Company Registration No. SC302037 (Scotland)
KENNOX ASSET MANAGEMENT LIMITED
ANNUAL REPORT AND FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2023
KENNOX ASSET MANAGEMENT LIMITED
COMPANY INFORMATION
Directors
M C L Adam
C L Heenan
G B Legg
Secretary
C L Heenan
Company number
SC302037
Registered office
33 Melville Street
Edinburgh
United Kingdom
EH3 7JF
Auditor
Johnston Carmichael LLP
7-11 Melville Street
Edinburgh
EH3 7PE
KENNOX ASSET MANAGEMENT LIMITED
CONTENTS
Page
Strategic report
1 - 3
Directors' report
4 - 5
Directors' responsibilities statement
6
Independent auditor's report
7 - 9
Profit and loss account
10
Balance sheet
11
Statement of changes in equity
12
Statement of cash flows
13
Notes to the financial statements
14 - 23
KENNOX ASSET MANAGEMENT LIMITED
STRATEGIC REPORT
FOR THE YEAR ENDED 30 JUNE 2023
- 1 -
The directors present the strategic report for the year ended 30 June 2023.
Review of the business
The strategic report has been prepared in accordance with Section 414C of the Companies Act 2006.
The company is principally engaged in the business of asset management services. The company is FCA registered (registration number 475658).
The future success of the company is dependent upon maintaining both ongoing funds and securing new funds for management. The company offers a highly differentiated investment product, focused on assets that are deemed to trade at significantly lower valuations than the market, a style regularly called “value investing”. Whilst this style has fallen out of favour with market participants over the last couple of years, the company is confident that the positioning of the fund is attractive for when the market’s interest returns to this area.
Results and performance
The turnover and loss for the year to June 2023 were £802,503 (2022: £1,145,117) and £108,122 (2022: £40,027 profit) respectively. The loss for the year is due to a reduction in the assets under management and a subsequent redundancy exercise during the first half of the year. The Board notes that the company is profitable going forward at current levels of turnover.
Key performance indicators
The Board assesses its performance in meeting the company's objectives against the following Key Performance Indicators:
Investment Performance - this is the investment performance of the assets that the company manages (comprised of the SW Kennox Strategic Value Fund and a segregated account). The Board has reviewed the investment performance and found it to be acceptable.
Assets under management, representing the total value of funds managed by the company. At the end of June 2023, this was £66m (2022: £152m).
Turnover and net profits/losses - as expressed above.
Cash flows as shown on the Cash flows Statement - this showed a decrease in cash of £151,535 (2022: increase of £50,364). The Board is satisfied with the actions of the company which led to the closing cash balances.
Shareholders’ Funds which stood at £633,008 (2022: £861,731). The Board monitors the level and quality of shareholders’ funds to ensure the smooth functioning of the company.
Principle risks and uncertainties
The key risks to the company are investment performance, loss of key clients, cost inflation, operational errors, including IT issues and issues with fraud. Details of how the company manages its risks are included within the Directors Report. The Board ensures that every effort is taken to manage these risks in the interest of the long term health of the company and reviews these issues and efforts regularly.
In accordance with MIFIDPRU 8, the required disclosures in respect of risk management objectives and policies, with own funds requirements, and remuneration policy and practices are available on request from the company's office.
Future developments
The company intends to continue with the current strategy, of focussing on providing high quality and differentiated investment management services for a select number of clients.
KENNOX ASSET MANAGEMENT LIMITED
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2023
- 2 -
Section 172 statement
Section 172 of the Companies Act 2006 requires that a director of a company must act in the way he or she considers, in good faith, would be most likely to promote the success of the company for the benefit of its members as a whole, and in doing so have regard (amongst other matters) to:
a) the likely consequences of any decisions in the long term;
b) the interest of the company's employees;
c) the need to foster the company's business relationships with suppliers, customers and others;
d) the impact of the company's operations on the community and the environment;
e) the desirability of the company maintaining a reputation for high standards of business conduct; and
f) the need to act fairly as between members of the company.
In performing their duties under section 172, the directors of Kennox Asset Management Limited have had regard to the matters set out in Section 172 as follows:
The directors’ approach
The directors have had regard to all the above factors when making strategic decisions during the year. The stakeholders that the directors have identified when describing their s172 duties include employees, suppliers, underlying clients/investors in the funds that Kennox manages, and the wider community.
