the future business performance by increasing revenue by 10% all acquisitions, with no corresponding increase in costs, would result in an additional £1,221,000 of undiscounted consideration. A decrease in revenue of 10% would result in a decrease to undiscounted consideration of £1,634,000.

 

13. Share capital and Share Premium

 

MJ Hudson Group plc was incorporated on 29 July 2019 and was admitted to the Alternative Investment Market (AIM) on 12 December 2019. Prior to admission the Group undertook a reorganisation such that MJ Hudson Group plc was established as the parent and holding company of MJH Group Holdings Limited.

 

 

2021

£'000

2020

£'000

Issued Ordinary Share capital

Allotted, called up and fully paid

172,627,765 Ordinary shares in MJ Hudson Group plc at £nil each (2020 - 171,320,220)

-

-

Share premium*

56,023

55,527

Owned shares

1,881,658 Ordinary shares in MJ Hudson Group plc at £nil each (2020 - £nil)

(928)

-

*Share premium includes premium paid on B shares of Subsidiary as stated below

 

 

 

 

Share Capital

Share premium

 

Date

Shares

£'000

£'000

Ordinary Share capital

 

 

 

 

Opening balance

1 Jul 2020

171,320,220

-

55,326

Shares issued in MJ Hudson Group plc

 

1,307,545

-

578

Cost of owned shares in excess of cash on exercise of share options

 

-

-

(82)

Outstanding at the end of the year

30 Jun 2021

172,627,765

-

55,822

             

 

 

 

Date

Shares

 

Owned shares

£'000

Owned shares

 

 

 

 

Opening balance

1 Jul 2020

-

 

-

Shares repurchased

 

(2,429,824)

 

(1,164)

Issued for cash on exercise of share options

 

495,000

 

236

Outstanding at the end of the year

30 Jun 2021

(1,934,824)

 

(928)

 

At the time of the admission to AIM the ordinary share capital of MJH Group Holdings Limited contained 2 classes of shares - A and B shares. The A ordinary shares were all acquired by MJ Hudson Group plc in exchange for 45 shares in MJ Hudson Group plc and each share issued carries one voting right. The B share capital of MJH Group Holdings Limited, a subsidiary of MJ Hudson plc, was not acquired under the takeover. The B shares were issued during 2020 at market value of £201,000 to senior management under a subsidiary growth share plan.

The 20,000 B shares issued have no voting rights and a par value of £0.01 each. There are no restrictions on the distribution of dividends and the repayment of capital.

 

Date

Shares

Share Capital

Share Premium

B Shares

Opening balance

1 Jul 2020

20,000

-

201

Outstanding at the end of the year

30 Jun 2021

20,000

-

201

 

The total share premium includes share premium from ordinary shares of £55,822,000 and the share premium of B shares of £201,000 total of £56,023,000.

 

Capital risk management

 

The Group's objectives when managing capital are to safeguard its ability to continue as a going concern, so that it can provide returns for shareholders and benefits for other stakeholders and to maintain an optimum capital structure to reduce the cost of capital. In addition, the Group capital management policy takes into consideration debt covenants with lenders and the capital adequacy requirements of relevant regulatory bodies to ensure that capital structure is in compliance with those requirements. The capital risk management policy remains unchanged throughout the periods presented.

 

Capital is regarded as total equity, as recognised in the consolidated statement of financial position and stated in the table above, plus debt as disclosed in note 12. Debt is calculated as total borrowings (excluding lease liabilities) less cash and cash equivalents.

 

In order to maintain or adjust the capital structure, the Group may adjust the number of dividends paid to shareholders, return capital to shareholders, issue new shares, issue new debt or sell assets to reduce debt.

 

The Group would look to raise capital when an opportunity to invest in a business or company was seen as value adding relative to the current share price at the time of the investment. The Group will explore new acquisitions as part of its growth strategy and continues to integrate and grow its existing businesses in order to maximise synergies.

