Company Registration No. 11939535 (England and Wales)
DEVON EQUITY MANAGEMENT LIMITED
ANNUAL REPORT AND FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
DEVON EQUITY MANAGEMENT LIMITED
COMPANY INFORMATION
Directors
A Darwall
A Emo
S Troughton
R Pavry
Company number
11939535
Registered office
123 Victoria Street
London
SW1E 6DE
United Kingdom
Auditor
HW Fisher LLP
Acre House
11-15 William Road
London
NW1 3ER
United Kingdom
DEVON EQUITY MANAGEMENT LIMITED
CONTENTS
Page
Strategic report
1 - 3
Directors' report
4
Directors' responsibilities statement
5
Independent auditor's report
6 - 8
Statement of comprehensive income
9
Balance sheet
10
Statement of changes in equity
11
Statement of cash flows
12
Notes to the financial statements
13 - 22
DEVON EQUITY MANAGEMENT LIMITED
STRATEGIC REPORT
FOR THE YEAR ENDED 31 DECEMBER 2022
- 1 -
Fair review of the business
The principal activity of the Company in the period under review was investment management.
The Company’s strategy is, over time, to build a diversified boutique fund management business.
Our primary objective for the future of the business is to focus on delivering superior and sustainable investment performance to our investors.
Fair review of the business
The directors are satisfied that the results of the underlying business for the year are broadly in line with their expectations.
Revenues during the period were £10,753,954 (2021: £11,979,598). The Company received management fees from European Opportunities Trust PLC, from its segregated institutional client and from both the European Opportunities and Global Opportunities sub-funds of Devon Equity Funds, a Luxembourg umbrella SICAV which was launched as a RAIF in February 2020 and which was converted to UCITS format in July 2022.
The Company’s revenues fell during the year as a result of the organic fall in assets under management driven by weaker markets for equities in 2022.
Dividends declared and paid in the year totalled £3,950,000 (2021: £5,300,000).
Key Performance Indicator
The directors consider that management fee revenues disclosed above represent the Company’s key performance indicator in relation to the financial period under review.
Principal risks and uncertainties
Devon, like all companies, faces a range of risks and uncertainties, both internal and external. We assess risks on an ongoing basis and implement controls to eliminate or reduce the risk to an acceptable level where appropriate. We are also required by our FCA authorisation to have risk identification and control documentation and processes, and we are subject to annual inspection and testing by Fundrock, the Luxembourg regulated management Company to our SICAV client.
The following are the main areas of risk and how we are mitigating them:
Economic, political and regulatory risks
Like all fund management companies, we are at risk of a general downturn in world economies and stock markets that might affect the companies in which we invest.
We mitigate these risks by having fund management personnel who have a track record of successful investment in all economic and market conditions, and whose investment processes have proven successful over time.
Devon has implemented a comprehensive risk and compliance framework to ensure it meets its regulatory obligations. This includes horizon scanning to identify all future in-scope regulation.
The directors are continuously reviewing known economic, political and regulatory risks and watching for new risks, such as those arising from the present conflict in Ukraine, so that we can be proactive in addressing them in a controlled and timely manner.
Foreign exchange risk
The Company earns fees in Swiss francs from its segregated institutional client. The Company's policy is to hold only a minimum amount of currency to cover operational needs and therefore converts most foreign currency into Sterling upon receipt. Direct currency exposure is therefore limited to the short-term outstanding non-Sterling debts at any time. The Company does not hedge this risk.
Interest rate risk
The Company has no interest-bearing debt. The Company is only exposed to interest rate risk in the level of return it earns on its cash deposits (amounting to £26,915 for 2022 (2021: nil)).
Credit risk
The Company is directly exposed to credit risk in the placement of its cash deposits. The Company's policy is to place deposits only with financial institutions which satisfy minimum ratings and other criteria set by the board from time to time. All such cash deposits are currently placed with HSBC.
DEVON EQUITY MANAGEMENT LIMITED
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
- 2 -
Principal risks and uncertainties
Keyman risk
Our main operational risk is the risk of losing fund management personnel. We have mitigated that risk by taking steps to ensure we have proper succession planning in place and to ensure that the business is not dependent for its success on any one person or client.
Market risk
The Company operates in a competitive environment and the business is reliant on continuing demand for its investment products, demand which is influenced by several factors including investment performance and retention of key personnel. The industry is sensitive to economic, political and market factors.