The main methods used by the directors during the year to engage with these stakeholders have included: direct discussions with staff, including frequent feedback and formal interactive reviews, regarding a range of issues including but not limited to procedures and policies, operational organisation, and culture; regular communication and direct discussions with clients/investors, including interactions regarding the appropriateness and effectiveness of the product and service standards; and interactions with the community, including charities, to identify causes to support.
Impact on decision making during the year
The key board activities during the year which were influenced by consideration of our stakeholders and the s172 factors set out above included:
in-depth reviews of Kennox's product offering to ensure maintaining the highest possible standards of provision;
actions to develop and maintain a culture focused on the needs of the end client as well as complying with all appropriate regulation;
support for the community, including donations to and support for charities;
the determination of fair bonus and dividend payments (while having regard to the financial strength of the company);
making all efforts to provide for the health and wellbeing of all staff, including support for their day to day duties as well as training for their longer-term development. Where redundancies were unavoidable, these were undertaken in good faith, and with an open, transparent and supportive process;
interaction with and support for all our suppliers, to ensure a steady business environment; and
agreeing a fair price when we acquired our own shares; a transaction which resulted in the new capital redemption reserve.
KENNOX ASSET MANAGEMENT LIMITED
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2023
- 3 -
C L Heenan
Director
19 October 2023
KENNOX ASSET MANAGEMENT LIMITED
DIRECTORS' REPORT
FOR THE YEAR ENDED 30 JUNE 2023
- 4 -
The directors present their annual report and financial statements for the year ended 30 June 2023.
Results and dividends
Ordinary dividends were paid amounting to £45,601 (2022 - £67,200).
Going concern
The company is funded through a combination of cash flows arising from existing asset management fees and shareholder equity. The directors actively monitor the formal cash flows and capital position of the company, including its ongoing compliance with regulatory capital requirements.
After making enquiries and preparing financial forecasts for a range of scenarios, the directors have a reasonable expectation that the company has adequate resources to continue in operational existence for at least the next 12 months and the foreseeable future. Accordingly, they continue to adopt the going concern basis for preparing the annual report and financial statements.
Financial risk management
The company’s activities expose it to several financial risks including market risk, operational and regulatory risk and business risk. The company's principal financial assets are its bank balances.
The company identifies, manages and monitors financial risks through activities which include forecasting, budgeting and cash flow management. Specifically, credit risk is managed by ensuring prompt payments, reviewing the financial strength of our clients and only placing cash deposits with highly rated approved counterparties. Liquidity risk is managed by maintaining additional capital on top of its minimum regulatory requirements.
Directors
The directors who held office during the year and up to the date of signature of the financial statements were as follows:
M C L Adam
P J Boyle
(Resigned 31 January 2023)
C L Heenan
G B Legg
Auditor
Johnston Carmichael LLP were appointed as auditor to the company and in accordance with section 485 of the Companies Act 2006. Johnston Carmichael LLP have expressed their willingness to continue in office and appropriate arrangements have been put in place for them to be deemed reappointed as auditor in the absence of an Annual General Meeting.
Energy and carbon report
As the company has not consumed more than 40,000 kWh of energy in this reporting period, it qualifies as a low energy user under these regulations and is not required to report on its emissions, energy consumption or energy efficiency activities.
Statement of disclosure to auditor
So far as each person who was a director at the date of approving this report is aware, there is no relevant audit information of which the company’s auditor is unaware. Additionally, the directors individually have taken all the necessary steps that they ought to have taken as directors in order to make themselves aware of all relevant audit information and to establish that the company’s auditor is aware of that information.
KENNOX ASSET MANAGEMENT LIMITED
DIRECTORS' REPORT (CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2023
- 5 -
On behalf of the board
C L Heenan
Director
19 October 2023
KENNOX ASSET MANAGEMENT LIMITED
DIRECTORS' RESPONSIBILITIES STATEMENT
FOR THE YEAR ENDED 30 JUNE 2023
- 6 -
The directors are responsible for preparing the strategic report, directors' report and the financial statements in accordance with applicable law and regulations.
Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the company and the profit or loss of the company for that period. In preparing these financial statements, the directors are required to:
select suitable accounting policies and then apply them consistently;
make judgements and accounting estimates that are reasonable and prudent;
state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements;
prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business.
