The directors present the strategic report for the period ended 31 December 2023.
In this report, Nother Portfolio Services Limited is referred to as "Nother Portfolio Services", or "the Company".
During the past financial period, we faced a challenging macroeconomic environment defined by fluctuations and divergence between market sentiment and economic reality. Stubborn inflation levels have resulted in a continued shifting of the goalposts when it comes to central bank actions and the thought that this inflationary period would be transitory has long gone. The realities of tighter monetary policy for some time to come is being realised. There have been some shining lights such as the AI boom and a welcome easing of UK pension restrictions, with big changes made to both the annual contribution and lifetime allowances. Despite these headwinds, we successfully maintained our focus on long-term investment strategies, optimizing portfolio performance, and providing value to our clients. The Company's total assets under management (AUM) grew by 40.3% across the reporting period demonstrating our ability to navigate challenging conditions and underscores the trust placed in us by our clients and stakeholders.
Nother Portfolio Services is exposed to several principal risks and uncertainties that could affect our business model, financial condition, and operational results. The Directors are committed to maintaining a robust risk management framework to identify, assess, and mitigate these risks.
Market Risk: The Company is inherently exposed to fluctuations in global and domestic financial markets. Factors such as geopolitical tensions, inflationary pressures, and changes in interest rates can impact asset valuations. We mitigate this risk through diversification, active portfolio management, and hedging strategies where appropriate. The Directors hold regular investment committee meetings with research experts to evaluate all portfolio holdings and whether they continue to align with the interests of our clients.
Regulatory Risk: As a UK-based discretionary fund manager, we are subject to extensive regulatory requirements from bodies such as the Financial Conduct Authority (FCA). Changes in regulations, compliance standards, or tax policies could affect our business operations. We actively monitor regulatory developments and maintain a proactive compliance culture to ensure adherence to all applicable laws and guidelines.
Credit Risk: Credit risk arises from the potential failure of counterparties or issuers to meet their contractual obligations. To manage this risk, we remain vigilant in monitoring our exposure to our creditors and take steps to mitigate potential risks as needed.
Liquidity Risk: Liquidity risk pertains to the ability of the Company to meet its financial obligations as they fall due. Our approach includes maintaining adequate cash reserves and monitoring cash flow forecasts. Additionally, we maintain highly liquid assets and regularly stress-test our liquidity position to ensure resilience under various market conditions.
Operational Risk: Operational risks, including cyber threats, system failures, and human errors, can impact our ability to deliver services. We continually invest in technology, staff training, and robust internal controls to mitigate such risks.
Nother Portfolio Services revenue is focused on fees from discretionary fund management and the directors consider that the key financial performance indicators are those that factor into these fees.
The revenue of the company from discretionary fund management is as below showing a 171% increase in revenue across accounting periods. This growth does need to be tempered with the consideration of the longer 16-month accounting period to move the accounting reference date to 31 December.
Discretionary Fund Management Revenue:
Period 01 September 2022 to 31 December 2023: £518,963
Period 01 July 2021 to 31 August 2022: £191,729
Total assets under management (AUM) experienced significant growth of 40.3%. This increase was driven by a combination of factors, including strong net inflows from newly acquired client assets and favourable market performance. The influx of new client investments, coupled with positive market trends, contributed to the robust expansion of our asset base. This growth not only reflects the effectiveness of our client acquisition strategies but also underscores our ability to capitalize on market opportunities to enhance overall portfolio value.
Our portfolios performed well against their relative benchmarks, demonstrating robust and consistent performance across our range of investment strategies. This achievement highlights our effective investment approach and ability to navigate market fluctuations. By consistently targeting benchmark expectations, we have reinforced our commitment to delivering superior returns and showcasing the strength and reliability of our portfolio management capabilities.
