The directors present the strategic report for the year ended 31 December 2023.
The Group, through its direct subsidiaries Craven Street Capital Limited and Craven Street Wealth Limited, offers a portfolio of professional corporate and wealth management services to its clients. The principal activities include M&A, IPO, debt advisory, financial advice and wealth management planning.
In February 2023, the business acquired the trade and assets of Bernard Barrett Associates Limited through its wealth management subsidiary, Chaucer Newco Limited. Through this deal, the business managed to increase its assets under advice to over £1.2 billion.
During the FY 2023, the Group achieved one of its significant strategic milestones. A well-planned process of creating a single wealth management business by merging its four independent wealth management businesses into a single entity was completed in October 2023.
In the year to 31 December 2023, the Group had turnover of £9.5 million (2022: £8.6 million) and recorded a loss before tax of £1.4m (2022: £0.8m). Whilst the Group realised losses before tax, EBITDA (earnings before interest, tax, depreciation and amortisation) in 2023 increased to £2.4m (2022: £2.2m). The growth in turnover is primarily attributed to the Group maintaining higher level of assets under advice following acquisitions.
At 31 December 2023, the Group had net liabilities of £0.9m (2022: net assets of £0.7m). This is directly attributable to high interest charges and amortisation resulting from business acquisitions, as evidenced by the strong EBITDA levels.
The activities of the Group expose it to a variety of risks, both financial and operational. Those which have a material impact on the Group are as follows:
Economic downturn and market risk
Like all financial services business the Group is exposed to downturns in the market. The Group tries to mitigate this risk through a close focus on costs and through close relationships with its clients. The Group wealth management business operates an investment committee. The committee ensures the investment strategies are managed within the risk parameters.
Regulatory Risk
The Group’s trading subsidiaries require Financial Services Authority (FCA) approval to undertake its financial services business and breach of the FCA rules might lead to the withdrawal of approval. The Group continues to mitigate this risk by the way of an experienced and dedicated regulatory team and fostering a client centric and compliance-focused culture.
People Risk
As a group of service companies, loss of key adviser and management is also a risk. We mitigate this risk by how we manage and look after the staff, and this is evidenced by low levels of staff turnover and high levels of retention across the Group.
Interest and Cash Flow Risk
The Group is exposed to an economic risk linked to the variable rate of interest associated with the bank loan facility. This is mitigated by the forward projections for the business which highlight an improving cash position.
The Group utilises the same forward projections to monitor and manage the cash flow risks of the business.
Credit and Liquidity Risk
The directors do not consider credit risk or liquidity risk to be material risks to the business, given that the majority of income is received as recurring income from product providers.
Price Risk
The directors monitor the price competitiveness of the wealth and corporate finance businesses in line with the Group’s regulatory responsibilities. The directors consider that pricing in both parts of the business is in line with competitors operating in similar parts of the market in the UK.
Key performance indicators are turnover, loss before tax and EBIDTA.
In the year to 31 December 2023, the Group had turnover of £9.5 million (2022: £8.6 million) and recorded a loss before tax of £1.4m (2022: £0.8m).
The business further uses EBIDTA as its other key performance indicator. EBIDTA for 2023 totaled £2.4m (2022: £2.2m).
The directors consider that turnover and EBITDA are the most suitable measures of scale and profitability of the Group. The directors monitor these KPIs regularly and note that the growth is in line with internal targets.
Acquisitions of wealth management businesses will continue to form an important part of our strategy and are indeed necessary to achieve our ambitious medium-term target of becoming a top advice business in the Southeast of England.
In FY23, the Group completed a well-planned process of creating a single wealth management business. The integration of front and back-office systems will enable its clients and staff to benefit from new working practices.
The change has placed the Group wealth management arm into excellent position to integrate new acquisitions efficiently, with lower costs and enhanced margins.
Events after the balance sheet date
On 29 February 2024, Craven Street Wealth Limited completed the acquisition of the financial planning business of Punter Southall Defined Contribution Consulting Limited (subsequently renamed Pension Potential Limited), known as Punter Southall Aspire (and now trading as Craven Street Aspire). With the acquisition of this business, Craven Street Wealth has reached approximately £2.0 billion assets under advice. Please refer to the notes to these financial statements for further information.
On behalf of the board
The directors present their annual report and financial statements for the year ended 31 December 2023.