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the company’s transactions and disclose with reasonable accuracy at any time the financial position of the company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
KENNOX ASSET MANAGEMENT LIMITED
INDEPENDENT AUDITOR'S REPORT
TO THE MEMBERS OF KENNOX ASSET MANAGEMENT LIMITED
- 7 -
Opinion
We have audited the financial statements of Kennox Asset Management Limited (‘the company’) for the year ended 30 June 2023, which comprise the Profit and Loss Account, Balance Sheet, Statement of Changes in Equity, Statement of Cash Flows, and notes to the financial statements, including significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland (United Kingdom Generally Accepted Accounting Practice).
In our opinion the financial statements:
Give a true and fair view of the state of the company's affairs as at 30 June 2023 and of its loss for the year then ended;
Have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and
Have been prepared in accordance with the requirements of the Companies Act 2006.
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor responsibilities for the audit of the financial statements section of our report. We are independent of the company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the directors' use of the going concern basis of accounting in the preparation of the financial statements is appropriate.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the company's ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.
The other information comprises the information included in the Annual Report other than the financial statements and our auditor's report thereon. The directors are responsible for the other information contained within the Annual Report. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of our audit:
The information given in the strategic report and the directors' report for the financial year for which the financial statements are prepared is consistent with the financial statements; and
The strategic report and the directors' report have been prepared in accordance with applicable legal requirements.
KENNOX ASSET MANAGEMENT LIMITED
INDEPENDENT AUDITOR'S REPORT (CONTINUED)
TO THE MEMBERS OF KENNOX ASSET MANAGEMENT LIMITED
- 8 -
Matters on which we are required to report by exception
In the light of our knowledge and understanding of the company and its environment obtained in the course of the audit, we have not identified material misstatements in the strategic report and the directors' report.
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion:
Adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited by us; or
The financial statements are not in agreement with the accounting records and returns; or
Certain disclosures of remuneration specified by law are not made; or
We have not received all the information and explanations we require for our audit.
Responsibilities of directors
As explained more fully in the directors' responsibilities statement set out on page 5, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the directors are responsible for assessing the company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the company or to cease operations, or have no realistic alternative but to do so.
Auditor responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s website at: http://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
Extent to which the audit is considered capable of detecting irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud, is detailed below.
We assessed whether the engagement team collectively had the appropriate competence and capabilities to identify or recognise non-compliance with laws and regulations by considering their experience, past performance and support available.
All engagement team members were briefed on relevant identified laws and regulations and potential fraud risks at the planning stage of the audit. Engagement team members were reminded to remain alert to any indications of fraud or non-compliance with laws and regulations throughout the audit.
We obtained an understanding of the legal and regulatory frameworks that are applicable to the company, focusing on provisions of those laws and regulations that had a direct effect on the determination of material amounts and disclosures in the financial statements. The most relevant frameworks we identified include:
KENNOX ASSET MANAGEMENT LIMITED
INDEPENDENT AUDITOR'S REPORT (CONTINUED)
TO THE MEMBERS OF KENNOX ASSET MANAGEMENT LIMITED
- 9 -
Extent to which the audit is considered capable of detecting irregularities, including fraud (continued)
We gained an understanding of how the company is complying with these laws and regulations by making enquiries of management and those charged with governance. We corroborated these enquiries through our review of relevant correspondence with regulatory bodies and board meeting minutes.
We assessed the susceptibility of the financial statements to material misstatement, including how fraud might occur, by meeting with management and those charged with governance to understand where it was considered there was susceptibility to fraud. This evaluation also considered how management and those charged with governance were remunerated and whether this provided an incentive for fraudulent activity. We considered the overall control environment and how management and those charged with governance oversee the implementation and operation of controls. We identified a heightened fraud risk in relation to:
In addition to the above, the following procedures were performed to provide reasonable assurance that the financial statements were free of material fraud or error:
Reviewing minutes of meetings of those charged with governance for reference to: breaches of laws and regulation or for any indication of any potential litigation and claims; and events or conditions that could indicate an incentive or pressure to commit fraud or provide an opportunity to commit fraud;
Reviewing the level of and reasoning behind the company’s procurement of legal and professional services;
Performing audit work procedures over the risk of management override of controls, including testing of journal entries and other adjustments for appropriateness, evaluating the business rationale of significant transactions outside the normal course of business and reviewing judgements made by management in their calculation of accounting estimates for potential management bias;
Completion of appropriate checklists and use of our experience to assess the company’s compliance with the Companies Act 2006; and
Agreement of the financial statement disclosures to supporting documentation.