Our portfolios performed well against their relative benchmarks, demonstrating robust and consistent performance across our range of investment strategies. This achievement highlights our effective investment approach and ability to navigate market fluctuations. By consistently targeting benchmark expectations, we have reinforced our commitment to delivering superior returns and showcasing the strength and reliability of our portfolio management capabilities. As a result of this The Company achieved an impressive client retention rate of 95% over the period, underscoring the exceptional satisfaction and trust our clients have in our services.
Nother Portfolio Services’ balance sheet strengthened over the period, with net assets growing by £55k, positioning us well for potential future growth opportunities.
When making key business decisions, the Board of Directors carefully considers the long-term implications for all stakeholders involved. This approach ensures that the impact of these decisions extends beyond immediate results and considers the future well-being of employees, customers, suppliers, and the broader community. By prioritising a comprehensive view of potential outcomes, the Board aims to balance short-term gains with sustainable, long-term benefits.
Key Investment Decisions
Key investment decisions typically involve a thorough financial analysis that includes a financial model extending beyond five years. This extended timeframe allows the Board to assess the long-term financial impacts of their investments. By incorporating projections and analysis spanning multiple years, the Board ensures that future financial performance and sustainability are adequately considered, mitigating potential risks and optimising overall investment outcomes.
The Directors are committed to maintaining strong and positive relationships with suppliers, customers, and other business partners. To facilitate this, a regular payment run process has been implemented to maximize the number of supplier invoices that are paid on time. This process not only supports the financial stability of suppliers but also enhances the company's reputation for reliability and trustworthiness. Additionally, risks associated with customers and suppliers are systematically analysed during investment committees and board meetings, ensuring that potential issues are identified and addressed proactively.
Impact on the Community and the Environment
When evaluating new projects, the Directors incorporate a comprehensive assessment of the environmental impact and explore strategies for minimising any negative effects. This approach reflects a commitment to sustainable practices and environmental stewardship. The company also offers ESG (Environmental, Social, and Governance) specific portfolios. By offering these ESG-specific portfolios, the company demonstrates its dedication to promoting sustainable development and ethical investment. This approach aligns with growing investor demand for responsible investment options and reflects the company’s commitment to contributing positively to global challenges. Through these portfolios, the company not only seeks to achieve financial returns but also aims to drive positive change and support sustainable practices across various sectors.
Maintaining a Reputation for High Standards of Business Conduct
The Directors actively sponsor a culture of compliance within the organization, ensuring that there are robust policies, procedures, and training programs in place across all key areas of compliance. This commitment extends to the health and safety of staff, customers, suppliers, and the community. To uphold high standards, the Directors implement comprehensive policies, conduct regular training sessions, perform risk assessments, and maintain a suite of checks to safeguard the well-being of all stakeholders.
Acting Fairly Between Members of the Company
The Directors are dedicated to ensuring fairness and transparency among all members of the company. They strictly adhere to the Shareholders’ Agreement, which outlines the principles and guidelines for equitable treatment and decision-making. This commitment to fairness helps to foster a positive and cooperative environment within the company, reinforcing trust and alignment among shareholders and members.
In fulfilling our section 172 duty, the Directors consider the factors mentioned above, along with any other relevant considerations pertinent to the decisions at hand. This includes the interests and perspectives of our key stakeholders. While we recognize that not every decision will produce a favourable outcome for all stakeholders, our approach is to align our decisions with the Company’s purpose, vision, and values, as well as its strategic priorities. By following a structured decision-making process, we strive to ensure that our decisions are consistent and predictable.
On behalf of the board
The directors present their annual report and financial statements for the period ended 31 December 2023.
The results for the period are set out on page 11.
No ordinary dividends were paid. The directors do not recommend payment of a final dividend.
The directors who held office during the period and up to the date of signature of the financial statements were as follows:
Looking forward as we enter 2024, ongoing economic challenges and geopolitical tensions are expected to impact global markets and investors. However, despite these headwinds, there’s a lot to be positive about in 2024.
Technological Innovation: Advancements in AI and digital technologies are expected to drive efficiency and open up new investment opportunities.
Economic Resilience: Despite challenges, global economies have shown resilience, suggesting potential for steady growth.