The whole of the Company’s assets under management are invested in equities and therefore the Company's profits are particularly sensitive to fluctuations in equity markets.
Taxation, legal and regulatory factors also influence the markets in which the Company operates. The industry is highly regulated and change in laws and regulations governing the industry could have an adverse effect on the Company.
Section 172(1) statement
Section 414CZA(1) of the Companies Act 2006 requires the directors to explain how they considered the matters set out in section 172(1) (a) to (f) of the Companies Act 2006 (‘S172 (1)’) when performing their duty to promote the success of the Company. When making decisions, each director ensures that they act in the way that would most likely promote the Company’s success for the benefit of its members as a whole, and in doing so have regard (amongst other matters) to the following matters:
(a) The likely consequences of any decision in the long term
The directors understand the business and the evolving environment in which the Company operates, including the challenges of operating in a regulated sector.
In July 2022 the Company was appointed as AIFM to European Opportunities Trust PLC in place of Fundrock Partners Limited, who had acted as third party AIFM to this client since the formation of Devon in November 2019. With this appointment the Company accepted an elevated regulatory obligation under applicable FCA rules relative to its former role as investment adviser to Fundrock as AIFM to European Opportunities Trust PLC.
(b) The interests of the Company’s employees
The directors recognise that the success of the business depends on attracting, retaining and motivating high quality employees. The directors take into account the implications of decisions which may affect their perception as a responsible employer, on determining remuneration and benefits, and on providing a healthy and safe workplace environment, where relevant.
All employees have been engaged on competitive terms in relation to reward and benefits, measured by reference to comparable roles elsewhere. The board has resolved to implement a formal annual review process for each employee in the new financial year so as create an opportunity for engagement and feedback between the directors and employees.
(c) The need to foster the Company's business relationships with suppliers, customers and others
The directors seek to promote strong mutually beneficial relationships with suppliers, customers, the regulators and authorities. Such general principles are critical in the delivery of the Company’s strategy.
Strong relationships have been established or novated in the context of the Company’s launch with all key service providers to the Company and its clients. These have been engaged on reasonable commercial terms with the intention of fostering long term relationships with the parties concerned. The Company has, notably, been successful in recreating substantially the same availability of investment research and corporate access as that which was available to the investment team at their former employer.
DEVON EQUITY MANAGEMENT LIMITED
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
- 3 -
Development and performance
The investment team continue to engage with both existing and prospective investors in the investment trust, the SICAV and with the trustees for the Company’s segregated investment mandate. These meetings, and related marketing activities, have been critical to ensuring their continued support under the company’s new management.
Relations with the regulator continued to be constructive following the Company's transition to AIFM status.
(d) The impact of the Company’s operations on the community and the environment
The Company is committed to understanding the interests of these stakeholder groups. The directors receive information on these topics on a periodic basis to provide relevant information for specific board decisions.
During the year under review the Company has published updated environment, social and governance (ESG) policies and its policies on engagement. Consideration of these matters forms part of the standing agenda for the Company’s board meetings. In addition, Devon continues to be a signatory to the internationally recognised PRI standard.
(e) The desirability of the Company maintaining a reputation for high standards of business conduct
The directors recognise the importance of acting in ways which promote high standards of business conduct. The board periodically reviews and approves clear operating frameworks, as set out in its published policies, its compliance manual and in its internal procedural codes to ensure that its high standards are maintained both within the businesses and the business relationships the Company has with stakeholders. The directors intend that these policies and values should be embedded within the culture of the business.
(f) The need to act fairly as between members of the Company
The directors aim to act fairly as between the Company’s members when delivering the Company’s strategy.
The Company had four members during the year under review, with the issue of a new class of Growth shares to three members in January 2022 alongside the Company's original Ordinary shareholders. Measures are codified in the Company’s articles of association and shareholders' agreement to protect the interests of minority holders.
Approved by the board on .............. and signed on its behalf by:
R Pavry
Director
25 April 2023
DEVON EQUITY MANAGEMENT LIMITED
DIRECTORS' REPORT
FOR THE YEAR ENDED 31 DECEMBER 2022
- 4 -
The directors present their annual report and financial statements for the year ended 31 December 2022.
Principal activities
Our primary objective for the future of the business is to continue to focus on delivering good investment performance for our investors, so that they continue to entrust their money to us and possibly contribute more in future.