The results for the year are set out on page 8.
No ordinary dividends were paid. The directors do not recommend payment of a further dividend.
The directors who held office during the year and up to the date of signature of the financial statements were as follows:
The auditor, HW Fisher LLP, is deemed to be reappointed under section 487(2) of the Companies Act 2006.
We have audited the financial statements of Craven Street Capital Holdings Limited (the 'parent company') and its subsidiaries (the 'group') for the year ended 31 December 2023 which comprise the group statement of comprehensive income, the group balance sheet, the company balance sheet, the group statement of changes in equity, the company statement of changes in equity, the group 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 FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland (United Kingdom Generally Accepted Accounting Practice).
Basis for opinion
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's 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 group's and parent 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
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.
In the light of the knowledge and understanding of the group and the parent 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 where the Companies Act 2006 requires us to report to you if, in our opinion:
adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or
the parent company financial statements are not in agreement with the accounting records and returns; or
certain disclosures of directors' remuneration specified by law are not made; or
we have not received all the information and explanations we require for our audit.
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 parent 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.
Detection of 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.
As part of our planning process:
We enquired of management the systems and controls the group and company has in place, the areas of the financial statements that are most susceptible to the risk of irregularities and fraud, and whether there was any known, suspected or alleged fraud. The group and company did not inform us of any known, suspected or alleged fraud.
We obtained an understanding of the legal and regulatory frameworks applicable to the group and company. We determined that the following were most relevant: FRS 102, Companies Act 2006 and the Financial Conduct Authority.
We considered the incentives and opportunities that exist in the group, including the extent of management bias, which present a potential for irregularities and fraud to be perpetuated, and tailored our risk assessment accordingly.
Using our knowledge of the group, together with the discussions held with the group at the planning stage, we formed a conclusion on the risk of misstatement due to irregularities including fraud and tailored our procedures according to this risk assessment.
The key procedures we undertook to detect irregularities including fraud during the course of the audit included:
Identifying and testing journal entries and the overall accounting records, in particular those that were significant and unusual.
Reviewing the financial statement disclosures and determining whether accounting policies have been appropriately applied.
Reviewing and challenging the assumptions and judgements used by management in their significant accounting estimates, in relation to work in progress, revenue recognition, recoverability of amounts due from fellow group undertakings and calculation and valuation of goodwill.
Assessing the extent of compliance, or lack of, with the relevant laws and regulations.
Testing key revenue lines, in particular cut-off, for evidence of management bias.
Obtaining third-party confirmation of material bank and loan balances.
Documenting and verifying all significant related party and consolidated balances and transactions.
Reviewing documentation such as the group’s board minutes for discussions of irregularities including fraud.
Testing all material consolidation adjustments.
Owing to the inherent limitations of an audit, there is an unavoidable risk that we may not have detected some material misstatements in the financial statements even though we have properly planned and performed our audit in accordance with auditing standards. The primary responsibility for the prevention and detection of irregularities and fraud rests with the those charged with governance of the group.
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.
As permitted by s408 Companies Act 2006, the company has not presented its own profit and loss account and related notes. The company’s profit for the year was £37,024 (2022 - £44,750 profit).
Craven Street Capital Holdings Limited (“the company”) is a private company limited by shares incorporated in England and Wales. The registered office is 3 Gough Square, 3rd floor, London, United Kingdom, EC4A 3DE.
The group consists of Craven Street Capital Holdings Limited and all of its subsidiaries.
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.
The 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 for parent company information presented within the consolidated financial statements:
Section 4 ‘Statement of Financial Position’: Reconciliation of the opening and closing number of shares;
Section 7 ‘Statement of Cash Flows’: Presentation of a statement of cash flow and related notes and disclosures;
Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instrument Issues’: Carrying amounts, interest income/expense and net gains/losses for each category of financial instrument; basis of determining fair values; details of collateral, loan defaults or breaches, details of hedges, hedging fair value changes recognised in profit or loss and in other comprehensive income;
Section 26 ‘Share based Payment’: Share-based payment expense charged to profit or loss, reconciliation of opening and closing number and weighted average exercise price of share options, how the fair value of options granted was measured, measurement and carrying amount of liabilities for cash-settled share-based payments, explanation of modifications to arrangements;
Section 33 ‘Related Party Disclosures’: Compensation for key management personnel.
