The director presents the strategic report for the year ended 28 February 2024.
The director of Gulf Central Merchant Bank Ltd (GCMB) considers the February 2024 results to be satisfactory, reflecting resilience and progress across key areas of the business. The outlook for the company remains positive, with director anticipating sustained growth in the foreseeable future.
Performance across GCMB’s divisions was mixed:
Investment Management continues to serve as the primary revenue driver and core contributor to overall performance.
Leverage Loan Business experienced a slower pace of activity but showed encouraging signs of recovery during the period.
Investment Banking and Real Estate Divisions are still in the development phase.
For the financial year ended February 2024, the company reported a turnover of £2,801,343 (2023: £3,523,883). A notable achievement was the increase in the gross profit margin to 29.03%, compared to 11.47% in the previous year. This improvement was primarily driven by the robust performance of our Fixed Income Global Absolute Return Strategy, reflecting the effectiveness of our investment approach.
Financial Risk and Management Objectives
As a provider of merchant banking services and investment management solutions, GCMB’s director identify the primary financial risk exposure as operational risk and the need to maintain adequate liquidity. Ensuring sufficient liquidity is essential to meet both regulatory capital requirements and working capital needs.
To mitigate these risks, GCMB has implemented comprehensive financial risk management strategies, including:
Clearly Defined Terms of Business: Rigorous agreements with counterparties to minimise exposure to transactional risks.
Stringent Credit Controls: Effective oversight of credit exposure across all transactions.
Active Monitoring: Regular review of cash flow and management accounts to ensure compliance with regulatory capital requirements and to maintain sufficient working capital reserves.
The company remains committed to delivering sustainable growth while adhering to robust risk management practices and regulatory standards. Director is confident that these measures will support continued progress and resilience in an evolving market environment.
The company is authorised and regulated by the FCA and has permission to advise on, arrange and manage investments.
Risk management
The director determines the company's business strategy and risk appetite along with designing and implementing a risk management framework that recognizes the risks that the business faces. He also determines how those risks may be mitigated and assess on an ongoing basis the arrangements to manage those risks. As merchant banking services and investment management providers, the director consider that the key financial risk exposure faced by the company is related to operational risk and the need to maintain sufficient liquidity to satisfy regulatory capital requirements and working capital needs. Another important consideration by the director is the counterparty risk. In order to mitigate this, they use rigorous KYC processes and aim to work with Tier 1 counterparties mainly. The management meet on a regular basis and discuss current projections for profitability and regulatory capital management, business planning and risk management. The directors manage the firm’s risks though a framework of policy and procedures having regard to relevant laws, standards, principles and rules (including FCA principles and rules) with the aim to operate a defined and transparent risk management framework. These policies and procedures are updated as required. The firm is small with an operational infrastructure appropriate to its size. It carries no market risk, other than foreign exchange risk on its accounts receivable in foreign currency, and credit risk from management and performance fees receivable.
Dear Valued Investors,
The principal activity of the company remains focused on delivering high-quality financial services, specialising in investment management and merchant banking. As an entity authorised by the Financial Conduct Authority, we are committed to maintaining the highest standards in all aspects of our operations.
Over the past year, the company has made significant progress toward achieving the objectives outlined in our 2023/2024 strategy. While the COVID-19 pandemic has caused delays in certain areas, we are on track to complete these goals in the current fiscal year. Key highlights include:
Reassessment of the Real Estate Division's Business Model: Management has strategically pivoted to prioritize real estate financing and structuring, aligning the division more closely with market demands.
Enhancing Assets Under Management (AUM): We have intensified our engagement with family offices and third-party distributors. Fundraising initiatives are underway, and we aim to meet our targets by Q2 2025.
Progress on Pending Real Estate Transactions: Despite a challenging financing environment, marked by market corrections unfavourable to the real estate sector, we remain focused on completing these transactions.
Optimization of Corporate Finance Services: While several mandates have been secured, rising interest rates have limited the visibility required by financing partners and investors to actively participate in these deals.
Looking ahead, the board has outlined strategic priorities for 2024/2025 to drive growth and enhance value creation:
Establishing a presence in the Kingdom of Saudi Arabia (KSA) to capitalize on new market opportunities.
Completing pending real estate transactions, leveraging improved market conditions.
Expanding and strengthening our investment banking advisory team to better serve our clients' needs.
We extend our gratitude to our clients and business partners for the trust and confidence they place in our company. Your continued support is invaluable, and we remain committed to exceeding your expectations as we navigate the year ahead.
Information concerning the decision-making process.