It continues to be the Directors' longer-term intention to grow the business by adding funds with different investment mandates so we can attract investors who have different needs from investors in our existing funds.
In the shorter term, the corporate goal is to increase the assets under management in the existing funds.
Price risk, credit risk, liquidity risk and cash flow risk
Refer to the Strategic Report for details of the Company's principal risks.
Results and dividends
Ordinary dividends were paid amounting to £3,950,000. The directors do not recommend payment of a further dividend.
Directors
The directors who held office during the year and up to the date of signature of the financial statements were as follows:
A Darwall
A Emo
S Troughton
R Pavry
Auditor
In accordance with the company's articles, a resolution proposing that HW Fisher LLP be reappointed as auditor of the company will be put at a General Meeting.
Statement of disclosure to auditor
So far as each person who was a director at the date of approving this report is aware, there is no relevant audit information of which the company’s auditor is unaware. Additionally, the directors individually have taken all the necessary steps that they ought to have taken as directors in order to make themselves aware of all relevant audit information and to establish that the company’s auditor is aware of that information.
Going Concern
The directors are confident that the company is well placed and has adequate resources to manage its financial position, operations, clients arid investments within the funds we operate for the foreseeable future. The directors therefore consider it appropriate to continue to adopt the going concern basis of accounting in preparing these annual financial statements.
On behalf of the board
R Pavry
Director
25 April 2023
DEVON EQUITY MANAGEMENT LIMITED
DIRECTORS' RESPONSIBILITIES STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2022
- 5 -
The directors are responsible for preparing the annual report and the financial statements in accordance with applicable law and regulations.
Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the company and of the profit or loss of the company for that period. In preparing these financial statements, the directors are required to:
select suitable accounting policies and then apply them consistently;
make judgements and accounting estimates that are reasonable and prudent;
state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements;
prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business.
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the company’s transactions and disclose with reasonable accuracy at any time the financial position of the company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
DEVON EQUITY MANAGEMENT LIMITED
INDEPENDENT AUDITOR'S REPORT
TO THE MEMBERS OF DEVON EQUITY MANAGEMENT LIMITED
- 6 -
Opinion
We have audited the financial statements of Devon Equity Management Limited (the 'company') for the year ended 31 December 2022 which comprise the statement of comprehensive income, the balance sheet, the statement of changes in equity, the statement of cash flows and notes to the financial statements, including significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland (United Kingdom Generally Accepted Accounting Practice).
In our opinion the financial statements:
give a true and fair view of the state of the company's affairs as at 31 December 2022 and of its profit for the year then ended;
have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and
have been prepared in accordance with the requirements of the Companies Act 2006.
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the financial statements section of our report. We are independent of the company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the directors' use of the going concern basis of accounting in the preparation of the financial statements is appropriate.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the 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.
The other information comprises the information included in the annual report other than the financial statements and our auditor's report thereon. The directors are responsible for the other information contained within the annual report. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of our audit:
the information given in the strategic report and the directors' report for the financial year for which the financial statements are prepared is consistent with the financial statements; and
the strategic report and the directors' report have been prepared in accordance with applicable legal requirements.
DEVON EQUITY MANAGEMENT LIMITED
INDEPENDENT AUDITOR'S REPORT (CONTINUED)
TO THE MEMBERS OF DEVON EQUITY MANAGEMENT LIMITED
- 7 -
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the company and its environment obtained in the course of the audit, we have not identified material misstatements in the strategic report and the directors' report.
We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion:
adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited by us; or
the financial statements are not in agreement with the accounting records and returns; or
certain disclosures of remuneration specified by law are not made; or
we have not received all the information and explanations we require for our audit.
Responsibilities of directors
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.
Auditor's responsibilities for the audit of the financial statements
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.
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud, is detailed below.
As part of our planning process:
We enquired of management the systems and controls the company has in place, the areas of the financial statements that are most susceptible to the risk of irregularities and fraud, and whether there was any known, suspected or alleged fraud. The company did not inform us of any known, suspected or alleged fraud.
We obtained an understanding of the legal and regulatory frameworks applicable to the company. We determined that the following were most relevant: FRS 102, Companies Act 2006 and the FCA’s CASS regulations.