The financial statements of the company are consolidated in the financial statements of Craven Street Capital Holdings Limited. These consolidated financial statements are available from the UK Registrar of Companies.
The consolidated group financial statements consist of the financial statements of the parent company Craven Street Capital Holdings Limited together with all entities controlled by the parent company (its subsidiaries) and the group’s share of its interests in joint ventures and associates.
All financial statements are made up to 31 December 2023, with the exception of Tarvos Wealth Limited with accounts drawn up to 31 October 2023. The results for the period 1 January 2023 to 31 December 2023 of Tarvos Wealth Limited have been included in these financial statements.
Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with those used by other members of the group.
All intra-group transactions, balances and unrealised gains on transactions between group companies are eliminated on consolidation. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred.
Subsidiaries are consolidated in the group’s financial statements from the date that control commences until the date that control ceases.
The financial statements have been prepared on a going concern basis. The directors have prepared long term forecasts and at the time of approving the financial statements, the directors have a reasonable expectation that the group has adequate resources to continue in operational existence for the foreseeable future. Should the necessity arise, there are sufficient third party cash facilities available to the group. Thus the directors continue to adopt the going concern basis of accounting in preparing the financial statements.
Turnover is recognised at the fair value of the consideration received or receivable for goods and services provided in the normal course of business, and is shown net of VAT and other sales related taxes.
Retainer fees are recognised over the period of the agreement. Fees in respect of specific projects are recognised once the contracts are exchanged and in the opinion of directors the company's involvement is over 95% complete and completion is guaranteed.
Where the substance of a contract is that a right to consideration doesn't arise until the occurrence of a critical event, revenue isn't recognised until that event occurs. This applies to the contracts where the right to consideration is conditional or contingent on a specified future event or outcome, the occurrence of which is outside of the company's control. Costs incurred on such fees are recorded as work in progress on the balance sheet if it is probable the costs will be recovered under the contract until the revenue is recognised. Work in progress is calculated based on the stage of completion of the project and the expected profit margin on that project as a proportion of total revenue.
Commissions and adviser charging fees are recognised once the client has formally signed and agreed to take up the investment advice given. Fee income is recognised as the contract progresses and to the extent that the business obtains the right to consideration in exchange for performance of its activities.
The revenue recognised is measured by reference to the amounts likely to be chargeable to clients, less a suitable allowance to recognise the uncertainties remaining in the completion of the obligations. Contingent income is recognised only when the contingent element is assured.
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.
Equity investments are measured at fair value through profit or loss, except for those equity investments that are not publicly traded and whose fair value cannot otherwise be measured reliably, which are recognised at cost less impairment until a reliable measure of fair value becomes available.
Shares in unlisted investments are held at cost. The directors do not have sufficient information to value the shares at fair market value.
In the parent company financial statements, investments in subsidiaries are initially measured at cost and subsequently measured at cost less any accumulated impairment losses.
A subsidiary is an entity controlled by the group. Control is the power to govern the financial and operating policies of the entity so as to obtain benefits from its activities.
At each reporting period end date, the group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the company estimates the recoverable amount of the cash-generating unit to which the asset belongs.
The carrying amount of the investments accounted for using the equity method is tested for impairment as a single asset. Any goodwill included in the carrying amount of the investment is not tested separately for impairment.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.
Recognised impairment losses are reversed if, and only if, the reasons for the impairment loss have ceased to apply. Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.
The group has elected to apply the provisions of Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instruments Issues’ of FRS 102 to all of its financial instruments.
Financial instruments are recognised in the group's balance sheet when the group 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.
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, other than those held at fair value through profit and loss, 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 profit or loss.
If there is a decrease in the impairment loss arising from an event occurring after the impairment was recognised, the impairment is reversed. The reversal is such that the current carrying amount does not exceed what the carrying amount would have been, had the impairment not previously been recognised. The impairment reversal is recognised in profit or loss.
Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire or are settled, or when the group 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 group after deducting all of its liabilities.
Basic financial liabilities, including creditors, bank loans and loans from fellow group companies 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 group's contractual obligations expire or are discharged or cancelled.
Equity instruments issued by the group 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 group.
The tax expense represents the sum of the tax currently payable and deferred 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 group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the reporting end date.
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.
The carrying amount of deferred tax assets is reviewed at each reporting end date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. 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 if, and only if, there is 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.