Due to the size of the Firm, we do not consider it appropriate to have a separate remuneration committee. Instead this function is undertaken by the Managing Board. This will be kept under review and should the need arise, the Firm will consider amending this arrangement to provide greater independent review.
The Board of Gulf Central Merchant Bank Ltd is responsible for ensuring that the remuneration policy is developed to align with its risk tolerance. No external consultants assisted in this review. Any person with a question regarding the policy or disclosures made under this policy should refer to the Managing Board.
The director of the company has acted in a way that he considers, in good faith, would most likely promote the success of the company for the benefit of its shareholders and customers as a whole. In doing so the director has had regard to (amongst other matters):
The likely consequences of any decisions in the long term - the Board takes full responsibility for all strategic matters and meets formally on a regular basis.
The interests of the Company's employees - as a small company all personnel are viewed as key staff. There exists a clear framework of policies and procedures that accord with the legal requirements around equality and diversity, regulatory responsibilities and employment rights but perhaps more importantly the firm has fostered an atmosphere in which all personnel feel comfortable to speak openly on any matter the feel they need to.
The need to foster the Company's business relationships with supplier and others - the Company operates closely with its key sservice providers, so they are aligned with its strategic objectives ensuring that all businesses continue to run optimally. The Board operates a risk management framework including Anti-Bribery and Corruption policies. The Board retains a transparent dialogue with regulators, ensuring that they are updated as required. The company receives regular updates on developments in financial services compliance and regulation. Compliance with the rules and regulations ensure the integrity of the financial markets in which Woburn AM operates.
The desirability of the Company maintaining a reputation for high standards of business conduct - this is demonstrated in how the right culture for a client facing regulated business is fostered. The company does maintain a reputation for high standards of business conduct.
The need to act fairly between shareholders of the Company - the company shareholders and board are aligned through a high level of share ownership.
Community & Environment - the firm takes its broader responsibilities very seriously and operates a work experience programme for young individuals considering a career in finance. The firm is also committed to sustainability and demonstrates this through various eco-friendly initiatives as well as screening sservice providers for their carbon footprint and ESG credential.
On behalf of the board
The director presents his annual report and financial statements for the year ended 28 February 2024.
The results for the year are set out on page 9.
Ordinary dividends were paid amounting to £78,000. The director does not recommend payment of a further dividend.
The director who held office during the year and up to the date of signature of the financial statements was as follows:
The company manages its cash and borrowing requirements in order to maximise interest income and minimise interest expense, whilst ensuring the company has sufficient liquid resources to meet the operating needs of the businesses.
The company’s principal foreign currency exposures arise from trading with overseas companies.
Investments of cash surpluses, borrowings and derivative instruments are made through banks and companies which must fulfill 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.
There are no post balance sheet events to report.
The company continues to expand its client base and is actively exploring new markets.
The auditor, Fisher, Sassoon & Marks, is deemed to be reappointed under section 487(2) of the Companies Act 2006.
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 director's 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 director 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 director's report for the financial year for which the financial statements are prepared is consistent with the financial statements; and
the strategic report and the director's report have been prepared in accordance with applicable legal requirements.
As explained more fully in the director's responsibilities statement, the director is 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 director determines 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 director is 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 director either intends to liquidate the company or to cease operations, or has 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 our procedures are 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, taxation legislation, anti-bribery, anti-money-laundering, employment;
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.
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.
Gulf Central Merchant Bank Ltd is a private company limited by shares incorporated in England and Wales. The registered office is 22a St. James's Square, London, England, SW1Y 4LB.
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 £.
Turnover from trading in trade receivable contracts are recognised on a trade date basis and represents the value of the principal contract traded. The corresponding purchase of the trade receivable contracts are recorded as a cost of sale.
Turnover earned from providing investment management services during the year, and is split between Management fees and Performance fees.
Management fees
Represent fees receivable for investment management services, exclusive of Value Added Tax, which are recognised on an accruals basis.
Management fees are recognised when the company obtains rights for consideration in exchange for its investment management services.
Performance fees
Represent fees that are payable in the event that the performance of the underlying investment exceeds a predetermined benchmark.
Performance fees receivable from funds are recognised in income when the fees crystallise.
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 director is 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 director does 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:
The actual charge for the year can be reconciled to the expected charge for the year based on the profit or loss and the standard rate of tax as follows:
The company has one class of ordinary shares which carry full rights in the company with respect to voting, dividends and distributions.
At the reporting end date, the company had outstanding commitments for future minimum rental licence payments under non-cancellable contact. The amount due within one year £5,000 (2023: £2,600).
There are no subsequent events to report.
The remuneration of key management personnel is as follows.
At the year end the director was owed £877 by the company (2023: £522). The loan is interest fee and unsecured.