Our audit procedures were designed to respond to the risk of material misstatements in the financial statements, recognising that the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve intentional concealment, forgery, collusion, omission or misrepresentation. There are inherent limitations in the audit procedures performed and the further removed non-compliance with laws and regulations is from the events and transactions reflected in the financial statements, the less likely we are to become aware of it.
This report is made solely to the company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company's members, as a body, for our audit work, for this report, or for the opinions we have formed.
Richard Sutherland (Senior Statutory Auditor)
For and on behalf of Johnston Carmichael LLP
19 October 2023
Chartered Accountants
Statutory Auditor
7-11 Melville Street
Edinburgh
EH3 7PE
KENNOX ASSET MANAGEMENT LIMITED
PROFIT AND LOSS ACCOUNT
FOR THE YEAR ENDED 30 JUNE 2023
- 10 -
2023
2022
Notes
£
£
Turnover
3
802,503
1,145,117
Cost of sales
(39,020)
(13,436)
Gross profit
763,483
1,131,681
Administrative expenses
(909,150)
(1,081,860)
Operating (loss)/profit
4
(145,667)
49,821
Interest receivable and similar income
8
4,397
117
(Loss)/profit before taxation
(141,270)
49,938
Tax on (loss)/profit
9
33,148
(9,911)
(Loss)/profit for the financial year
(108,122)
40,027
The profit and loss account has been prepared on the basis that all operations are continuing operations.
There have been no items of other comprehensive income attributable to the shareholders other than the results for the current and preceding financial year as presented in the profit and loss account above and therefore no separate Statement of Comprehensive Income has been presented. All results have been derived from continuing operations.
The notes on pages 14-23 form an integral part of these financial statements.
KENNOX ASSET MANAGEMENT LIMITED
BALANCE SHEET
- 11 -
2023
2022
Notes
£
£
£
£
Fixed assets
Tangible assets
11
3,033
6,783
Current assets
Debtors
12
99,984
241,273
Cash at bank and in hand
591,092
742,627
691,076
983,900
Creditors: amounts falling due within one year
13
(53,997)
(127,256)
Net current assets
637,079
856,644
Total assets less current liabilities
640,112
863,427
Provisions for liabilities
Provisions
14
7,104
Deferred tax liability
15
1,696
(7,104)
(1,696)
Net assets
633,008
861,731
Capital and reserves
Called up share capital
17
364
417
Share premium account
4,497
4,497
Capital redemption reserve
53
Profit and loss reserves
628,094
856,817
Total equity
633,008
861,731
The financial statements were approved by the board of directors and authorised for issue on 19 October 2023 and are signed on its behalf by:
C L Heenan
Director
Company Registration No. SC302037
KENNOX ASSET MANAGEMENT LIMITED
STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2023
- 12 -
Share capital
Share premium account
Capital redemption reserve
Profit and loss reserves
Total
Notes
£
£
£
£
£
Balance at 1 July 2021
417
4,497
883,990
888,904
Year ended 30 June 2022:
Profit and total comprehensive income for the year
-
-
-
40,027
40,027
Dividends
10
-
-
-
(67,200)
(67,200)
Balance at 30 June 2022
417
4,497
856,817
861,731
Year ended 30 June 2023:
Loss and total comprehensive income for the year
-
-
-
(108,122)
(108,122)
Dividends
10
-
-
-
(45,601)
(45,601)
Own shares acquired
-
-
-
(75,000)
(75,000)
Redemption of shares
17
(53)
53
-
Balance at 30 June 2023
364
4,497
53
628,094
633,008
KENNOX ASSET MANAGEMENT LIMITED
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 30 JUNE 2023
- 13 -
2023
2022
Notes
£
£
£
£
Cash flows from operating activities
Cash (absorbed by)/generated from operations
21
(23,591)
38,170
Income taxes paid
(10,341)
(21,451)
Net cash (outflow)/inflow from operating activities
(33,932)
16,719
Investing activities
Purchase of tangible fixed assets
(1,099)
Interest received
4,097
117
Net cash generated from investing activities
2,998
117
Financing activities
Own shares acquired
(75,000)
Dividends paid
(45,601)
(67,200)
Net cash used in financing activities
(120,601)
(67,200)
Net decrease in cash and cash equivalents
(151,535)
(50,364)
Cash and cash equivalents at beginning of year
742,627
792,991
Cash and cash equivalents at end of year
591,092
742,627
KENNOX ASSET MANAGEMENT LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2023
- 14 -
1
Accounting policies
Company information
Kennox Asset Management Limited is a private company limited by shares incorporated in Scotland. The registered office is 33 Melville Street, Edinburgh, United Kingdom, EH3 7JF.