We considered the incentives and opportunities that exist in the company, including the extent of management bias, which present a potential for irregularities and fraud to be perpetuated, and tailored our risk assessment accordingly.
Using our knowledge of the company, together with the discussions held with the company at the planning stage, we formed a conclusion on the risk of misstatement due to irregularities including fraud and tailored our procedures according to this risk assessment.
The key procedures we undertook to detect irregularities including fraud during the course of the audit included:
Identifying and testing journal entries and the overall accounting records, in particular those that were significant and unusual.
Reviewing the financial statement disclosures and determining whether accounting policies have been appropriately applied.
Testing key revenue lines, in particular cut-off, for evidence of management bias.
Obtaining third-party confirmation of material bank balances.
Documenting and verifying all significant related party balances and transactions.
Reviewing documentation such as the company board minutes, for discussions of irregularities including fraud.
Assessing the extent of compliance, or lack of, with the relevant laws and regulations.
DEVON EQUITY MANAGEMENT LIMITED
INDEPENDENT AUDITOR'S REPORT (CONTINUED)
TO THE MEMBERS OF DEVON EQUITY MANAGEMENT LIMITED
- 8 -
Owing to the inherent limitations of an audit, there is an unavoidable risk that we may not have detected some material misstatements in the financial statements even though we have properly planned and performed our audit in accordance with auditing standards. The primary responsibility for the prevention and detection of irregularities and fraud rests with the directors.
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.
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.
Gilles Siow (Senior Statutory Auditor)
For and on behalf of HW Fisher LLP
Chartered Accountants
Statutory Auditor
Acre House
11-15 William Road
London
NW1 3ER
United Kingdom
25 April 2023
DEVON EQUITY MANAGEMENT LIMITED
STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2022
- 9 -
2022
2021
Notes
£
£
Turnover
3
10,753,954
11,979,598
Administrative expenses
(6,325,579)
(6,176,367)
Operating profit
4
4,428,375
5,803,231
Interest receivable and similar income
8
26,915
Interest payable and similar expenses
9
(25,903)
(64,073)
Gain on investments
10
852,563
Profit before taxation
4,429,387
6,591,721
Tax on profit
11
(699,164)
(1,400,000)
Profit for the financial year
3,730,223
5,191,721
The profit and loss account has been prepared on the basis that all operations are continuing operations.
DEVON EQUITY MANAGEMENT LIMITED
BALANCE SHEET
AS AT
31 DECEMBER 2022
31 December 2022
- 10 -
2022
2021
Notes
£
£
£
£
Fixed assets
Tangible assets
13
7,672
20,927
Current assets
Debtors
14
1,864,536
1,985,662
Cash at bank and in hand
2,928,089
3,758,671
4,792,625
5,744,333
Creditors: amounts falling due within one year
15
(1,430,090)
(2,179,624)
Net current assets
3,362,535
3,564,709
Total assets less current liabilities
3,370,207
3,585,636
Provisions for liabilities
Deferred tax liability
16
11,696
8,382
(11,696)
(8,382)
Net assets
3,358,511
3,577,254
Capital and reserves
Called up share capital
18
1,001,034
1,000,000
Profit and loss reserves
2,357,477
2,577,254
Total equity
3,358,511
3,577,254
The financial statements were approved by the board of directors and authorised for issue on 25 April 2023 and are signed on its behalf by:
R Pavry
Director
Company Registration No. 11939535
DEVON EQUITY MANAGEMENT LIMITED
STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2022
- 11 -
Share capital
Profit and loss reserves
Total
Notes
£
£
£
Balance at 1 January 2021
1,000,000
2,685,533
3,685,533
Year ended 31 December 2021:
Profit and total comprehensive income for the year
-
5,191,721
5,191,721
Dividends
12
-
(5,300,000)
(5,300,000)
Balance at 31 December 2021
1,000,000
2,577,254
3,577,254
Year ended 31 December 2022:
Profit and total comprehensive income for the year
-
3,730,223
3,730,223
Issue of share capital
18
1,034
-
1,034
Dividends
12
-
(3,950,000)
(3,950,000)
Balance at 31 December 2022
1,001,034
2,357,477
3,358,511
DEVON EQUITY MANAGEMENT LIMITED
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2022
- 12 -
2022
2021
Notes
£
£
£
£
Cash flows from operating activities
Cash generated from operations
22
4,374,987
5,899,617
Interest paid
(25,903)
(64,073)
Income taxes paid
(1,251,626)
(628,982)
Net cash inflow from operating activities
3,097,458
5,206,562
Investing activities
Purchase of tangible fixed assets
(5,989)
(2,731)
Proceeds on disposal of investments
-
4,362,000
Interest received
26,915
Net cash generated from investing activities
20,926
4,359,269
Financing activities
Proceeds from issue of shares
1,034
(Repayment)/proceeds of loans from directors
-
(2,496,007)
Dividends paid
(3,950,000)
(5,300,000)
Net cash used in financing activities
(3,948,966)
(7,796,007)
Net (decrease)/increase in cash and cash equivalents
(830,582)
1,769,824
Cash and cash equivalents at beginning of year
3,758,671
1,988,847
Cash and cash equivalents at end of year
2,928,089
3,758,671
DEVON EQUITY MANAGEMENT LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
- 13 -
1
Accounting policies
Company information
Devon Equity Management Limited is a private company, limited by shares, registered in England and Wales. The is registered office address is 123 Victoria Street, London, SW1E 6DE.
