Interim Results

RNS Number : 5383G

MJ Hudson Group PLC

18 March 2020

 

18 March 2020

MJ Hudson Group plc

("MJ Hudson", the "Company" or the "Group")

Interim results for the six months ended 31^st December 2019

MJ Hudson Group plc, the international financial services support provider, today announces its interim results for the six months ended 31^st December 2019 ("H1 2020").

Highlights

· Group underlying revenue growth of 25.8% to £10.0m, 12.5% organic*

· Adjusted EBITDA up 112.2% to £1.7m following good growth and solid margin gains 

· Adjusted pre-tax profit from (£0.1m) to £0.3m (reconciled to statutory results in table below)

· Adjusted diluted EPS of 0.3p

· Strong client gains with four new larger and multi divisional clients in the period

· Busy M&A pipeline with one acquisition completed in the period, two as post balance sheet events including Meyler announced today

· Balance sheet transformed to a £20.1m net cash at period end following IPO and positive adjusted operating net cashflow pre-financing activities

· Sustained market volatility creates uncertainty which will impact future periods but we anticipate meeting full year market expectations

*Organic revenue growth adjusts for the impact of acquisitions

Financial summary

	Notes	Six months ended 31st Dec 2019 £m	Six months ended 31st Dec 2018 £m	Growth
Adjusted results
Underlying revenue	1	10.0	7.9	25.8%
Normalised operating profit	2	1.0	0.3
Adjusted EBITDA	3	1.7	0.8	112.2%
Adjusted EBITDA margin		16.8%	10.0%
Adjusted profit/(loss) before tax	4	0.3	(0.1)
Basic and Diluted adjusted EPS (p)	5	0.3p	(0.2)p
Statutory results
Revenues		11.1	11.3	(1.2)%
Operating loss		(1.7)	(0.5)
EBITDA		(0.9)	0.0
Profit before tax		(3.2)	(1.7)
Basic and Diluted EPS (p)		(3.3)p	(2.3)p
Net cash/ (debt)		20.1	(12.0)

In order to assist shareholders' understanding of the underlying performance of the Group, adjusted results have been presented. The items that are excluded from adjusted results are reconciled to statutory results within the table below

1: Revenue under IFRS includes all revenues received by the Group. Within the Group's FMS sub division (Business outsourcing) a material proportion of revenue is typically passed through to clients as a specific payment linked to the performance of the clients' funds. This is reflected in direct costs of sales. In managing the business and looking at underlying trends for the Group as a whole, Management consider that these payments can have a distorting effect. Underlying revenue is a measure defined to specifically excludes these items. It provides a more representative metric, especially in relation to the value created by the Group, its underlying growth and the operating efficiency of its activities.

2: Normalised operating profit adjusts for fundraising and acquisition costs, non-recurring costs, share based payment charge, and amortisation of acquired intangibles. Fundraising and acquisition costs are professional fees incurred relating to new debt or equity issuances and acquisition of new entities. Non-recurring costs are one off in nature such as relocation costs, dilapidation provisions and other one-off costs.

3: Adjusted EBITDA adds back depreciation and amortisation to normalised operating profit.

4: Adjusted profit/(loss) before tax is calculated by taking normalised operating profit less finance expenses. Finance expenses are adjusted to exclude unwind of discounting of deferred consideration related to acquisitions

5: Adjusted EPS takes the adjusted profit/(loss) after taxes divided by the weighted average shares outstanding at the period end.

Commenting on the results, CEO of MJ Hudson, Matthew Hudson said:

"I am pleased to report our maiden interim results as a quoted company, following our admission to AIM at the end of last year. New business momentum within the alternatives sector continues to drive our growth. Recent acquisitions are integrating well and broadening our touch points with clients, especially in benchmarking and ESG.

"Externally, we cannot ignore the current risk posed by Coronavirus and its impact on global stock markets and investing. Naturally, we continue to monitor this situation, however our belief in our business is shaped by the long-term nature of the alternatives sector which we serve and its long-term uncorrelated performance in times of historic stock market volatility.