1.1
Accounting convention
These financial statements have been prepared in accordance with FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland” (“FRS 102”) and the requirements of the Companies Act 2006.
The financial statements are prepared in sterling, which is the functional currency of the company. Monetary amounts in these financial statements are rounded to the nearest £.
The financial statements have been prepared under the historical cost convention. The principal accounting policies adopted are set out below.
1.2
Going concern
At the time of approving thetrue directors have a reasonable expectation that the company has adequate resources to continue in operational existence for at least the 12 months following the approval of the financial statements and the foreseeable future. Thus the directors continue to adopt the going concern basis of accounting in preparing the financial statements.
1.3
Turnover
Turnover represents amounts receivable for investment management services. Investment management fees are amounts due for the management of funds under management. They are recognised as the services are provided, on an accrual basis. The turnover, all of which arises in the United Kingdom, is attributable to the company's principal activity.
Interest income is recognised in the Profit and Loss Account as it accrues.
1.4
Tangible fixed assets
Tangible fixed assets are initially measured at cost and subsequently measured at cost, net of depreciation and any impairment losses.
Depreciation is recognised so as to write off the cost of assets less their residual values over their useful lives on the following bases:
Plant and equipment
20% straight line
Mobile handsets
33% straight line
The gain or loss arising on the disposal of an asset is determined as the difference between the sale proceeds and the carrying value of the asset, and is recognised in the Profit and Loss Account.
1.5
Cash and cash equivalents
Cash and cash equivalents include cash in hand, deposits held at call with banks, and bank overdrafts.
1.6
Financial instruments
Financial assets are recognised in the company's balance sheet when the company becomes party to the contractual provisions of the instrument.
Financial assets and liabilities are offset and the net amounts presented in the financial statements when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle on a net basis or to realise the asset and settle the liability simultaneously.
KENNOX ASSET MANAGEMENT LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2023
1
Accounting policies
(Continued)
- 15 -
Basic financial assets
Basic financial assets, which include trade and other debtors and cash, are initially measured at transaction price including transaction costs and are subsequently carried at amortised cost using the effective interest rate model.
Impairment of financial assets
Financial assets, are assessed for indicators of impairment at each reporting end date.
Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows have been affected. If an asset is impaired, the impairment loss is the difference between the carrying amount and the present value of the estimated cash flows discounted at the asset’s original effective interest rate. The impairment loss is recognised in the Profit and Loss Account.
Derecognition of financial assets
Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire or are settled, or when the company transfers the financial asset and substantially all the risks and rewards of ownership to another entity, or if some significant risks and rewards of ownership are retained but control of the asset has transferred to another party that is able to sell the asset in its entirety to an unrelated third party.
Basic financial liabilities
Basic financial liabilities, including all current liabilities, are recognised at transaction price.
Derecognition of financial liabilities
Financial liabilities are derecognised when the company’s contractual obligations expire or are discharged or cancelled.
1.7
Equity instruments
Equity instruments issued by the company are recorded at the proceeds received, net of transaction costs. Dividends payable on equity instruments are recognised as liabilities once they are no longer at the discretion of the company.
1.8
Taxation
The tax expense represents the sum of the tax currently payable and deferred tax.
Current tax
The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the profit and loss account because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The company’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the reporting end date.
KENNOX ASSET MANAGEMENT LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2023
1
Accounting policies
(Continued)
- 16 -
Deferred tax
Deferred tax liabilities are generally recognised for all timing differences and deferred tax assets are recognised to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits. Such assets and liabilities are not recognised if the timing difference arises from goodwill or from the initial recognition of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit.
Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited in the profit and loss account, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity. Deferred tax assets and liabilities are offset when the company has a legally enforceable right to offset current tax assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority.
1.9
Provisions
Provisions are recognised when the company has a legal or constructive present obligation as a result of a past event, it is probable that the company will be required to settle that obligation and a reliable estimate can be made of the amount of the obligation.