1.1
Accounting convention
These financial statements have been prepared in accordance with FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland” (“FRS 102”) and the requirements of the Companies Act 2006.
The financial statements are prepared in sterling, which is the functional currency of the company. Monetary amounts in these financial statements are rounded to the nearest £.
The financial statements have been prepared under the historical cost convention. The principal account policies are set out below.
1.2
Going concern
The directors have considered the effect of the on-going war in Ukraine and the increase in inflation and interest rates during the course of the year under review. The directors consider that, although these issues have caused disruption to the company’s business, they are confident that the company can continue as a going concern for a period of at least twelve months from the date approval of these financial statements. trueThe directors are also confident that the company will meet the capital resource and liquid fund requirements. The directors therefore have a reasonable expectation that the company has adequate resources to continue in operation for the foreseeable future.
1.3
Turnover
Turnover, being investment management fees, comprises the fair value of the consideration received or receivable for the service provided in the ordinary course of the company's activities. Fees are calculated monthly as a percentage of assets under management. Turnover is shown net of sales/value added tax, returns rebates and discounts.
1.4
Tangible fixed assets
Tangible fixed assets are initially measured at cost and subsequently measured at cost or valuation, net of depreciation.
Depreciation is provided at the following annual rates in order to write off each asset over its estimated useful life.
Computer equipment
straight line over 3 years
1.5
Financial instruments
The company has elected to apply the provisions of Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instruments Issues’ of FRS 102 to all of its financial instruments.
Financial instruments are recognised in the company's balance sheet when the company becomes party to the contractual provisions of the instrument.
Financial assets and liabilities are offset, with the net amounts presented in the financial statements, when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle on a net basis or to realise the asset and settle the liability simultaneously.
DEVON EQUITY MANAGEMENT LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
1
Accounting policies
(Continued)
- 14 -
Basic financial assets
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.
Impairment of financial assets
Financial assets, other than those held at fair value through profit and loss, are assessed for indicators of impairment at each reporting end date.
Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows have been affected. If an asset is impaired, the impairment loss is the difference between the carrying amount and the present value of the estimated cash flows discounted at the asset’s original effective interest rate. The impairment loss is recognised in profit or loss.
If there is a decrease in the impairment loss arising from an event occurring after the impairment was recognised, the impairment is reversed. The reversal is such that the current carrying amount does not exceed what the carrying amount would have been, had the impairment not previously been recognised. The impairment reversal is recognised in profit or loss.
Basic financial 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.
1.6
Equity instruments
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.
1.7
Taxation
Taxation for the year comprises current and deferred tax. Tax is recognised in the Income Statement, except to the extent that it relates to items recognised in other comprehensive income or directly in equity.
Current or deferred taxation assets and liabilities are not discounted.
Current tax is recognised at the amount of tax payable using the tax rates and laws that have been enacted or substantively enacted by the balance sheet date.
Deferred tax
Deferred tax is recognised in respect of all timing differences that have originated but not reversed at the balance sheet date.
Timing differences arise from the inclusion of income and expenses in tax assessments in periods different from those in which they are recognised in financial statements. Deferred tax is measured using tax rates and laws that have been enacted or substantively enacted by the year end and that are expected to apply to the reversal of the timing difference.
Unrelieved tax losses and other deferred tax assets are recognised only to the extent that is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits.