"We remain cautiously confident about our current financial year given what has already been achieved in the six months to December, the momentum in our business and the full year impact of recent acquisitions. At the same time, our conviction in our markets and our long-term opportunity has deepened."

For further information contact:

MJ Hudson Group plc Matthew Hudson, CEO Andrew Walsh, IRO Katherine Hazelden, IR & Marketing Solutions	[phone]
Cenkos Securities (Nomad and Broker) Giles Balleny Stephen Keys Callum Davidson Harry Hargreaves	[phone]
Yellow Jersey PR Charles Goodwin Joe Burgess Annabel Atkins	[phone] [phone]

This announcement contains inside information as defined in Article 7 of the Market Abuse Regulation

Chief Executive's Statement

MJ Hudson, the international financial services support provider, is pleased to report its interim results for the six months ended 31^st December 2019.  As shareholders will recall, we were admitted to the AIM market on the 12^th December 2019 and our admission document contained information on current trading.

With thanks to our new investors and those existing shareholders, including staff, who chose to add to their investment in the Group, we successfully raised £29.3m for the Company in a placing. This has transformed the strength of the Company's balance sheet, moving from a net debt position of £12.0m (excluding lease liabilities of £0.6m) at the end of June 2019 to a net cash position of £28m for the Company at admission. Following near term acquisition payments of £2.5m and IPO and other expenses, the Company had a cash balance of £23.8m and net cash balances of £20.1m (excluding lease liabilities of £7.1m) at the end of December 2019.

During the reporting period we completed the acquisition of our ESG business MJ Hudson Spring, and we received regulatory approval for our acquisition of Anglo Saxon Trust at the end of January this year. As a result, the first meaningful contribution from these businesses will come in the second half of FY 2020. Alongside the MJ Hudson Amaces business acquired in December 2018, these businesses are integrating well and have broadened the touch points with clients in Europe as well as North America.

Separately today we have also announced the acquisition of Meyler LLC, a North American marketing services and analytics business with an alternatives client base and a team of four, plus consultants. This is a small but important step for us as we continue to extend our presence in the US and Canada which began with MJ Hudson Amaces in 2018. The transaction is expected to be EPS enhancing in the first full period of consolidation.

Segment adjusted performance

£000s	Advisory	Business Outsourcing	Data & Analytics	Organic Investments	Total
6m to 31st Dec '19
Underlying revenue	5,731	1,797	2,053	394	9,975
Growth	7.8%	16.8%	120.5%	177.5%	25.8%
Adjusted EBITDA *	1,016	599	456	(397)	1,674
Adjusted EBITDA margin	17.7%	33.3%	22.2%	n/a	16.8%
6m to 31st Dec '18
Underlying revenues	5,314	1,539	931	142	7,926
Adjusted EBITDA *	598	462	274	(545)	789
Adjusted EBITDA margin	11.3%	30.0%	29.4%	n/a	10.0%

*Adjusted EBITDA takes the segment profit from the segment note and adds back share based payments.

At the Group level, EBITDA margin for the period improved from 10.0% to 16.8% as at December 2019 reflecting a strong performance across all segments. This continues the improving trend seen at the full year to June 2019. This change has been driven by a combination of reduced losses within organic investments and an improving mix of higher margin businesses, as well as a greater emphasis on profitability particularly in the Advisory division.

Performance for the individual segments is as follows:

· Advisory - 7.8% revenue growth, with an almost 50% improvement in Adjusted EBITDA margin to 17.7%. A solid revenue performance in Law combined with efficiency gains helped to advance profitability. This was achieved despite the distraction of the IPO process, in which some of our team were actively involved. Investment Advisory saw good gains at the top line and better margins following historical restructuring activity.

· Business Outsourcing - 16.8% growth, EBITDA margin up from 30.0% to 33.3%. The division saw double digit growth in all its elements - fund administration, fiduciary, AIFM, AR and corporate secretarial. This is despite the fact that the key beneficiary of certain new key accounts was Luxembourg, described below in organic investments, and that the Anglo Saxon Trust acquisition will not contribute in earnest until H2 FY 2020. 