Diversification Benefits: With diverse global markets, opportunities for strategic investments across various sectors and regions are promising.
Strategic Adaptations: Firms are adapting strategically, focusing on innovation and customer-centric approaches, which could lead to a more dynamic market environment.
Staying diversified and leveraging emerging opportunities will be key to navigating the year successfully. We believe that having visibility, good communication and subsequent agility will prove valuable factors in 2024, whatever the weather.
The directors are confident in the company’s strong financial position and believe that the firm is well-positioned for continued growth and in its ability to navigate the evolving market environment successfully.
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. However, because not all future events or conditions can be predicted this statement is not a guarantee as to the company's ability to continue as a going concern.
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 period for which the financial statements are prepared is consistent with the financial statements; and
the strategic report and the directors' report have been prepared in accordance with applicable legal requirements.
As explained more fully in the directors' responsibilities statement, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the directors are responsible for assessing the company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the company or to cease operations, or have no realistic alternative but to do so.
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
The extent to which the audit was considered capable of detecting irregularities including fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud, is detailed below. However, the primary responsibility for the prevention and detection of fraud rests with both those charged with governance of the entity and management.
Our approach to identifying and assessing the risks of material misstatement in respect of irregularities, including fraud and non-compliance with laws and regulations, was as follows:
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, but not limited to, the Companies Act 2006, FCA legislation and taxation legislation.
we assessed the extent of compliance with the laws and regulations identified above through making enquiries of management and inspecting 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:
understanding the business model as part of the control and business environment;
considering the internal controls in place to mitigate risks of fraud and non-compliance with laws and regulations and;
making enquiries of management as to where they considered there was susceptibility to fraud, their knowledge of actual, suspected and alleged fraud.
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 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;
enquiring of management as to actual and potential litigation and claims; and
reviewing correspondence and enquiring with the company of actual and potential non-compliance with laws and regulations.
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 by for example forgery, or intentional misrepresentation or through collusion. Our audit procedures are designed to detect material misstatement. We are not responsible for preventing non-compliance or fraud and cannot be expected to detect non-compliance with all laws and regulations.
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.
Nother Portfolio Services Ltd is a private company limited by shares incorporated in England and Wales. The registered office is Second Floor, 2 Throgmorton Avenue, London, EC2N 2DG.
The company's annual reporting date was extended from 31 August 2023 to 31 December 2023. These financial statements cover the period 1 September 2022 to 31 December 2023, which comprised 16 months. The comparative period covers 12 months to end of August 2022.
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 £.
Basic financial assets, which include debtors and cash and bank balances, are initially measured at transaction price including transaction costs and are subsequently carried at amortised cost using the effective interest method unless the arrangement constitutes a financing transaction, where the transaction is measured at the present value of the future receipts discounted at a market rate of interest. Financial assets classified as receivable within one year are not amortised.
Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire or are settled, or when the company transfers the financial asset and substantially all the risks and rewards of ownership to another entity, or if some significant risks and rewards of ownership are retained but control of the asset has transferred to another party that is able to sell the asset in its entirety to an unrelated third party.
Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the company after deducting all of its liabilities.
Basic financial liabilities, including creditors, are initially recognised at transaction price.
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.
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.
The average monthly number of persons (including directors) employed by the company during the period was:
The actual charge for the period can be reconciled to the expected charge for the period based on the profit or loss and the standard rate of tax as follows:
With effect from 1 April 2023, the rate of corporation tax increased, tapering from 19% for businesses with profits of less than £50,000 to 25% for businesses with profits over £250,000.
Included within other creditors are loan balances of £132,000 (2022: £107,000) that are unsecured, interest free and repayable on demand.
Included within other creditors are loan balances of £Nil (2022: £25,000) that are unsecured and interest free.
There is a single class of Ordinary shares. There are no restrictions on the distribution of dividends and repayment of capital.
Retained earnings represents accumulated comprehensive income for the year and prior periods less dividends paid.
During the period the company entered into the following transactions with related parties: