The directors present the strategic report for the year ended 31 December 2023.
APAM Ltd is a part of the Catella Group. APAM is a specialist real estate asset manager, operating since 2011 and providing end to end real estate services to our clients. APAM’s strategy is to further broaden, enhance and extend its services and client base to maintain and solidify its reputation as a best in class UK Asset and Investment Management business.
APAM’s platform is built to be market and cycle agnostic and performs well in any market conditions and through all parts of the cycle. APAM's expertise is across a broad range of real estate classes and sectors. APAM have a diverse client base with institutional clients, banks and special services, and private equity clients based both in the UK and abroad. APAM's agility and ability to be flexible to clients’ needs has been integral to our success. APAM’s services include asset management, investment management, property and facilities management, portfolio management, corporate and client accounting services as well as debt and tenant advisory services. APAM operates a number of subsidiaries to deliver procurement services, principal contracting and development management.
APAM returned a solid financial performance, maintaining core revenues despite market conditions and downwards pressures on values. Assets under APAM's management remained stable at circa £1.9Bn over the course of the year. A number of performance fees were delivered on real estate asset sales.
APAM secured a prestigious advisory mandate with a local authority as well as acquiring two real estate assets during the year.
APAM continued to manage its Principal Investments Programme, utilising both Catella’s and its own balance sheet. APAM’s co-investments through all investment programmes was £3.2m at year end.
The underlying business grew with the set up of two additional subsidiary services, as well as the recruitment of key staff to broaden our business development strategy. APAM continued to invest in systems to focus on business efficiency and ensure the platform for growth remains in place as market conditions improve. Profit margin was adversely impacted by this continued investment in the business as well as higher staff remuneration and retention costs affected by increased inflationary and market salary conditions.
Financial Performance
The directors track the progress of the business using various key performance indicators (“KPIs”):-
Current year (£) Prior year (£)
Turnover 7,568,416 7,899,177
Operating profit 1,000,212 1,835,509
Net assets 5,673,275 5,168,642
APAM’s strategy is to follow an appropriate risk policy, which effectively manages risk exposures in a commercially conscious manner and in progress of the achievement of our core business objectives. APAM are regulated by the Royal Institute of Chartered Surveyors, registered with the Information Commissioners Office and registered with HMRC for Real Estate Lettings and Estate Agency Anti-Money Laundering Supervision. APAM’s Corporate Governance is based generally on external statutory and regulatory frameworks, such as the Companies Act 2006 and professional guidelines issued by regulators (such as the Royal Institute of Chartered Surveyors) from time to time. APAM’s Articles of Association, and associated policy documents support these external frameworks and govern the prudent operation of APAM’s Executive Board and Committees. Additionally, as part of the Catella Group, a listed entity on the Nasdaq Stockholm, APAM provides regular financial, compliance and employee related disclosures under Group reporting requirements.
APAM maintains a business level risk register, where all risks are evaluated based on estimated probability and impact as well as the effectiveness of established measures to mitigate identified risks. APAM’s Risk Committee meets quarterly and provides a status independent forum to make streamlined risk management decisions and to evaluate the effectiveness of mitigation strategies. Legal and Risk reports are considered by the Executive Board at each meeting of the Board.
The key risks which management face are detailed as follows:
Macroeconomic risks
Instability and volatility of the commercial property investment market
Ongoing instability in UK real estate markets may dampen investor appetite and pose challenges to growing AUM during periods of uncertainty. APAM mitigate this risk by operating a predominantly non-discretionary and “market agnostic” segregated account mandate business. Revenue generated from non-discretionary real estate management services on a segregated account basis is flexible and allows APAM to adapt to market cycles.
Strategic risks
Margin pressure
A persistent high inflationary environment and fee revenues linked to declining real estate values, reduction in rents payable by tenants and delayed decision making put downward pressure on margins. APAM looks to mitigate this risk by diversifying revenue streams in new service lines – in FY23 we opened a Principal Contracting subsidiary and seeded an equities fund with Catella. Fees and margins are reviewed regularly and rebased where appropriate.