· Data & Analytics - 120.5% revenue growth, Adjusted EBITDA margin fall to 22.2% from 29.4%. This division saw the addition of MJ Hudson Spring in ESG to 2018's acquisition MJ Hudson Amaces in benchmarking. The fall in margin reflects the change in the mix of businesses, with the earlier stage MJ Hudson Spring blending with MJ Hudson Amaces' established margins however we envisage this growing as MJ Hudson Spring matures. Both businesses have seen good client demand in their initial integration phases and beyond.  Data & Analytics now accounts for 21% of the Group's underlying revenues, having accounted for approximately half that figure in the six months to December 2018.

· Organic Investments - Losses at the Adjusted EBITDA level fell from £0.55m to £0.40m in the period with revenue more than doubling to £0.4m.

Within this, our three investments are at different stages of maturity. With the benefit of recent new account wins, our Luxembourg business - a start-up team three years ago - significantly reduced its losses in the six months to December 2019. In our risk and regulatory business, a new head of the team, who previously worked at a global law firm and a Big Four accountancy practice, led the launch of our activities in earnest. At the same time, fund administration saw slower growth after the boost from the listed bank contract won in the first half of 2019.

New Business activity

During the period we invested in a new centralised business development function with a team drawn from internal resources and led by a senior hire, ex JP Morgan. The simple objective was to help us co-ordinate the marketing of the Group to new and larger clients on a cross divisional basis. To date, we have had successes in this area, but it has been somewhat inbound in nature driven by the success of our brand, client referrals and reputation. We detailed three large and cross divisional new clients in our AIM admission document and a further one in the trading update in January. Having a dedicated team focussed on this, however, has made a real difference despite it being only a recent initiative. The team has also been active in introducing recent acquisitions to existing group clients, especially in ESG.

More generally, we are pleased with our ability to continue to attract larger clients. Average client revenue yield amongst our top 10 clients increased by 7.1% as at December 2019 to £0.23m compared with last year.  We are also encouraged by our success at selling the whole Group as a solution to varied client strategic issues, often with an alternatives theme. A total of 61 clients (representing 12.3% of revenues) took services from more than one division in the six months to December 2019, compared with 43 (9.4% of revenues) in 2018.  

Part of this, we believe, is a comment on the continued growth of the alternatives sector and its developing impact on the corporate strategies of more mainstream client groups. MJ Hudson as a trusted advisor in the alternatives space is well placed to benefit from these changes and the new business development team was built to address this.

There is much more to do here and we have an additional senior hire planned during the remainder of this financial year. Key outputs for investors from this will include, increased numbers of new and key clients taking services from more than one division and average client revenue yields. I look forward to reporting on this and our other initiatives in more detail at the full year results.

Reconciliation of Adjusted Financial Measures

	Six months ended 31st Dec 2019 £m	Six months ended 31st Dec 2018 £m
Loss before taxation	(3.2)	(1.7)
Fundraising and acquisition costs	2.0	0.3
Non-recurring costs	0.4	0.3
Share based payment charge	0.1	0.1
Amortisation of acquired intangibles	0.2	0.1
Unwind of discount on deferred and contingent consideration	0.3	0.1
Fair value adjustments	0.5	0.7
Adjusted profit/(loss) before taxation	0.3	(0.1)

Adjusted financial measures are presented to provide additional information to best represent the underlying performance of the business. IPO costs totalled £1.7m which related to costs paid to legal and financial advisers and costs associated with listing. Acquisitions added a further £0.3m of costs. The non-recurring costs are one-off in nature such as relocation costs, dilapidation provisions and other one-off costs.

