The directors present the strategic report for the year ended 31 March 2024.
The principal activity of the company is the provision of financial intermediation and financial management services to private, corporate, and institutional clients. The company is authorised and regulated by the Financial Conduct Authority (FCA).
The company reports increased turnover by 92% to £713,649 (2023: £370,797) and a slightly increased gross profit margin of 96.37% (2023: 94.15%). Administrative costs increased by 54% to £664,951 for the year (2023: £432,323). The profit before tax was £41,391 (loss 2023: £79,292). Turnover increased each quarter during the year and even though costs increased they were controlled, so the company expects to maintain its growth and will aim for achieving profitability in the following year.
The business performed in line with expectations and achieved important growth metrics while controlling costs to achieve profitability. The increase in revenue was attributable to increase in the number of clients, growth in recurring revenues and quality of assets under administration as well as higher value services provided to the new and existing clients.
The company has decided to give up its matched principal trading permissions, which has derisked the company’s trading profile, and so the company can fully concentrate continuing to align with clients’ interests by trading as an agent.
The management is determined to achieve improvements and invest in all areas to support future growth, including infrastructure, talent recruitment, and new IT systems. The focus is on growing the core investment services alongside additional and ancillary investment services to company’s existing and new clients.
The company is well positioned to capitalise on business development efforts during the year which should result in a solid organic growth in the forthcoming year. The company will continue to focus on providing high quality services to private, corporate and institutional clients, with focus on institutional business.
The company utilises a framework of policies, procedures, and internal controls to process risk acceptance and risk management. Compliance with regulatory and legal requirements are of the highest priority for the company.
Regulatory and compliance risk
The Company is authorised and regulated by the FCA and while acknowledging that the increased regulatory and operational requirements have led to and will continue to levy additional costs on the firm and demands on the senior management, the Company is confident that the changes will not pose meaningful risks to the firm and its ability to deliver high quality services to its clients in a compliant manner.
Capital
The Company is required to comply with the FCA’s regulatory capital requirements to have adequate financial resources for the business it undertakes. The company had a loss during the 2023 financial year but managed to improve its financial performance in the following year to increase revenues and achieve profitability while controlling costs. The management is regularly monitoring capital adequacy requirements and is confident in the company’s ability to continue to comfortably satisfy the regulatory capital requirements.
Inflation and high interest rate
Rising inflation and high interest environment presented several challenges as well as opportunities for the investors and the company. Undoubtably this affected affluent clients and corporates, due to inflation, however, this presented new opportunities for some clients with treasury management requirements, which Topstone can capitalise on. Topstone remains debt free hence largely unaffected by high interest rates. However, should inflation affect Company’s costs due to increase in commercial contracts, Senior management will reconsider suppliers and ability to enter into shorter term contracts allowing for more flexibility in the longer term.
Competition:
Competitive pressures in the UK continue to present risks for the Company. Independent brokerage and investment management sector in the UK are consolidating meaning that, even though there is smaller number of players in the market, such players are generally larger which potentially creates headwinds in soliciting business away from larger established firms, or from smaller firms acquired or merged into larger groups. This potentially presents challenges for the Company and its business development efforts. However, the risk is mitigated by provision of high quality, personalized services to the client which may not be available in the larger firms. The Company strongly believes that offering such bespoke services strengthens position that will enable the Company to withstand competitive pressures.Retention of key staff:
The Company is dependent on its key members of management team. The loss of key personnel may significantly affect the Company, albeit in the short-term. The Company’s directors will ensure that all key members of the Company are appropriately compensated, as well as providing opportunities for growth including by professional development and education. As a small firm, the Company maintains importance of its culture as one of the key abilities to retain staff.
IT services and infrastructure
Like most firms the Company is reliant on the efficient and reliable functioning of its computer and system infrastructure for the smooth operation of its activities. The disruption of IT services and infrastructure may pose risk to the consistency and continuity of the Company’s client servicing and operations. The Company places significant importance on the IT and cybersecurity infrastructure, by employing an experienced IT services team as well as maintaining back-up systems, and recovery protocols allowing for the employees to continue performing their function, should they need be, from remote location, with no or very limited interruption to the services.
The company uses a series of key performance indicators (KPI’s) to monitor the performance of the business.
Financial KPI’s for the company include:
- Total Revenue of the company being: £713,649 (2023: £370,797)
- Administrative Costs: £664,951 (2023: £432,323)
- Total Equity being: £276,600 (2023: £235,209)
The company has put in place non-financial KPI’s to manage the financial and operational risks.