The costs of short-term employee benefits are recognised as a liability and an expense, unless those costs are required to be recognised as part of the cost of stock or fixed assets.
The cost of any unused holiday entitlement is recognised in the period in which the employee’s services are received.
Termination benefits are recognised immediately as an expense when the company is demonstrably committed to terminate the employment of an employee or to provide termination benefits.
Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due.
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 leased asset are consumed.
Rental income from operating leases is recognised on a straight line basis over the term of the relevant lease. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised on a straight line basis over the lease term.
In the application of the group’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.
Entities within the group have amounts due to and from fellow group undertakings from the process of maintaining appropriate levels of working capital and to meet regulatory liquidity requirements.
The directors use their judgement in applying accounting policies in relation to the recoverability of the balance when preparing the financial statements. In making their judgement, the directors use their experience, knowledge of the wider group and consider the industry in which they operate and future events, plans and forecasts. After assessment, the directors concluded the entities within the Group will be able to recover its debtors balances in full and no provisions have been made against the amounts outstanding as at 31 December 2023 (2022: £nil).
The group recognises goodwill arising from business combinations. The cost of the business combinations include initial cash consideration and other costs to the group, as well as the calculation of deferred consideration payable. The calculation of the deferred consideration requires judgements and estimates to be made.
The deferred consideration on the business combinations is payable subject to performance targets being met. The likelihood of targets being achieved in full is estimated based on the anticipated future performance of the business acquired and a probability of the necessary performance being achieved.
The expected future value of the deferred consideration is discounted from the anticipated date of payment to the present value. The directors estimate an appropriate discount rate based on the interest rates offered under their current lending facilities. The difference between the present value at acquisition and the total undiscounted deferred consideration is recognised as a finance charge between the date of acquisition and the expected date of settlement.
At the end of each reporting year, the directors review the recoverable value of the goodwill. The directors estimate the future level of profitability expected from the acquired businesses by using appropriate valuation methods including using forecasts of expected future results and cash flows and expected client attrition rates as well as any legal and regulatory or contractual provisions.
The group as a default amortises acquired goodwill over a ten-year period, unless it has been determined through the forecasting of expected future results and other factors that the useful life of the acquired business will be lower than the ten-year period.
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 group provides professional services to clients through its corporate finance and wealth management subsidiaries.
Work in progress is recognised where the substance of a contract is that the right to consideration doesn't arise until the occurrence of a critical event. The total revenue is calculated using the signed agreement and information provided by the client, and is deferred until that event occurs. The final settlement of fees may vary from the calculated recognition fees if the assignment is not completed or requires a higher level of work. The change is charged to the financial statement in the subsequent periods. Costs incurred on such fees are recorded as work in progress. The directors, using their knowledge and experience of the work performed, estimate the stage of completion of the project and the expected profit margin on that project and apply this to the estimated value of work undertaken to calculate the work in progress to be recorded.
The average monthly number of persons (including directors) employed by the group and company during the year was:
Their aggregate remuneration comprised:
The actual charge for the year can be reconciled to the expected credit for the year based on the profit or loss and the standard rate of tax as follows:
Factors that may affect future tax charges
Changes to the UK corporation tax rates were substantially enacted as part of the 2021 budget on 3 March 2021. This included an increase to the main rate from 19% to 25% from April 2023. The group will be taxed at a rate of 25% unless its profits are sufficiently low enough to qualify for a lower rate of tax, the lowest being 19%.
Where applicable, deferred taxes at the balance sheet date have been measured using a tax rate of 25% to reflect the rate that the timing differences are likely to unwind and are reflected in the financial statements.
In the financial statements for the year ended 31 December 2022, loan arrangement fees of £254,500 were included within the cost of business combinations. This has been reclassified and offset against bank loans in these financial statements and will be amortised over the terms of the loans.
The remeasurement of cost of business combinations relates to an adjustment to the deferred consideration on the acquisition of Christchurch Investment Management Limited of £514,408 and Tarvos Wealth Limited of £149,665.
The shares in unlisted investments relates to a 2.9% shareholding in GGH (Jersey) Limited. The Directors do not have sufficient information to estimate the fair value of this shareholding. Therefore, the investment is held at cost.
Details of the company's subsidiaries at 31 December 2023 are as follows:
Craven Street Financial Planning Limited owns 50% of the total share capital of Kreston Reeves Financial Planning Services Limited, but 51% of the voting rights. Thus, Kreston Reeves Financial Planning Services Limited is a subsidiary on the basis of control and has been consolidated in these financial statements.
