The Directors present the Strategic Report for the year ended 31 December 2023.
Principle Activities
The Company is regulated by the Financial Conduct Authority (FCA) and authorised to provide wealth management services, including discretionary management services, investment advice, debt advice and cash management.
The Company is primarily being used as a vehicle to hold strategic investments, on behalf of the Group, and thus facilitate the Group’s corporate strategy. To date, the Company has invested in four companies.
Outlook
The Company will continue to review investment opportunities in line with the Group’s corporate strategy.
Principle Risks and Uncertainties
The business recognises there are a number of categories of risk to which the business will be exposed to if not already; these encapsulate both risks that are specific to the Company and those which are relevant to the financial services market in general.
Regulatory Risk
The Company is regulated by the Financial Conduct Authority in respect of its investment and wealth management business in the United Kingdom. Failure to comply with the regulations set out by the FCA could lead to disciplinary action, financial penalties and reputational damage. The Risk and Compliance Team is responsible for ensuring that the Company meets all regulatory requirements.
Operational Risk
Operational risk will arise where there is a risk resulting from the failure of any of the Company's processes, systems and controls.
The Group has documented policies and procedures designed to minimise operational risks in its principal lines of business and as a growing firm is developing and refining these on a continuing basis.
Employee Risk
The Company does not have any direct employees but leverages the people resources of its parent company, when necessary. The parent company recognises that its employees are its most valuable resource and therefore it seeks to recruit and retain the highest calibre staff.
Foreign Exchange Risk
A proportion of Squared's fees are likely to be billed in foreign currencies, and to this extent the Company will be exposed to fluctuations in foreign exchange rates. As only a small proportion of the Company's anticipated income is billed in foreign currency and due to the expense involved, Squared has chosen not to actively hedge any foreign currency exposure at this time.
Market and Investment Risk
Squared does not run its own trading book and so is only exposed to market risk in the sense that any impact on the Company's assets under management, as a result of negative market movements, would be likely to have an impact on the revenues earned from management and performance fees charged on client portfolios. Investment risk may also stem from a fall in markets or through the inappropriate management of clients' portfolios, the knock-on of any such investment risk may be a failure to satisfy clients' investment objectives and hence poor client retention.
Whilst it is not possible (and may not be desirable) to eliminate all market risk, the Company's policy is to construct diversified portfolios for clients and allocate funds across asset classes and regions in order to minimise the impact of a fall in any single market or asset class. In addition, the Risk and Compliance team independently monitor the activities of the Investment Team in order to ensure that the level of risk in a portfolio is appropriate for its client and that excessive risks are not being taken.
Credit Risk
A large proportion of the Company's assets are held in its own bank accounts and therefore the Company chooses to hold its own assets with only a small number of high quality institutions who have strong credit profiles.
Exposure to credit risk in relation to the potential non-payment of fees is kept to a minimum as any fees due are generally remitted by the client's bank from the account managed in their name by the Company. To this extent the greater source of credit risk in respect of these relationships could be seen to be the credit worthiness of the banking institution; as with its own assets, the Company advises clients only to bank with high quality financial institutions.
The Directors of the Company, as those of all UK companies, confirm they must act in accordance with a set of general duties. These duties are detailed in section 172 of the UK Companies Act 2006, which is summarised as follows:
A director of a company must act in the way he 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 decision in the long-term,
(b) the interests of the company's employees,
(c) the need to foster the company's business relationships with clients, suppliers 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.
The Directors confirm, the implementation of the Group corporate strategy is considered within the context of the long-term success of the business. Strategic management decisions are assessed and reviewed, as necessary, to ensure they continue to align themselves with the evolving long-term direction of the business. On this basis, the Directors believe both the Company and other stakeholders, including employees, clients and others, benefit from the best results and outcomes.
The Parent Company’s employees are its greatest asset, and the Directors recognise the importance of the contribution they make to the success of the business. Retention and recruitment of the highest calibre of employees is therefore a key focus for the business. The positive wellbeing in the working environment and the health of the staff are key focuses of the Company. Employees have access to a range of benefits, such as private health care, life assurance, income protection insurance and the cycle to work scheme.
Maintaining positive client and occupier relationships are at the core of the business, therefore it is critical to the success of the Company. As an FCA-regulated business, treating customers fairly and maintaining high standards of business conduct are core values of the Company. The business ensures that it continues to offer services which suit the needs of clients. There are processes in place for customer complaint handling and dispute resolution. Furthermore, staff are given regular training on business conduct.