Non-financial KPI’s for the company include:
-Number of new client relationships: 9 new clients
-New Net AUM: USD $149,032,253.16
-Topstone carried out regular management meetings and management reporting
-Topstone carried out regular compliance monitoring and risk assessment as part of firm’s ICARA process
Other key performance indicators
The directors are committed to promoting the health, safety and welfare of their staff and continue to ensure appropriate measures are undertaken in this regard. No reportable accidents arose during the year.
The directors are mindful of environmental issues and have sought to minimise the impact of the company's activities on the environment. Company has introduced “Cycle-to-work” scheme to its employees.
Outlook for business
The company is looking to grow its existing offering and increase focus on institutional client base by providing high quality execution and custody services.
During the previous years the company spent significant amount of time and effort to growing its infrastructure, access to the market and efficiency of services provided to the clients, which has paid off during the reporting year. In the coming year the firm is looking to fully utilise its regulatory permissions and grow its client base. In an effort to grow the company the headcount is expected to grow as well in the following areas: account management, compliance, trading and operations.
Directors of Topstone Capital Limited consider, both individually and collectively, that they have acted in the way they consider, in good faith, would most likely promote the success of the company for the benefit of its stakeholders as a whole in decisions taken during the year ended 31 March 2024 and were in line with the long-term objectives of the company. In particular:
The objectives of the company are designed to have a long-term beneficial impact on the company and its stakeholders. We aim to provide an excellent service, based on comprehensive research, and capabilities in an open-minded and straightforward way that allows our client to rely on us, to protect, grow and transfer their wealth.
Our employees are fundamental to the delivery of our objectives. We aim to be a responsible employer in our approach to the pay and benefits our employees receive. The health, safety and well-being of our employees is one of our primary considerations in the way we conduct business.
Our vision is to provide access to whole of market solutions, for each client to be able to achieve their desired investment objectives while having our interests aligned with those of our clients.
We provide tailored solutions with institutional level of market access for private, corporate and institutional clients. We are independent and provide access to whole of market as we are not tied to any product providers. We are client oriented and are focused on what really matters to our clients. Our industry experience and wide network allows our investment professionals to navigate complex financial markets and complex investments efficiently. Our trade desk is reachable and available to answer client questions directly. Clients can discuss their holdings and transactions with relationship manager or investment advisor at their convenience to help monitor, analyses and plan investment strategy and objectives. Operating in a highly regulated and competitive market enabling clients to access investment products and services from the global financial centre.
We provide agency dealing services in a broad range of instruments and across global markets. Our established network of industry professionals and counterparties allows us to provide best execution and access local markets via local counterparties with the best access and experience. Our directors take an active interest in these connections and participate where possible in building such relationships.
Our objective is to take into account the impact of the company’s operations on the community and environment and our wider societal responsibilities.
As board of directors, our intention is to behave responsibly and ensure that the board operates the business in a responsible manner, operating within the high standards of business and good governance expected of a business such as ours and in doing so, will contribute to the delivery of the company’s long term objectives. The intention is to nurture our reputation, through excellent client services.
Also, as board of directors, our intention is to behave responsibly towards our customers and treat them fairly and equally, so they too may benefit from the successful delivery of the company’s objective.
On behalf of the board
The directors present their annual report and financial statements for the year ended 31 March 2024.
The results for the year are set out on page 10.
No ordinary dividends were paid. The directors do not recommend payment of a final dividend.
The directors who held office during the year and up to the date of signature of the financial statements were as follows:
The company has directors and officers' insurance in place.
The company's current policy concerning the payment of trade creditors is to:
settle the terms of payment with suppliers when agreeing the terms of each transaction;
ensure that suppliers are made aware of the terms of payment by inclusion of the relevant terms in contracts; and
pay in accordance with the company's contractual and other legal obligations.
The company manages its cash requirements in order to maximise interest income and , whilst ensuring the company has sufficient liquid resources to meet the operating needs of the business.
Substantial amounts of the company’s revenues are denominated in Euro or US Dollars, while the administrative costs are in Sterling. The company ensures that the exposure to cash balances held in foreign currency is monitored and managed.
Investments of cash surpluses, are made through banks and companies which must fulfil credit rating criteria approved by the Board.
All customers who wish to trade on credit terms are subject to credit verification procedures. Trade debtors are monitored on an ongoing basis and provision is made for doubtful debts where necessary.
Economic risk
The majority of the company’s revenues arise from custody and execution fees and the amount of assets under administration is affected by the market conditions resulting in potentially volatile fee income.
There are no matters to report.
In accordance with the company's articles, a resolution proposing that Fisher, Sassoon & Marks be reappointed as auditor of the company will be put at a General Meeting.