Operational risks
Key personnel
Overreliance on key-personnel may cause business disruption in the event of key personnel departures. APAM mitigate this risk by; (1) expanding and diversifying the senior leadership team in FY23 (2) operating as a fully integrated team across Manchester, London, Ireland and a number of remote locations; (3) systemisation of core client contacts, handbooks, procedures and processes; and (4) succession planning and talent management through our annual review process and performance development process.
Business continuity
Serious business disruption events may significantly impact service continuity if not appropriately planned for. APAM are completely cloud-based, our data is hosted securely by market leading providers and is regularly backed meaning employees can work easily, from anywhere. A disaster recovery and business continuity plan has been drawn up, including annual staff training, is tested annually and regularly updated to ensure APAM as an evolving business are prepared in the event of serious business disruption events.
Regulatory and Compliance risk
Regulatory or compliance breach that has a significant negative impact reputationally or financially on the business. APAM mitigate this by regularly updating, reviewing and communicating business policies (including the Employee Handbook and Compliance Manual) and best practices to all employees. All employees receive compliance training as part of their onboarding and this training is refreshed at least annually. In addition, APAM operates a Whistleblowing policy and Speak Up scheme encouraging employees to report any concerns confidentially and anonymously.
Business performance risk
Business performance risk is the risk that the company may not perform as expected either due to internal factors or due to competitive pressures in the market in which they operate. This risk is managed through a number of measures: ensuring the appropriate management team is in place; diversification of services; budget and business planning; key performance indicators; and regular forecasting; contract price management.
Health and safety risk
The company is committed to ensuring a safe working environment. The risks arising from inadequate management of health and safety matters are the exposure of employees and third parties to the risk of injury, potential liability and/or loss of reputation. These risks are managed by the company through: the strong promotion of a health and safety culture; and well defined health and safety policies.
Employee development
Long term growth of the business depends on the company’s ability to retain and attract personnel of high quality. This risk is managed through development plans which are regularly reviewed and updated. These are accompanied by specific policies in areas such as training, management development and performance management.
Financial and business control
Strong financial and business controls are necessary to ensure the integrity and reliability of financial and other information on which the company relies for day-to-day operations, external reporting and for longer term planning. The company exercises financial and business control through a combination of: qualified and experienced financial teams; performance analysis; budgeting and cash flow forecasting; monthly reporting and variance commentary and clearly defined approval limits. The external auditors provide advice on specific accounting and tax issues as they arise.
Social, ethical and environmental risk
Due to the company’s nature and size no significant social, ethical or environmental risks have been identified by the management. APAM operates a DE&I Committee, is a member of Real Estate Balance and volunteers with a number of charities. The company operates to the Catella ESG policy and reports on ESG metrics annually.
On behalf of the board
The directors present their annual report and financial statements for the year ended 31 December 2023.
The directors who held office during the year and up to the date of signature of the financial statements were as follows:
The results for the year are set out on page 9.
Ordinary dividends were paid amounting to £183,550. Preferred dividends in arrears totalled £51,420. The directors do not recommend payment of a final dividend.
Expenditure is approved at board level and flexibility is maintained by retaining surplus cash in a readily accessible bank account.
Credit risk arises principally on third party derived revenues. Company policy is aimed at minimising such risk and requires that deferred terms are granted only to customers who demonstrate an appropriate payment history and satisfy creditworthiness procedures. Individual exposures are monitored with customers subject to credit limits to ensure that the company’s exposure to bad debts is not significant.
The company has a normal level of exposure to price, credit, liquidity, commodity and cash flow risks arising from its trading activities which are conducted in sterling. The company does not enter into any complex financial instruments.
There were no significant events arising after the year-end affecting the company. The company is developing opportunities contributing to its growth and the business is expected to continue its development over the next twelve months through domestic markets.
Basis for 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.
Other information
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.
As explained more fully in the directors' responsibilities statement, 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.
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.
Extent to which the audit was 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.