DEVON EQUITY MANAGEMENT LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
1
Accounting policies
(Continued)
- 15 -
1.8
Foreign exchange
Transactions in currencies other than pounds sterling are recorded at the rates of exchange prevailing at the dates of the transactions. At each reporting end date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the reporting end date. Gains and losses arising on translation in the period are included in profit or loss.
1.9
Rentals paid under operating leases are charged to profit or loss on a straightline basis over the period of the lease.
1.10
Pension costs and other post-retirement benefits
The company operates a defined contribution pension scheme. Contributions payable to the company's pension scheme are charged to profit or loss in the period which they relate.
1.11
Trade receivables for performance obligations satisfied over time are recognised gradually, as the performance obligation is satisfied and in full once the invoice is due.
2
Judgements and key sources of estimation uncertainty
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 any judegments or key sources of estimation uncertainty during the year.
3
Turnover and other revenue
2022
2021
£
£
Turnover analysed by class of business
Fees receivable
10,753,954
11,979,598
2022
2021
£
£
Other significant revenue
Interest income
26,915
-
DEVON EQUITY MANAGEMENT LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
3
Turnover and other revenue
(Continued)
- 16 -
2022
2021
£
£
Turnover analysed by geographical market
UK
7,663,616
8,296,673
Europe
3,090,338
3,682,925
10,753,954
11,979,598
4
Operating profit
2022
2021
Operating profit for the year is stated after charging/(crediting):
£
£
Exchange differences apart from those arising on financial instruments measured at fair value through profit or loss
37,523
(3,338)
Depreciation of owned tangible fixed assets
19,244
23,412
Operating lease charges
238,567
233,287
5
Auditor's remuneration
2022
2021
Fees payable to the company's auditor and associates:
£
£
For audit services
Audit of the financial statements of the company
17,350
12,500
For other services
Audit-related assurance services
1,350
1,350
All other non-audit services
2,175
1,450
3,525
2,800
6
Employees
The average monthly number of persons (including directors) employed by the company during the year was:
2022
2021
Number
Number
Administration and support
10
9
DEVON EQUITY MANAGEMENT LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
6
Employees
(Continued)
- 17 -
Their aggregate remuneration comprised:
2022
2021
£
£
Wages and salaries
3,411,623
3,596,475
Social security costs
479,160
489,434
Pension costs
39,891
36,092
3,930,674
4,122,001
7
Directors' remuneration
2022
2021
£
£
Remuneration for qualifying services
2,262,145
2,397,224
Company pension contributions to defined contribution schemes
6,277
6,000
2,268,422
2,403,224
The number of directors for whom retirement benefits are accruing under defined contribution schemes amounted to 3 (2021: 1)
Remuneration disclosed above include the following amounts paid to the highest paid director:
2022
2021
£
£
Remuneration for qualifying services
1,236,393
1,474,000
8
Interest receivable and similar income
2022
2021
£
£
Interest income
Interest on bank deposits
26,915
Investment income includes the following:
Interest on financial assets not measured at fair value through profit or loss
26,915
DEVON EQUITY MANAGEMENT LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
- 18 -
9
Interest payable and similar expenses
2022
2021
£
£
Other finance costs:
Other interest payable
25,903
64,073
10
Amounts written off investments
2022
2021
£
£
Fair value gains/(losses) on financial instruments
Change in value of financial assets held at fair value through profit or loss
734,815
Other gains/(losses)
Gain on disposal of fixed asset investments
117,748
852,563
11
Taxation
2022
2021
£
£
Current tax
UK corporation tax on profits for the current period
840,033
1,395,809
Adjustments in respect of prior periods
(144,183)
Total current tax
695,850
1,395,809
Deferred tax
Origination and reversal of timing differences
3,314
4,191
Total tax charge
699,164
1,400,000
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:
2022
2021
£
£
Profit before taxation
4,429,387
6,591,721
Expected tax charge based on the standard rate of corporation tax in the UK of 19.00% (2021: 19.00%)
841,584
1,252,427
Adjustments in respect of prior years
(144,183)
Depreciation on assets not qualifying for tax allowances
(1,551)
1,304
Deferred tax
3,314