Cashflow

Adjusted cash flows from operation activities:	Six months ended 31st Dec 2019 £m	Six months ended 31st Dec 2018 £m
Adjusted profit/(loss) before taxation	0.3	(0.1)
Decrease/(increase) in trade and other receivables	(0.8)	(0.6)
Increase/(decrease) in trade and other payables	0.3	0.8
Depreciation and impairment of fixed assets and right-of-use assets	0.3	0.3
Amortisation and impairment of intangible assets (excluding amortisation of acquired intangibles)	0.4	0.2
Amortisation of interest on convertible loans	0.1	0.1
Net interest payable/(receivable)	0.6	0.4
Foreign exchange	0.1	-
Adjusted cash from operations	1.3	1.1

Net cash flow from operations, adjusted for IPO and other financing costs, totalled £1.3m compared with £1.1m in the same period last year. Within this, £0.5m was absorbed in working capital whereas the position was positive last time. This resulted, in part, from a timing issue in relation to one client which we expect to reverse in the second half of the year.

Dividend

In our admission document on admission to AIM in December we said that we would adopt a progressive dividend policy, once quoted. On the strength of these results we expect to be able to pay our maiden dividend in respect of the six-month period to December 2020 with reference to the normalised profits at that point. This is in line with market expectations.

Board & Staff

We welcome our new Chairman and new non-executive Directors to the Board, all of whom have already made valuable contributions through the IPO process and in the period under review.

As set out above, we added to our business development team and regulatory practice during the period. In terms of central services, our finance team has expanded to include four fully qualified chartered accountants - three of whom are from Big Four accountancy practices.  We plan to continue to recruit selectively across all our divisions on a cautious basis, given the current economic environment.

Coronavirus and market volatility

Clearly, we are issuing our interim results at a time of significant market volatility. However, many of our clients manage or invest into:

· long term (often 10 year plus) funds

· closed ended funds (that means they cannot be redeemed by investors)

· holding private company assets.

During the 2007-08 global financial crisis, these types of funds largely rode out the crisis and, as it transpired in some cases, profited from cheaper asset entry points.  As such, many of our client funds are uncorrelated to mainstream listed stocks and bonds. In addition, an increasing amount of our revenue is contracted and fixed; our Business Outsourcing and Data & Analytics divisions, where revenues are largely underpinned by rolling contracts, now represent together 39% of the Group's underlying revenue whilst this figure was 31% one year ago.

This all said, we cannot ignore the general business environment, and although we have not noticed any slowdown yet, we are being cautious. Certainly, a sustained period of market volatility could impact our clients and ourselves alike, as well as our competition. 

In respect of Coronavirus itself, we have taken steps to protect our staff as far as we are able and in line with official guidelines. Our staff have experience of working remotely and our technology can support this so that, we believe, client service levels will remain unaffected.

Acquisitions

We announced today the acquisition of Meyler in the US; a small step in our expansion plans in a strategically important territory and an extension of our marketing services activities for clients. This makes three acquisitions in FY 2020 to date.

Looking to the balance of the year and beyond, acquisitions remain a key part of our growth strategy . Whilst equity and debt markets remain volatile, we have net cash of £20m following our AIM fundraising late last year and minimal bank debt. The other side of market volatility from an acquisitions perspective, is that asset prices have fallen and vendor pricing expectations have moderated.

Current Trading & Outlook

Looking to the full year, the Board is encouraged by the progress made in the first half both on an organic and inorganic basis. New business momentum within the alternatives sector continues to drive our growth and recent acquisitions are integrating well and broadening our touch points with clients, especially in benchmarking and ESG. Whilst we remain cautiously confident about our business and the current financial year, we cannot ignore the current risk posed by Coronavirus and its impact on global stock markets and investing, as well as business confidence.

18^th March 2020

MJ Hudson Group plc

Consolidated statements of comprehensive income

		Unaudited six months to 31 December 2019	Unaudited six months to 31 December 2018
	Note	£'000	£'000
Revenue	3	11,132	11,267
Direct cost of sales		(1,158)	(3,341)
Other cost of sales		(685)	(379)
		__________	__________
Gross profit		9,289	7,547
Administrative and other expenses		(11,020)	(8,092)
Other operating income		4	18
		__________	__________
Operating loss		(1,727)	(527)
Finance expense		(973)	(487)
Fair value movements		(544)	(727)
		__________	__________
Loss before taxation		(3,244)	(1,741)
Tax benefit/(expense)		7	(50)
		__________	__________
Loss for the period		(3,237)	(1,791)
		__________	__________
Other comprehensive income
Exchange differences arising on translation of foreign operations		(201)	-
		__________	__________
Total comprehensive loss for the period		(3,438)	(1,791)
		__________	__________
Earnings per share attributable to the ordinary equity holders of the parent
Basic and diluted EPS	4	(0.03)	(0.02)