Identifying and assessing potential risks related to irregularities
In identifying and assessing risks of material misstatement in respect of irregularities, including fraud, we considered the following:
the nature of the industry and sector, control environment and business performance;
any matters we identified having obtained and reviewed the company’s documentation of their policies and procedures relating to:
identifying, evaluating and complying with laws and regulations and whether they were aware of any instances of non-compliance,
detecting and responding to the risks of fraud and whether they have knowledge of any actual, suspected or alleged fraud;
the internal controls established to mitigate risks of fraud or non-compliance with laws and regulations; and
the matters discussed among the audit engagement team regarding how and where fraud might occur in the financial statements and any potential indicators of fraud.
As a result of these procedures, we considered the opportunities and incentives that may exist within the organisation for fraud. In common with all audits under ISAs (UK), we are also required to perform specific procedures to respond to the risk of management override.
We also obtained an understanding of the legal and regulatory frameworks the company operates in, 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 key laws and regulations we considered in this context included the UK Companies Act and tax legislation.
In addition, we considered provisions of other laws and regulations that do not have a direct effect on the financial statements but compliance with which may be fundamental to the company’s ability to operate or to avoid a material penalty.
Audit response to risks identified
Our procedures to respond to risks identified included the following:
review of the financial statement disclosures to underlying supporting documentation,
review of correspondence, enquiries of management and evaluating whether there was evidence of bias by the director that represented a risk of material misstatement due to fraud,
challenging assumptions and judgements made by management in their significant accounting estimates,
identifying and testing journal entries, in particular any journal entries posted with unusual account combinations or posted by senior management,
discussions with management, including consideration of known or suspected instances of non-compliance with laws and regulation and fraud.
There are inherent limitations in the audit procedures described above 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 would become aware of it. Also, 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 deliberate concealment by, for example, forgery or intentional misrepresentations, or through collusion.
A further description of our responsibilities is available on the Financial Reporting Council’s website at: https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor's report.
Use of our report
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.
The profit and loss account has been prepared on the basis that all operations are continuing operations.
APAM Ltd is a private company limited by the shares incorporated in England and Wales. The registered office is 4th Floor, 84 Grosvenor Street, London, England, W1K 3JZ.
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 £.
This company is a qualifying entity for the purposes of FRS 102, being a member of a group where the parent of that group prepares publicly available consolidated financial statements, including this company, which are intended to give a true and fair view of the assets, liabilities, financial position and profit or loss of the group. The company has therefore taken advantage of exemptions from the following disclosure requirements:
Section 7 ‘Statement of Cash Flows’: Presentation of a statement of cash flow and related notes and disclosures;
Section 33 ‘Related Party Disclosures’: Compensation for key management personnel.
The company has taken advantage of the exemption under section 401 of the Companies Act 2006 not to prepare consolidated accounts. The financial statements present information about the company as an individual entity and not about its group.
APAM Ltd is a majority-owned subsidiary of Catella AB and the results of APAM Ltd are included in the consolidated financial statements of Catella AB which are available from its registered office, Birger Tarlsgatan 6 PO BOX 5894, Stockholm, Sweden, SE 102 40.
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 credited or charged to profit or loss.
Basic financial assets, which include debtors and cash and bank balances, are initially measured at transaction price including transaction costs and are subsequently carried at amortised cost using the effective interest method unless the arrangement constitutes a financing transaction, where the transaction is measured at the present value of the future receipts discounted at a market rate of interest. Financial assets classified as receivable within one year are not amortised.
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.
Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the company after deducting all of its liabilities.
Basic financial liabilities, including creditors, bank loans, loans from fellow group companies and preference shares that are classified as debt, are initially recognised at transaction price unless the arrangement constitutes a financing transaction, where the debt instrument is measured at the present value of the future payments discounted at a market rate of interest. Financial liabilities classified as payable within one year are not amortised.
Debt instruments are subsequently carried at amortised cost, using the effective interest rate method.
Trade creditors are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Amounts payable are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities. Trade creditors are recognised initially at transaction price and subsequently measured at amortised cost using the effective interest method.
Financial liabilities are derecognised when the company’s contractual obligations expire or are discharged or cancelled.
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.
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 following judgements (apart from those involving estimates) have had the most significant effect on amounts recognised in the financial statements.
Investments in equity instruments that are not publicly traded are measured at cost less impairment and not fair value. The fair value information available is not deemed to be reliable, due to not accurately reflecting the minority interest in investments, that APAM hold.