Group
Included in other creditors is deferred consideration of £79,660 (2022: £378,650) relating to the acquisition of Christchurch Investment Management Limited, £nil (2022: £2,727,188) relating to the acquisition of Reeves + Neylan Financial Services Limited and £576,544 (2022: £403,196) relating to the acquisition of Tarvos Wealth Limited. See note 16 for further details.
Also included in other creditors is deferred consideration of £845,590 (2022: £nil) relating to the acquisition of Bernard Barrett Associates Limited during the year. See note 21 for further details.
Also included in other creditors is a clawback provision on indemnity insurance. The company received commissions from insurance companies under indemnity terms. The indemnity period over which income is derived is dependent upon the type of contract taken out by the client. If a contract is cancelled by the client during this indemnity period the company must repay to the insurance company that part of the commission which relates to the unexpired term of the indemnity period. The company takes these reclaims, where they occur, directly to the income statement at the time they occur.
Company
Amounts due to group undertakings are unsecured and interest free. No agreement is in place and thus the balance is deemed to be repayable on demand.
Group
Included within other borrowings are redeemable loan notes of £1,503,569 (2022: £1,376,000). The loan notes attract interest 8% per annum for the first 5 years from 2 March 2021, and 10% per annum thereafter. The loan notes are redeemable on Exit. Exit is defined as the sale of the participating companies.
Included within other creditors is deferred consideration of £391,924 (2022: £811,336) relating to the acquisition of Christchurch Investment Management Limited. The total undiscounted deferred consideration recognised on acquisition was £1,952,000 payable in four annual instalments from twelve months after the date of acquisition. The future value of the deferred consideration has been calculated using a discount rate of 8%. The difference between the present value at acquisition and the total undiscounted deferred consideration is recognised as a finance charge between the date of acquisition and the expected date of settlement.
Included within other creditors is deferred consideration of £nil (2022: £532,222) relating to the acquisition of Tarvos Wealth Limited. The total undiscounted deferred consideration recognised on acquisition was £998,750 payable in two annual instalments from twelve months after the date of acquisition. The future value of the deferred consideration has been calculated using a discount rate of 8.5%. The difference between the present value at acquisition and the total undiscounted deferred consideration is recognised as a finance charge between the date of acquisition and the expected date of settlement.
Included within other creditors is deferred consideration of £639,797 (2022: £nil) relating to the acquisition of Bernard Barrett Associates Limited in the year. See note 21 for further details.
Group and Company
Included within other borrowings is an unsecured loan from a related party of £1,667,384 (2022: £1,425,883). The loan attracts interest at 16.66% per annum and matures in 2025.
Group
In the financial statements for the year ended 31 December 2022, loan arrangement fees of £254,500 were included within the cost of business combinations. The total of these arrangement fees has been reclassified and offset against bank loans in these financial statements.
The bank loans are held with Shawbrook Bank Limited. The outstanding capital amount as at 31 December 2023 for each Facility in use of the bank loan is as follows:
Facility A - £5,230,728 (2022: £1,905,150). Interest on Facility A is charged at 5.95% per annum plus the higher of SONIA and 0.25% per annum. Facility A is repayable in monthly instalments of £106,750.
Facility B - £6,238,573 (2022: £2,800,000). Interest on Facility B is charged at 7.25% per annum plus the higher of SONIA and 0.25% per annum. Facility B is repayable in full in 2026.
Facility C - £nil (2022: £1,352,289). Interest on facility C is charged at 7.25% per annum plus the higher of SONIA and 0.25% per annum. Facility C is repayable in monthly instalments of £35,109.
Facility E - £nil (2022: £487,500). Interest on facility E is charged at 6.95% per annum plus the higher of SONIA and 0.25% per annum. Facility E is repayable in monthly instalments of £12,500.
Facility F - £nil (2022: £600,000). Interest on Facility F is charged at 7.25% per annum plus the higher of SONIA and 0.25% per annum. Facility F is repayable in full in 2026.
During the year, the balances relating to facilities C, E and F have been transferred to facilities A and B.
Other loans relate to redeemable loan notes of £1,503,569 (2022: £1,376,000). The loan notes attract interest 8% per annum for the first 5 years from 2 March 2021, and 10% per annum thereafter. The loan notes are redeemable on Exit. Exit is defined as the sale of the participating companies.