The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the reporting end date, taking into account the risks and uncertainties surrounding the obligation. Where the effect of the time value of money is material, the amount expected to be required to settle the obligation is recognised at present value. When a provision is measured at present value, the unwinding of the discount is recognised as a finance cost in profit or loss in the period in which it arises.
1.10
Employee benefits
Short term employee benefits are recognised as an expense in the period which they are incurred.
The cost of any unused holiday entitlement is recognised in the period in which the employee's services are received.
1.11
Retirement benefits
Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due.
1.12
Leases
Rentals payable under operating leases, including any lease incentives received, are charged to profit or loss on a straight line basis over the term of the relevant lease except where another more systematic basis is more representative of the time pattern in which economic benefits from the leases asset are consumed.
1.13
Foreign exchange
Transactions in currencies other than pounds sterling are recorded at the rates of exchange prevailing at the dates of the transactions. At each reporting end date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the reporting end date. Gains and losses arising on translation in the period are included in profit or loss.
1.14
Cost of sales relates to rebates paid to investors.
1.15
Administrative expenses comprise payroll costs, professional fees and other operating costs and are recognised when incurred.
KENNOX ASSET MANAGEMENT LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2023
- 17 -
2
Judgements and key sources of estimation uncertainty
In the application of the company’s accounting policies, the directors are required to make judgements, estimates and assumptions about the carrying amount of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised where the revision affects only that period, or in the period of the revision and future periods where the revision affects both current and future periods.
The directors believe there are no significant judgments or estimates made which would have a material impact on these financial statements.
3
Turnover and other revenue
An analysis of the company's turnover is as follows:
2023
2022
£
£
Turnover analysed by class of business
Investment management fees
802,503
1,145,117
2023
2022
£
£
Turnover analysed by geographical market
United Kingdom
802,503
1,145,117
4
Operating (loss)/profit
2023
2022
Operating (loss)/profit for the year is stated after charging:
£
£
Depreciation of owned tangible fixed assets
4,399
4,307
Operating lease charges
35,100
25,200
5
Auditor's remuneration
2023
2022
Fees payable to the company's auditor and associates:
£
£
For audit services
Audit of the financial statements of the company
10,350
8,498
For other services
Other assurance services
3,300
3,000
Taxation compliance services
2,750
2,500
6,050
5,500
16,400
13,998
KENNOX ASSET MANAGEMENT LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2023
- 18 -
6
Employees
The average monthly number of persons (including directors) employed by the company during the year was:
2023
2022
Number
Number
Investment management
2
3
Marketing
1
1
Operations & Administration
3
4
Total
6
8
Their aggregate remuneration comprised:
2023
2022
£
£
Wages and salaries
381,799
604,677
Social security costs
44,824
70,720
Pension costs
39,182
57,169
465,805
732,566
7
Directors' remuneration
2023
2022
£
£
Remuneration for qualifying services
194,167
346,000
Company pension contributions to defined contribution schemes
22,000
33,000
Compensation for loss of office
91,667
307,834
379,000
The number of directors for whom retirement benefits are accruing under money purchase scheme amounted to 3 (2022 - 3).
8
Interest receivable and similar income
2023
2022
£
£
Interest income
Other interest income
4,397
117
9
Taxation
2023
2022
£
£
Current tax
UK corporation tax on profits for the current period
10,341
KENNOX ASSET MANAGEMENT LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2023
9
Taxation
2023
2022
£
£
(Continued)
- 19 -
Deferred tax
Origination and reversal of timing differences
(33,148)
(430)
Total tax (credit)/charge
(33,148)
9,911
The actual (credit)/charge for the year can be reconciled to the expected (credit)/charge for the year based on the profit or loss and the standard rate of tax as follows:
2023
2022
£
£
(Loss)/profit before taxation
(141,270)
49,938
Expected tax (credit)/charge based on the standard rate of corporation tax in the UK of 20.50% (2022: 19.00%)
(28,960)
9,488
Tax effect of expenses that are not deductible in determining taxable profit
1,723
15
Remeasurement of deferred tax for changes in tax rates
(5,973)
408
Fixed asset differences
(51)
Other permanent differences
113
Taxation (credit)/charge for the year
(33,148)
9,911
On 1 April 2023 the tax charge on the standard rate of corporation tax in the UK increased to 25%. In the current year the standard rate has been reduced by marginal relief providing an increase in the effective corporation tax rate to 20.5% from 19% in prior year.