The estimates and assumptions which have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities are as follows.
The total carrying amount at the end of the period, relating to cash-settled share-based payments, is calculated with reference to the expected value per share to be paid to the holders, at both the 'Exit Event One' and 'Exit Event Two'. These exit event value calculations are based on the estimated future financial results of the company, and as such are subject to change. Further details with regards to this cash-settled share-based payment arrangement can be seen in note 22.
All turnover was generated from the UK.
The average monthly number of persons (including directors) employed by the company during the year was:
Their aggregate remuneration comprised:
The number of directors for whom retirement benefits are accruing under defined contribution schemes amounted to 3 (2022 - 4).
The actual charge for the year can be reconciled to the expected charge for the year based on the profit or loss and the standard rate of tax as follows:
Impairment tests have been carried out where appropriate and the following impairment losses have been recognised in profit or loss:
The impairment losses in respect of financial assets are recognised in other gains and losses in the profit and loss account.
Preferred dividends in arrears total £51,420. This relates to the ordinary B shareholding and is equal to 5% of annual profit before tax, less all salaries and compensation under incentive scheme and any accruals for E Shareholders.
Details of the company's subsidiaries at 31 December 2023 are as follows:
Details of the company's joint ventures at 31 December 2023 are as follows:
The total carrying amount at the end of the period, relating to cash-settled share-based payments, is calculated with reference to the expected value per share to be paid to the holders, at both the 'Exit Event One' and 'Exit Event Two'. Further details with regards to this cash-settled share-based payment arrangement can be seen in note 22.
The following are the major deferred tax liabilities and assets recognised by the company and movements thereon:
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.
The ordinary A shares and ordinary B shares carry the same voting rights. Each share is intitled to one vote.
Up to 12 April 2023 the directors could declare a dividend on both the ordinary A shares and ordinary B shares, in such proportions as the directors determined, between the different classes of ordinary A shares and ordinary B shares. All dividends declared in respect of ordinary A shares and ordinary B shares, should be distributed among the holders of such shares, in proportion to the number of shares held.
On 12 April 2023 the ordinary B shares became entitled to a preferred dividend, equal to 5% of annual profit before tax, less all salaries and compensation under incentive scheme and any accruals for E Shareholders.
On 3 July 2023 1,250 ordinary B shares were redesignated as ordinary A shares.
The ordinary E shares have been issued to employees and represent a long term cash-settled share based payment arrangement. The ordinary E shares will not have any voting rights or the right to receive any dividends.
A buyback of all ordinary E shares is proposed to take place no later than 120 days from 31 December 2025. Two mandatory buyback events will apply to the ordinary E shares. The first mandatory buyback event will occur no later than 120 days from 31 December 2024 (Exit Event One) and the second mandatory buyback event will occur no later than 120 days from 31 December 2025 (Exit Event Two). It is proposed that 30 per cent of the ordinary E shares per E shareholder will be repurchased by the company under 'Exit Event One' and 70 per cent (or the remainder of the ordinary E shares) will be repurchased by the company under 'Exit Event Two'.
The valuations of the ordinary E Shares at 'Exit Event One' and 'Exit Event Two' will be based on 8x the financial results of the company for the preceding two-year average. The ordinary E share proceeds will be based on the increase in value of the ordinary E shares above the specific entry hurdle value, applicable to those ordinary E shares (defined as the "Relevant Hurdle"). The Share Scheme Committee will determine the value of the company at the exit / buyback date (as applicable) and the value of each ordinary E share will be equal to 0.01 per cent of the amount by which the exit / buyback date valuation exceeds the 'Relevant Hurdle'.
At the reporting end date the company had outstanding commitments for future minimum lease payments under non-cancellable operating leases, which fall due as follows:
Sales of £60,000 (2022: £983,166) were made to companies under common directorships.
Dividends totalling £234,970 (2022 - £721,500) were paid in the year in respect of shares held by the company's directors.
Interest free loans have been granted by the company to its directors as follows:
The immediate and ultimate parent company is Catella AB, a company registered in Sweden.