 

14.  Other Reserves

 

Balance as at 1 July 2019

584

883

(24)

1,443

Share-based payments

437

-

-

437

Exercise of options

(565)

-

-

(565)

Exercise of convertible debt

-

(883)

 

(883)

Currency translation difference

-

-

77

77

Balance as at 30 June 2020

456

-

53

509

Share-based payments

2,446

-

-

2,446

Exercise of options

(11)

-

-

(11)

Currency translation difference

-

-

(116)

(116)

Balance as at 30 June 2021

2,891

-

(63)

2,828

 

Share-based payments

 

Employees of the Group are granted options to acquire shares in the Group. The charge for the period was £166,000 ended 30 June 2021 (2020 - £437,000). There were also charges related to the long-term incentive plan (LTIP) for the period of £1,385,000. The LTIP may be settled in cash or shares. Management has modified the settlement policy as of 30 June 2021 and concluded that this plan will be settled with shares rather than in cash. As such the Group has transferred the liability of £447,000 previously recorded into the share-based payment reserve from other long term liabilities. The valuation has been updated effective 30 June 2021.

 

15. Changes in liabilities from financing activities

 

The following is a reconciliation of cash flow and non-cash flow movements relating to financing of the Group, in accordance with the requirements of IAS 7.44(A).

 

 

2020

Repayments

New loans

New leases

Interest paid

Non cash

Total

Year ended 30 June 2021

£'000

£'000

£'000

£'000

£'000

£'000

£'000

Long term borrowings

873

(873)

16,746

-

-

(88)

16,658

Short term borrowings

2,556

(2,735)

685

-

(494)

-

12

Lease liabilities

7,295

(614)

-

591

(343)

345

7,274

Total debt liabilities

10,724

(4,222)

17,431

591

(837)

257

23,944

 

The non-cash decrease in long term borrowings of £88,000 for the year ended 30 June 2021 is due to the foreign currency translation of Euro denominated loans introduced during the year.

 

 

2019

Repayments

New loans

New leases

Interest paid

Non cash

Total

Year 30 June 2020

£'000

£'000

£'000

£'000

£'000

£'000

£'000

Long term borrowings

14,563

(805)

499

-

(627)

(12,757)

873

Short term borrowings

978

(759)

524

-

(238)

2,051

2,556

Lease liabilities

554

(422)

-

7,104

(164)

223

7,295

Total debt liabilities

16,095

(1,986)

1,023

7,104

(1,029)

(10,483)

10,724

 

The non-cash decrease in long term borrowings of £12,757,000 for the year ended 30 June 2020 is due to the conversion of convertible loan notes into equity of £10,706,000 and the transfer from long term to short term borrowings of £2,051,000.

 

16. Business combinations

 

Acquisitions during the year

 

On 13 October 2020, the Group acquired 100% of Bridge Group Limited (Bridge), a funds service provider based in Ireland, conditional on regulatory approval for £9,793,000 paid in cash, shares and deferred consideration. Full regulatory approval from the Central Bank of Ireland was obtained on 12 February 2021. The acquisition will build on the Group's specialist funds operations in London, Luxembourg and Guernsey and adds a strategically important geography to the Group's network. It also brings a number of new international asset management clients.

 

On 29 December 2020, the Group acquired 100% of Prof. Gottschalg UG and its subsidiary PERACS GmbH (PERACS), a fund and portfolio performance specialist company for £3,902,000 paid in cash, shares and deferred consideration. The acquisition of PERACS extends the services provided by MJ Hudson's Data & Analytics division. PERACS Group offers investors and asset managers in the alternative assets industry a set of proprietary tools to produce authoritative metrics and insights into the performance of funds. The business was subsequently renamed to MJ Hudson Performance Analytics (German) UG.

 

On 24 June 2021, the Group acquired 100% of FinTech risk specialist Clarus Risk Limited (Clarus), for £1,984,000 paid in cash, shares and deferred consideration, to widen the breadth of services in the Group's data and analytics division. Clarus offers its clients risk and regulatory risk reporting either as managed service, or via software as a service (SaaS). Such services are deployed through an advanced, customisable dashboard environment.