Group and Company
Loans from related parties relate to an unsecured loan of £1,667,384 (2022: £1,425,883). The loan attracts interest at 16.66% per annum and matures in 2025.
The following are the major deferred tax liabilities and assets recognised by the group and company, and movements thereon:
A defined contribution pension scheme is operated for all qualifying employees. The assets of the scheme are held separately from those of the group in an independently administered fund.
On 14 October 2022, the Company issued 1,000 ordinary shares at £150 per share, giving rise to additional share premium of £149,990.
In the financial statements for the year to 31 December 2023, share capital has increased by £5. This relates to corrections filed at Companies House on 27 March 2024 relating to the period from 2018 to 2023.
On 28 February 2023 the group acquired 100 percent of the issued capital of Bernard Barrett Associates Limited.
The goodwill arising on the acquisition of the business is attributable to the anticipated profitability of the company's trade and the future operating synergies from the combination. Goodwill is considered to have a finite useful life and is amortised on a systematic basis over its expected life, which is 10 years.
The total undiscounted deferred consideration is £1,580,000 payable in two annual instalments from twelve months after the date of acquisition. The future value of the deferred consideration has been calculated using a discount rate of 11.18%. The difference between the present value at acquisition and the total undiscounted deferred consideration is recognised as a finance charge between the date of acquisition and the expected date of settlement. Deferred consideration is included within other creditors in the financial statements.
On 2 March 2021, the company entered into a cross guarantee and debenture of the bank borrowings of a fellow group company. At 31 December 2023, the company’s maximum potential liability under this arrangement was £11,469,301 (2022: £7,161,889).
S479 Parent Company Guarantee
For the financial year ended 31 December 2023, the below subsidiaries are exempt from the requirements stipulating that they be audited since they fulfil all the conditions for exemption under section 479A of the Companies Act 2006.
Craven Street Capital Limited
Craven Street Wealth Limited
Chaucer Newco Limited
Christchurch Investment Management Limited
Tarvos Wealth Limited
Bernard Barrett Associates Limited
The outstanding liabilities at the balance sheet date of the above subsidiary undertakings have been guaranteed by Craven Street Capital Holdings Limited pursuant to s479A to s479C of the Companies Act 2006.
At the reporting end date the group had outstanding commitments for future minimum lease payments under non-cancellable operating leases, which fall due as follows:
During the year the group made sales of £685,000 (2022: £390,000) to related parties, of which £378,000 (2022: £210,000) was outstanding at year end. The group also paid management charges of £21,912 (2022: £nil) to related parties, of which £5,824 (2022: £nil) was outstanding at the year end.
Included within other borrowings is an unsecured loan of £1,667,384 (2022: £1,425,883). The loan attracts interest at 16.66% per annum and matures in 2025.
On 29 February 2024, Craven Street Wealth Limited acquired the financial planning division of Punter Southall Defined Contribution Consulting Limited (subsequently renamed Pension Potential Limited), known as Punter Southall Aspire (and now trading as Craven Street Aspire), for initial cash and share consideration of £5.75m. At the time of approving the financial statements, the directors' best estimate of the total consideration, including any deferred contingent consideration, is £8.0m. Craven Street Wealth Limited borrowed a further £2.8m from its existing facilities with Shawbrook Bank Limited to fund the acquisition of Punter Southall Aspire. Interest is charged at 7.25% per annum plus the higher of SONIA and 0.25% per annum.
On 3 May 2024, the share capital of Craven Street Capital Holdings Limited was reduced from £123, divided into 11,500 ordinary shares of £0.01 each and 800 growth shares of £0.01 each, to £97.66, divided into 9,316 ordinary shares of £0.01 each and 450 growth shares of £0.01 each, by cancelling and extinguishing 2,184 ordinary shares of £0.01 each 350 growth shares of £0.01 each, all of which were held in treasury as at 31 December 2023.
On 23 May 2024, Craven Street Wealth Limited borrowed a further £1.1m from its existing facilities with Shawbrook Bank Limited to fund the payment of deferred consideration payable on the acquisitions of Christchurch Investment Management Limited and Bernard Barrett Associates Limited. Interest is charged at 7.25% per annum plus the higher of SONIA and 0.25% per annum.