MJ Hudson Group plc

Adjusted results: Key performance indicators

		Unaudited six months to 31 December 2019	Unaudited six months to 31 December 2018
	Note	£'000	£'000
Revenue	3	11,132	11,267
Direct cost of sales		(1,158)	(3,341)
		__________	__________
Underlying Revenue		9,974	7,926
Other cost of sales		(685)	(379)
		__________	__________
Gross profit		9,289	7,547
Depreciation and amortisation, Administrative and other expenses (exc IPO and non-recurring costs)		(8,340)	(7,305)
Other operating income		4	18
		__________	__________
Adjusted operating profit		953	260
Finance expense (exc unwind of discount on deferred and contingent consideration)		(633)	(388)
		__________	__________
Adjusted profit/(loss) before taxation		320	(128)
Tax benefit/(expense)		7	(50)
		__________	__________
Adjusted profit/(loss) for the period		327	(178)
		__________	__________
Adjusted basic and diluted EPS		0.3p	(0.2)p

MJH Group Holdings plc

Consolidated statements of financial position

	Note	Unaudited at 31 December 2019	Audited at 30 June 2019
		£'000	£'000
ASSETS
Non-current assets
Intangible assets		25,530	22,716
Tangible assets		1,205	465
Right-of-use asset		7,574	555
Investments		745	707
		__________	__________
Total non-current assets		35,054	24,443
Current assets
Trade and other receivables		10,724	9,274
Cash and cash equivalents		23,805	3,099
		__________	__________
Total current assets		34,529	12,373
		__________	__________
Total assets		69,583	36,816
		__________	__________
LIABILITIES AND EQUITY
Non-current liabilities
Borrowings and other liabilities	5	5,215	18,921
Lease liabilities		6,596	228
		__________	__________
Total non-current liabilities		11,811	19,149
Current liabilities
Trade and other payables		7,704	6,701
Deferred consideration		4,547	2,081
Borrowings		680	779
Lease liabilities - Current		468	326
		__________	__________
Total current liabilities		13,399	9,887
Equity
Issued share capital		20	20
Share premium account	6	55,257	15,344
Other reserves	7	(181)	1,443
Retained loss		(10,723)	(9,027)
		__________	__________
Total equity		44,373	7,780
		__________	__________
Total liabilities and equity		69,583	36,816
		__________	__________

MJH Group Holdings plc

Consolidated statements of changes in equity

	Share Capital	Share Premium	Preference Shares	Other Reserves	Retained loss	Total equity
	£'000	£'000	£'000	£'000	£'000	£'000
Balance as at 1 July 2018	17	9,474	50	1,166	(5,399)	5,308
Share based payments	-	-	-	112	-	112
Loss for the period	-	-	-	-	(1,791)	(1,791)
Shares issued	1	1,279	-	-	-	1,280
	__________	__________	__________	__________	__________	__________
Balance as at 31 December 2018	18	10,753	50	1,278	(7,190)	4,909
Share based payments	-	-	-	189	-	189
Loss for the period	-	-	-	(24)	(1,837)	(1,861)
Shares issued	2	4,591	-	-	-	4,593
Shares redeemed	-	-	(50)	-	-	(50)
	__________	__________	__________	__________	__________	__________
Balance as at 30 June 2019	20	15,344	-	1,443	(9,027)	7,780
Share based payments	-	-	-	373	-	373
Exercise of options	-	-	-	(957)	957	-
Convertible options	-	12,125	-	(883)	584	11,826
Warrant issued	-	-	-	44	-	44
Loss for the period	-	-	-	(201)	(3,237)	( 3,438)
Shares issued	2	35,391	-	-	-	35,393
Cost of shares issued	-	(2,773)	-	-	-	(2,773)
Other shares issued	20	181	-	-	-	201
Group restructure	(22)	(5,011)	-	-	-	(5,033)
	__________	__________	__________	__________	__________	__________
Balance as at 31 December 2019	20	55,257	-	(181)	(10,723)	44,373
	__________	__________	__________	__________	__________	__________