As the company has not consumed more than 40,000 kWh of energy in this reporting period, it qualifies as a low energy user under these regulations and is not required to report on its emissions, energy consumption or energy efficiency activities.
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' rresponsibilities 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 is detailed below
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 engagement partner ensured that the engagement team collectively had the appropriate competence, capabilities and skills to identify or recognise non-compliance with applicable laws and regulations;
we identified the laws and regulations applicable to the company through discussions with directors and other management, and from our commercial knowledge and experience of the financial services sector;
we focused on specific laws and regulations which we considered may have a direct material effect on the financial statements or the operations of the company, including the Financial Conduct Authority (FCA), Companies Act 2006,FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland, taxation legislation, anti-bribery, anti-money-laundering, and employment law;
we assessed the extent of compliance with the laws and regulations identified above through making enquiries of management and inspecting legal correspondence; and
identified laws and regulations were communicated within the audit team regularly and the team remained alert to instances of non-compliance throughout the audit.
We assessed the susceptibility of the company’s financial statements to material misstatement, including obtaining an understanding of how fraud might occur, by:
making enquiries of management as to where they considered there was susceptibility to fraud, their knowledge of actual, suspected and alleged fraud;
considering the internal controls in place to mitigate risks of fraud and non-compliance with laws and regulations; and
understanding the design of the company’s remuneration policies.
To address the risk of fraud through management bias and override of controls, we:
performed analytical procedures to identify any unusual or unexpected relationships;
tested journal entries to identify unusual transactions;
assessed whether judgements and assumptions made in determining the accounting estimates as set out in note 2 were indicative of potential bias; and
investigated the rationale behind significant or unusual transactions.
In response to the risk of irregularities and non-compliance with laws and regulations, we designed procedures which included, but were not limited to:
agreeing financial statement disclosures to underlying supporting documentation;
reading the minutes of meetings of those charged with governance;
enquiring of management as to actual and potential litigation and claims; and
reviewing correspondence with HMRC, relevant regulators including the FCA and reviewing the company’s compliance monitoring procedures and findings.
There are inherent limitations in our audit procedures described above. The more removed that laws and regulations are from financial transactions, the less likely it is that we would become aware of non-compliance. Auditing standards also limit the audit procedures required to identify non-compliance with laws and regulations to enquiry of the directors and other management and the inspection of regulatory and legal correspondence, if any. Material misstatements that arise due to fraud can be harder to detect than those that arise from error as they may involve deliberate concealment 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.
Topstone Capital Limited is a private company limited by shares incorporated in England and Wales.The registered office 4 Covent Garden, London, United Kingdom, WC2B 5AH.The principal place of business is 4 Covent Garden, London, United Kingdom WC2B 5HA.
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 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.
Other financial assets, including investments in equity instruments which are not subsidiaries, associates or joint ventures, are initially measured at fair value, which is normally the transaction price. Such assets are subsequently carried at fair value and the changes in fair value are recognised in profit or loss, except that investments in equity instruments that are not publicly traded and whose fair values cannot be measured reliably are measured at cost less impairment.
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.
Derivatives, including interest rate swaps and forward foreign exchange contracts, are not basic financial instruments. Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently re-measured at their fair value. Changes in the fair value of derivatives are recognised in profit or loss in finance costs or finance income as appropriate, unless hedge accounting is applied and the hedge is a cash flow hedge.
Debt instruments that do not meet the conditions in FRS 102 paragraph 11.9 are subsequently measured at fair value through profit or loss. Debt instruments may be designated as being measured at fair value through profit or loss to eliminate or reduce an accounting mismatch or if the instruments are measured and their performance evaluated on a fair value basis in accordance with a documented risk management or investment strategy.
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 directors do not consider there to be any critical judgements or key sources of estimation uncertainty involved in the preparation of the company's financial statements.
The average monthly number of persons (including directors) employed by the company during the year was:
Their aggregate remuneration comprised:
During the year retirement benefits were accruing to 2 director (2023 -1) in respect of contribution pension schemes.
The actual charge for the year can be reconciled to the expected charge/(credit) for the year based on the profit or loss and the standard rate of tax as follows:
The company has tax losses carried forward as at 31st March 2024 of £38,121 (2023: £78,918). A deferred tax asset has not been recognised in respect of the losses due to the uncertainty as to the timing of future taxable profits.
Details of the company's subsidiaries at 31 March 2024 are as follows:
Topstone Capital Nominees Limited remained dormant at the balance sheet date.
The company operates a 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.
Each share has full rights in the company with respect of voting, dividends and distributions.
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:
There are no matters to report.
The remuneration of key management personnel is as follows.