10
Dividends
2023
2022
£
£
Final paid
45,601
67,200
KENNOX ASSET MANAGEMENT LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2023
- 20 -
11
Tangible fixed assets
Plant and equipment
Mobile handsets
Total
£
£
£
Cost
At 1 July 2022
56,387
56,387
Additions
1,099
1,099
Disposals
(7,071)
(7,071)
At 30 June 2023
49,316
1,099
50,415
Depreciation and impairment
At 1 July 2022
49,604
49,604
Depreciation charged in the year
4,216
183
4,399
Eliminated in respect of disposals
(6,621)
(6,621)
At 30 June 2023
47,199
183
47,382
Carrying amount
At 30 June 2023
2,117
916
3,033
At 30 June 2022
6,783
6,783
12
Debtors
2023
2022
Amounts falling due within one year:
£
£
Trade debtors
134,813
Other debtors
750
4,950
Prepayments and accrued income
67,782
101,510
68,532
241,273
Deferred tax asset (note 15)
31,452
99,984
241,273
13
Creditors: amounts falling due within one year
2023
2022
£
£
Trade creditors
18,547
34,905
Corporation tax
10,341
Other taxation and social security
12,860
62,080
Accruals and deferred income
22,590
19,930
53,997
127,256
KENNOX ASSET MANAGEMENT LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2023
- 21 -
14
Provisions for liabilities
2023
2022
£
£
7,104
-
Movements on provisions:
£
Additional provisions in the year
7,104
The provision in the year was for two quarterly payments in relation to the Morningstar agreement. Although Morningstar is no longer used, the 2023 contract was unable to be cancelled before the end of the year, therefore the remaining quarterly payments have been recorded as an onerous contract.
15
Deferred taxation
The following are the major deferred tax liabilities and assets recognised by the company and movements thereon:
Liabilities
Liabilities
Assets
Assets
2023
2022
2023
2022
Balances:
£
£
£
£
Accelerated capital allowances
-
1,696
(758)
-
Carried forward trading losses
-
-
32,210
-
-
1,696
31,452
-
2023
Movements in the year:
£
Liability at 1 July 2022
1,696
Credit to profit or loss
(33,148)
Asset at 30 June 2023
(31,452)
The deferred tax asset set out above is expected to reverse within 12 months and relates to the utilisation of tax losses against future expected profits of the same period.
KENNOX ASSET MANAGEMENT LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2023
- 22 -
16
Retirement benefit schemes
2023
2022
Defined contribution schemes
£
£
Charge to profit or loss in respect of defined contribution schemes
39,182
57,169
The company operates a defined contribution pension scheme for all qualifying employees. The assets of the scheme are held separately from those of the company in an independently administered fund.
17
Share capital
2023
2022
2023
2022
Ordinary share capital
Number
Number
£
£
Issued and fully paid
Ordinary shares of 1p each
36,367
41,700
364
417
On 27 January 2023, the company bought 5,333 Ordinary shares of 1p each from Peter Boyle for a total consideration of £75,000.
18
Operating lease commitments
Lessee
At 30 June 2023, the company was committed to making the following payments during the next five years in respect of operating leases:
2023
2022
£
£
Within one year
21,000
2,100
21,000
2,100
19
Related party transactions
Remuneration of key management personnel
The remuneration of key management personnel is as follows.
2023
2022
£
£
Aggregate compensation
307,833
379,000
20
Ultimate controlling party
The ultimate controlling party is C L Heenan, a director and shareholder of the company.
KENNOX ASSET MANAGEMENT LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2023
- 23 -
21
Cash (absorbed by)/generated from operations
2023
2022
£
£
(Loss)/profit for the year after tax
(108,122)
40,027
Adjustments for:
Taxation (credited)/charged
(33,148)
9,911
Investment income
(4,097)
(117)
Depreciation and impairment of tangible fixed assets
4,399
4,307
Asset disposed of at a loss
450
100
Increase in provisions
7,104
-
Movements in working capital:
Decrease in debtors
172,741
74,840
Decrease in creditors
(62,918)
(90,898)
Cash (absorbed by)/generated from operations
(23,591)
38,170
The notes on pages 14-23 form an integral part of these financial statements.
22
Analysis of changes in net funds
1 July 2022
Cash flows
30 June 2023
£
£
£
Cash at bank and in hand
742,627
(151,535)
591,092
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