 

The goodwill represents the experience and expertise of the staff of businesses acquired and non-contractual relationships. In calculating the goodwill arising on acquisition, the fair values of net assets of businesses have been assessed and adjustments from book value have been made where necessary. The goodwill values recorded upon acquisition are not deductible for tax purposes.

 

 

PERACS

£'000

Bridge

£'000

Clarus

£'000

Total

£'000

Intangible fixed assets

388

-

182

570

Tangible fixed assets

-

30

1

31

Right-of-use asset

-

99

-

99

Investments

-

20

-

20

Trade receivables

447

612

65

1,124

Other receivables

15

98

32

145

Contract assets

-

302

-

302

Cash at bank and in hand

73

1,730

9

1,812

Total assets

923

2,891

289

4,103

Trade and other payables

(698)

(1,003)

(83)

(1,784)

Contract liabilities

(53)

-

-

(53)

Lease liability

-

(106)

-

(106)

Net assets

172

1,782

206

2,160

Customer relationships

20

6,757

467

7,244

Goodwill at cost (note 9)

3,710

1,254

1,311

6,275

Total purchase consideration

3,902

9,793

1,984

15,679

 

Initial cash consideration of £3,336,000 was paid at the time of acquisitions, which is shown net of cash acquired within the statement of cashflows. In the current period £7,243,000 has been settled of the total consideration of £15,679,000 noted above. Included within the remaining £8,436,000 of consideration to be paid to the vendors of businesses acquired £6,909,000 is contingent upon the achievement of future performance criterion by those businesses. This consideration is based on the estimated fair value where the achievement of targets is probable and can be measured reliably.

 

If these performance thresholds are not met the total consideration will decrease, or if the thresholds initially considered not probable are met or exceeded the total consideration may increase. Refer to note 12 above for further details on contingent consideration.

 

The useful economic life of customer relationships has been estimated to be 5 years for PERACS; 15 years for Bridge and 11 years for Clarus based on estimates of the timing of the expected future net present cashflows attributable to the business.

 

The results of the businesses since their acquisition for the year ended 30 June 2021 are as follows:

 

 

PERACS

£'000

Bridge

£'000

Clarus

£'000

Total

£'000

Results since acquisition

 

 

Revenue

 

181

1,931

13

2,125

Profit/(loss) for the year

 

(88)

275

3

190

Estimated results if owned since the beginning of the reporting period

 

 

Revenue

 

1,273

4,007

595

5,875

Profit for the year

 

(70)

831

76

837

 

 

 

17. Related party disclosures

 

Transactions with related entities

 

Matthew Hudson ("Mr. Hudson") is a director and shareholder of HCO Global Limited. Mr. Hudson's wife, Katherine, is also a shareholder and director of this company. During the year the Group was charged £61,449 (2020 - £205,923) by HCO Global Limited. At 30 June 2021 the Group owed HCO Global Limited £nil (2020 - £20,973). 

 

Mr. Hudson is a director and shareholder of Sports Apps Limited. Mr. Hudson's wife, Katherine, is also a shareholder of this company. During the year the Group invoiced Sports Apps Limited £98,035 (2020 - £61,311) in respect of legal and corporate administration services and this was settled by addition to a convertible loan note. At 30 June 2021 Sports Apps Limited owed the Group £33,700 (2020 - £4,752). As at the 30 June 2021 Sports Apps Limited owed the Group £161,831 (2020 - £143,683) in respect of the convertible loan note which has been written down to £nil. At 30 June 2021 the fair value of the Group's equity investment in the entity is £nil (2020 - £83,029).

 

Mr. Hudson is a director of Alpha Hawk Limited. During the year the Group invoiced Alpha Hawk Limited £18,187 (2020 - £nil) in respect of legal services. As at 30 June 2021 Alpha Hawk Limited owed the Group £117,291 (2020 - £55,873). Due to performance of this business the Group has made a full provision in respect of this loan balance in the 2021 financial statements.