4,191
Capital gain
142,078
Taxation charge for the year
699,164
1,400,000
DEVON EQUITY MANAGEMENT LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
- 19 -
12
Dividends
2022
2021
£
£
Final paid
3,950,000
5,300,000
13
Tangible fixed assets
Computer equipment
£
Cost
At 1 January 2022
70,949
Additions
5,989
At 31 December 2022
76,938
Depreciation and impairment
At 1 January 2022
50,022
Depreciation charged in the year
19,244
At 31 December 2022
69,266
Carrying amount
At 31 December 2022
7,672
At 31 December 2021
20,927
14
Debtors
2022
2021
Amounts falling due within one year:
£
£
Trade debtors
786,448
13,768
Other debtors
170,045
74,811
Prepayments and accrued income
908,043
1,897,083
1,864,536
1,985,662
DEVON EQUITY MANAGEMENT LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
- 20 -
15
Creditors: amounts falling due within one year
2022
2021
£
£
Trade creditors
84,466
1,947
Corporation tax
840,033
1,395,809
Social security and other taxes
487,208
705,528
Accruals and deferred income
18,383
76,340
1,430,090
2,179,624
16
Deferred taxation
The following are the major deferred tax liabilities and assets recognised by the company and movements thereon:
Liabilities
Liabilities
2022
2021
Balances:
£
£
Accelerated capital allowances
11,696
8,382
2022
Movements in the year:
£
Liability at 1 January 2022
8,382
Charge to profit or loss
3,314
Liability at 31 December 2022
11,696
17
Retirement benefit schemes
2022
2021
Defined contribution schemes
£
£
Charge to profit or loss in respect of defined contribution schemes
39,891
36,092
The company operates a defined contribution pension scheme. The pension cost charge for the year represents contributions payable by the company to the scheme and amounted to £39,891 (2021: £36,092) of which £6,277 (2021: £6,000) relates to directors contributions.
Contributions totalling £nil (2021: £2,476) were payable to the scheme at the end of the year and year included in other creditors.
DEVON EQUITY MANAGEMENT LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
- 21 -
18
Share capital
2022
2021
2022
2021
Ordinary share capital
Number
Number
£
£
Issued and fully paid
A Ordinary of £1 each
800,000
800,000
800,000
800,000
B Ordinary of £1 each
100,000
100,000
100,000
100,000
C Ordinary of £1 each
100,000
100,000
100,000
100,000
G Ordinary of 1p each
103,449
-
1,034
-
1,103,449
1,000,000
1,001,034
1,000,000
A, B and C Ordinary shares have attached to them full voting rights, dividend and capital distribution (including on winding up) rights and rank pari passu. They do not confer any rights of redemption.
In January 2022, G Ordinary shares were allotted totalling 103,449 shares at an aggregate nominal amount of £1,034. These shares have attached to them full voting rights but no rights to dividends or income distribution. Upon capital distribution (including on winding up), after the A, B and C Ordinary shareholders have been paid their paid up share capital and deferred dividends, then the G Ordinary shares hold rights ranking in priority to the A, B and C Ordinary shares if a hurdle has been exceeded.
19
Operating lease commitments
Lessee
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:
2022
2021
£
£
Within one year
135,567
199,200
Between two and five years
135,567
135,567
334,767
20
Related party transactions
Transactions with related parties
During the year the company entered into the following transactions with related parties:
Included within creditors is £nil owed to the directors (2021: £nil). Interest of £nil (2021: £64,073) was charged on the loan during the year.
During the year dividends of £3,950,000 (2021: £5,300,000) were paid to the directors.
21
Ultimate controlling party
The ultimate controlling party is A F C Darwall.
DEVON EQUITY MANAGEMENT LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
- 22 -
22
Cash generated from operations
2022
2021
£
£
Profit for the year after tax
3,730,223
5,191,721
Adjustments for:
Taxation charged
699,164
1,400,000
Finance costs
25,903
64,073
Investment income
(26,915)
Depreciation and impairment of tangible fixed assets
19,244
23,412
Gain on sale of investments
-
(117,748)
Amounts written off investments
-
(734,815)
Movements in working capital:
Decrease/(increase) in debtors
121,126
(130,492)
(Decrease)/increase in creditors
(193,758)
203,466
Cash generated from operations
4,374,987
5,899,617
23
Analysis of changes in net funds
1 January 2022
Cash flows
31 December 2022
£
£
£
Cash at bank and in hand
3,758,671
(830,582)
2,928,089
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