MJH Group Holdings plc

Consolidated statements of cash flows

		Unaudited six months to 31 December 2019	Unaudited six months to 31 December 2018
		£'000	£'000
Cash flows from operating activities:
Loss for the financial period before taxes		(3,244)	(1,741)
Adjustments for:
Depreciation and impairment of fixed assets and right-of-use assets		343	301
Amortisation and impairment of intangible assets		523	218
Revaluation of investments		-	182
Fair value movements		544	454
Share based payment		373	111
Amortisation of interest on convertible loans		90	91
Net interest payable/(receivable)		573	396
Decrease/(increase) in trade and other receivables		(817)	(627)
Increase/(decrease) in trade and other payables		268	874
Foreign exchange		98	-
		__________	__________
Cash from operations		(1,250)	259
Taxation paid		-	-
		__________	__________
Net cash (used in) / generated from operating activities		(1,250)	259
		__________	__________
Cash flows from investing activities:
Purchases of tangible assets		(804)	(30)
Purchase of intangible assets		(102)	(417)
Purchase of subsidiary undertaking		(895)	(1,726)
Payment of deferred consideration related to acquisitions		(2,500)	-
		__________	__________
Net cash used in investing activities		(4,301)	(2,173)
		__________	__________
Cash flows from financing activities
Interest paid		(284)	(255)
Equity subscription less associated costs		27,287	1,280
Proceeds from issue of bank loan		223	-
Repayment of bank loan		(478)	(39)
Proceeds from issue of convertible loan notes		-	2,950
Directors loan repayments in the period		(246)	(124)
Payment of lease liabilities		(245)	(224)
		__________	__________
Net cash generated from financing activities		26,257	3,588
		__________	__________
Net increase in cash and cash equivalents		20,706	1,674
Cash and cash equivalents at beginning of period		3,099	326
		__________	__________
Cash and cash equivalents at end of period		23,805	2,000
		__________	__________
Cash and cash equivalents comprise:
Cash at bank and in hand		23,805	2,130
Bank overdrafts		-	(130)
		__________	__________
		23,805	2,000
		__________	__________

Notes to the interim report
1.  1	General information

MJ Hudson Group plc (the "Company") is a public limited company incorporated in Jersey, Channel Islands and its shares are quoted on the AIM Market of the London Stock Exchange under the Companies (Jersey) Law 1991. The address of the registered office is PO Box 264, Forum 4, Grenville Street, St Helier, JE4 8TQ. The financial information consolidates the financial statements of the Company and its subsidiary undertakings (together the "Group").

The principal activity of the Group is acting as an independent advisory and infrastructure business, serving fund managers, investors and advisers active in private equity, venture capital, hedge, credit, real estate and infrastructure. The group owns two full scope AIFM management platforms to fund managers, one in the UK and another in Luxembourg. 

2.	Basis of preparation

The financial information presented in this Interim Report has been prepared in accordance with International Financial Reporting Standards as adopted by the European Union (" IFRS ") that are expected to be applicable to the financial statements for the year ending 30 June 2020 and on the basis of the accounting policies expected to be used in those financial statements.

The financial information is prepared on a going concern basis, under the historical cost convention, except for certain financial assets and liabilities, which are revalued and measured at fair value through profit or loss. The financial information is presented in pounds sterling and all values are rounded to the nearest thousand (£000), except when otherwise indicated.

The Interim Report covers the six months ended 31 December 2019 and was approved by the Board of Directors on 17 March 2020. The Interim Report is unaudited. The interim condensed set of consolidated financial statements in the Interim Report are not statutory accounts as defined by Companies (Jersey) Law 1991. Comparative figures for the year ended 30 June 2019 have been extracted from the Admissions Document of the Group for that period.