 

Bridge Consulting Limited was acquired by the Group on 13th October 2020 (refer to note 12). During the year, Bridge Consulting Limited provided £2,534 in funds administration services to Bridge Independent Risk Solutions, a joint venture to the Group. 

 

Directors' loans  

 

Included in the consolidated accounts are certain amounts due from directors of group companies. No new director loans were created in the twelve month period to 30 June 2021. 

 

As disclosed as part of the Group's RNS announcement on 18 November 2020 under AIM Rule 19, the following disclosures were omitted from the Group's 2020 financial statements. As part of the Company's IPO in December 2019 Mr. Hudson and others entered into a share subscription agreement. Under this agreement, Mr. Hudson subscribed but did not pay for 659,191 shares in the Company at the IPO issue price of 57p per share resulting in a payable due to the Company of £375,739. The details of this loan were previously included in other receivables from directors in the 2020 financial statements. The balance of the loan remained unpaid as at 30 June 2020. The loan should originally have been repaid by 3 March 2020. In January of 2021 the repayment date of the loan was extended, with the consent of the Board, to 31 December 2021. The loan was repaid by Mr. Hudson on 30 April 2021.

 

The remaining loan payable by Mr. Hudson to the Company at 30 June 2021 is £462,703 (2020 - £462,703). This loan balance and the terms remain unchanged in the 12 months ending 30 June 2021. . As the loan remained outstanding this triggered corporation tax payable of £150,378, which is fully recoverable at the time of repayment of the loan by the director. The loan is non-interest bearing and is repayable on demand. All amounts are expected to be received in full and no provision has been recorded against these balances (2020 - £nil). 

 

A separate share subscription of £50,000 at the IPO by Charles Spicer, the Company's chairman, was outstanding at 30 June 2020 and was settled on 18 August 2020. 

 

Loans from directors of subsidiaries 

 

Deferred consideration loans from directors of £nil (2020 - £159,236) relate to deferred consideration on the acquisition of Amaces Limited by MJH Group Holdings Limited in December 2018. These loans were repaid during the year in line with the contractual requirement in respect of the acquisition. The loan balances were due to the former directors of Amaces Limited, and their immediate family, and the breakdown was as follows at the end of 2020 - Aidan Dennis £49,761; Sandra Dennis £49,761; and James Economides £59,714. A further deferred consideration loan from Jonathan Bale of £nil (2020 - £17,967) which related to the 2014 acquisition of MJ Hudson Services Jersey Limited (formerly Verras Services Limited) was settled in the year. This loan balance was incorrectly shown as relating to deferred consideration on the acquisition of MJ Hudson Law LLP on 2 December 2013. 

 

 

 

18. Post balance sheet events

 

On 23 July 2021, the Group entered into a share purchase agreement relating to the purchase of the entire share capital of Saffery Champness Fund Services Limited (´SCFS´), a Guernsey based fund administration business, from the accountancy group Saffery Champness. The acquisition is expected to double MJ Hudson´s fund administration revenues in Guernsey with a 50% increase in local staff numbers. The deal was approved by the Guernsey Financial Services Commission and completed on 31 October 2021. It is expected to be modestly accretive to earnings per share. The maximum consideration for SCFS is £2.8m in cash and is subject to performance criteria over a two-year period. The acquired business generated revenues of £1.4m for the twelve-month period to March 2021 with an EBITDA margin comparable with the Group´s Outsourcing division on a pro forma basis.

 

On 20 August 2021 the Group borrowed £7 million from Santander under the terms of the Uncommitted Facility described more fully in note 12. This was to fund accelerated regulatory capital required in the Irish operations due to new business gains and working capital.

 

The Board of Directors have approved a resolution to recommend to shareholders at the AGM of the Company that a final dividend be declared in respect of FY21 of 0.125p per share.

 

There are no other transactions which occurred in the period after the consolidated statement of financial position date up to the date of the authorisation of these financial statements which would affect the figures stated within these financial statements.

 

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