As a successful business, we feel a responsibility to act in a socially and environmentally positive manner. Additionally, the Group has supported a number of charitable causes within the year.
MiFIDPRU 8 Disclosure
The Company is regulated by the Financial Conduct Authority (“FCA”) in the UK and is subject to minimum capital requirements imposed by the Regulator and the Investment Firms Prudential Regime (“IFPR”).
Details of the Company’s unaudited IFPR disclosures, as required under MiFIDPRU 8, are included on the website of its Parent Company.
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 11.
During the year, no dividends (2022: £100,000) were paid to the parent company.
In accordance with the Company's articles, a resolution proposing that Moore Kingston Smith LLP be reappointed as auditor of the Company will be put at a General Meeting.
The Company has chosen in accordance with the Companies Act 2006, s. 414C(11) to set out in the company's Strategic Report information required by Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008, Sch. 7 to be contained in the Directors' Report. It has done so in respect of principal activities, future developments and key performance indicators.
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 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.
As part of an audit in accordance with ISAs (UK) we exercise professional judgement and maintain professional scepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purposes of expressing an opinion on the effectiveness of the company’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors.
Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the company to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
Explanation as to what extent 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.
The objectives of our audit in respect of fraud, are; to identify and assess the risks of material misstatement of the financial statements due to fraud; to obtain sufficient appropriate audit evidence regarding the assessed risks of material misstatement due to fraud, through designing and implementing appropriate responses to those assessed risks; and to respond appropriately to instances of fraud or suspected fraud identified during the audit. However, the primary responsibility for the prevention and detection of fraud rests with both management and those charged with governance of the company.
Our approach was as follows:
We obtained an understanding of the legal and regulatory requirements applicable to the company and considered that the most significant are the Companies Act 2006, UK financial reporting standards as issued by the Financial Reporting Council, the rules of the Financial Conduct Authority and UK taxation legislation.
We obtained an understanding of how the company complies with these requirements by discussions with management and those charged with governance.
We assessed the risk of material misstatement of the financial statements, including the risk of material misstatement due to fraud and how it might occur, by holding discussions with management and those charged with governance.
We inquired of management and those charged with governance as to any known instances of non-compliance or suspected non-compliance with laws and regulations.
Based on this understanding, we designed specific appropriate audit procedures to identify instances of non-compliance with laws and regulations. This included making enquiries of management and those charged with governance and obtaining additional corroborative evidence as required.
There are inherent limitations in the audit procedures described above. We are less likely to become aware of instances of non-compliance with laws and regulations that are not closely related to events and transactions reflected in the financial statements. 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.
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 Income Statement has been prepared on the basis that all operations are continuing operations.
Squared Limited is a private company limited by shares domiciled and incorporated in England and Wales. The registered office is One Connaught Place, London, W2 2ET.
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 pound.
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 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instrument Issues: Interest income/expense and net gains/losses for financial instruments not measured at fair value; 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 33 ‘Related Party Disclosures’: Compensation for key management personnel.
The financial statements of the Company are consolidated in the financial statements of Arbion Holdings Limited. These consolidated financial statements are available from its registered office, One Connaught Place, London, W2 2ET.
Equity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs. Dividends payable on equity instruments are recognised as liabilities once they are no longer at the discretion of the Company.
Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recognised in profit or loss immediately, together with any changes in the fair value of the hedged asset or liability that are attributable to the hedged risk.
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 note that the fixed asset investments accounting policy detailed in Note 1.6 is a key judgement that impacts the current and prior year.
The Directors do not consider that there are any other significant judgements or sources of estimation uncertainty and will continue to consider this on an ongoing basis.
An analysis of the Company's turnover is as follows:
No individuals were employed by the Company during the current or prior year.
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:
At 31 December 2023 an impairment of £17,530 (2022: nil) was recognised in respect of the unlisted investments held by the company, which represented a full impairment of an individual investment held. On 11 March 2024 £6,669 was received is respect of this investment.
Deferred tax assets and liabilities are offset where the company has a legally enforceable right to do so. The following is the analysis of the deferred tax balances (after offset) for financial reporting purposes:
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.
The shares have attached to them full voting, dividend and capital distribution rights (including on winding up), and do not confer any rights of redemption.
No remuneration was paid to the Directors in the current or preceding financial year.
Squared Limited has taken the exemption under FRS 102 from the requirement to disclose transactions with wholly owned members of the group.
There were no other related party transactions that required disclosure under FRS 102.