3.	Segment information

For management purposes, the Group is organised into business units based on its products and services and has three reportable segments as follows:

· Advisory: the provision of legal and consultancy services for alternative asset management across all areas of the alternative investment industry. This includes services to alternative asset managers, corporate entities and institutional investors to advise on M&A and establishing investment funds along with support for primary fund investments, co-investments and secondaries. MJ Hudson Allenbridge provides individual independent investment advisers and professional trustees to corporate pension schemes, local government pension schemes and charitable organisations.

· Business outsourcing: a multi-service platform providing regulatory cover and a variety of management, operations and marketing support services to asset managers and advisers. This includes the provision of all key front, middle and back office functions, including investor relations, portfolio management, risk management, fund and corporate administration, accounting and fiduciary services.

· Data & analytics: Research, consulting, benchmarking services and tools to support sustainable investment, tax-advantaged investing and stronger relationships with investors, custodian banks and others. This includes providing assistance to clients to make strategic choices, improve investment performance and obtain better value from their service providers.

No operating segments have been aggregated to form the above reportable operating segments. Key management are the Chief Operating Decision Makers (CODM) and monitor the operating results of its business units separately for the purpose of making decisions about resource allocation and performance assessment. Segment performance is evaluated based on adjusted operating profit or loss. The adjustments include unallocated central costs, organic investments, fundraising and acquisition costs, non-recurring items, and depreciation and amortisation. Unallocated central costs (Group expenses) are items incurred centrally which are neither directly attributable nor can be reasonably allocated to individual segments , but are considered recurring in nature. The organic investments are revenues and costs related to newly formed businesses which are still considered to be in their start-up phase. Fundraising and acquisition costs are professional fees incurred relating to new debt or equity issuances and acquisition of new entities. Non-recurring costs are one off in nature such as relocation costs, dilapidation provisions and other one-off costs.

Business unit performance is not driven from assets given the nature of business being primarily the provision of services. For this reason, the CODM does not regularly obtain the split of asset and liabilities by reporting segment, which are monitored on a Group basis. The Group's financing costs (including finance costs, finance income and other income), fair value movements and income taxes are also managed on a Group basis and are not allocated to operating segments.

Unaudited six months to	Advisory	Business outsourcing	Data & analytics	Total
31 December 2019	£'000	£'000	£'000	£'000
Revenue	5,731	2,955	2,053	10,739
Direct cost of sales	-	(1,158)	-	(1,158)
	________	________	________	________
Revenue less direct cost of sales	5,731	1,797	2,053	9,581
Other cost of sales	(606)	-	(79)	(685)
	________	________	________	________
Gross profit	5,125	1,797	1,974	8,896
Administrative and other expenses	(4,196)	(1,230)	(1,524)	(6,950)
Other operating income	3	-	-	3
	________	________	________	________
Segment profit/(loss)	932	567	450	1,949
Group expenses				-
Organic Investments:
Revenue				394
Expenses				(791)
Fundraising and Acquisition costs				(1,974)
Non-recurring costs				(439)
Depreciation and amortisation				(866)
				________
Operating loss				(1,727)
				________

Unaudited six months to	Advisory	Business outsourcing	Data & analytics	Total
31 December 2018	£'000	£'000	£'000	£'000
Revenue	5,314	4,880	931	11,125
Direct cost of sales	-	(3,341)	-	(3,341)
	________	________	________	________
Revenue less direct cost of sales	5,314	1,539	931	7,784
Other cost of sales	(268)	-	(111)	(379)
	________	________	________	________
Gross profit	5,046	1,539	820	7,405
Administrative and other expenses	(4,519)	(1,115)	(565)	(6,199)
Other operating income	10	8	-	18
	________	________	________	________
Segment profit	537	432	255	1,224
Group expenses				(54)
Organic Investments:
Revenue				142
Expenses				(688)
Fundraising and Acquisition costs				(334)
Non-recurring costs				(298)
Depreciation and amortisation				(519)
				________
Operating loss				(527)
				________

Geographic information (revenue)

	Unaudited six months to 31 December 2019	Unaudited six months to 31 December 2018
	£'000	£'000
United Kingdom	5,903	8,332
Channel Islands	1,334	461
Switzerland	732	641
Luxembourg	268	20
Netherlands	408	78
Rest of Europe	803	361
North America	1,162	581
Cayman Islands	138	729
Rest of World	384	64
	__________	__________
	11,132	11,267
	__________	__________

UK revenue has reduced with the change in mix of business in the FMS division where a material proportion of revenue is typically passed through to clients as a specific payment linked to the performance of the clients' funds. The direct cost of sales associated with this revenue is £1.2m in this period (£3.3m in prior period).

4.	Earnings per share (EPS)
	Basic EPS is calculated by dividing the profit for the period attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the period. Diluted EPS is calculated by dividing the profit attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the period plus the weighted average number of ordinary shares that would be issued on conversion of all the dilutive potential ordinary shares into ordinary shares. During the reorganisation of the Group on 12 December 2019 shares in MJH Group Holdings Limited were exchanged for shares in MJ Hudson Group plc at a ratio of 45 to 1.  31 December 2018 share figures below are illustrated as if this split had already occurred for comparative purposes. The following table reflects the income and share data used in the basic and diluted EPS calculations:
			Unaudited six months to 31 December 2019		Unaudited six months to 31 December 2018
			£'000		£'000
	Loss for the period attributable to equity holders of the Group		(3,238)		(1,791)

			Thousands	Thousands
	Weighted average number of ordinary shares for basic EPS		97,905	78,278
			__________	__________
	Basic and diluted loss per share		(0.03)	(0.02)
			__________	__________

The following instruments are not included in the diluted EPS calculation due to the fact that they would have an antidilutive effect on EPS. The weighted average number of instruments

		Unaudited six months to 31 December 2019	Unaudited six months to 31 December 2018
		Number '000	Number '000
Share options		9,088	18,412
Convertible loan notes		1,053	11,478
		__________	__________
Total of antidilutive instruments not included		10,141	29,890
		__________	__________

5.		Non-current borrowings and other liabilities
			Unaudited at 31 December 2019	Audited at 30 June  2019
			£'000	£'000
	Bank loans		2,180	2,209
	Other loans		279	357
	Convertible bonds		600	11,792
	Deferred consideration		2,077	4,358
	Other payables		79	205
			________	________
			5,215	18,921
			________	_______

6.	Share capital and Share Premium
			Unaudited at 31 December 2019	Audited at 30 June 2019
			£'000	£'000
	Share capital
	Allotted, called up and fully paid
	171,305,450 Ordinary shares in MJ Hudson Group plc at £nil each and 20,000 B Shares in MJH Group Holdings Limited at £1.00 each (June 2019 - 1,969,000 ordinary shares in MJH Group Holdings Limited of £0.01 each)		20	20
			__________	__________
	Share premium		55,257	15,344
			__________	__________

During the period MJ Hudson Group plc acquired MJH Group Holdings Limited.  At the time of the acquisition the ordinary share of MJH Group Holdings Limited contained 2 classes of shares - A and B shares.  The A ordinary shares were all acquired by MJ Hudson Group plc in exchange for 45 shares in MJ Hudson Group plc and each share issued carries one voting right. The B Share capital of MJH Group Holdings Limited, a subsidiary of MJ Hudson plc Limited, was not acquired under the takeover. The B Shares were issued during the period at market value to senior management under a subsidiary growth share plan. The 20,000 B shares issued have no voting rights and a par value of £1.00 each. There are no restrictions on the distribution of dividends and the repayment of capital.

7.	Other Reserves
	Share based payment reserve	Convertible debt option & warrant reserve	Foreign currency translation reserve	Total other Reserves
	£'000	£'000	£'000	£'000
Balance as at 1 July 2018	283	883	-	1,166
Share based payments	189	-	-	189
	__________	__________	__________	__________
Balance as at 31 December 2018	472	883	-	1,355
Share based payments	112	-	-	112
Currency translation difference	-	-	(24)	(24)
	__________	__________	__________	__________
Balance as at 30 June 2019	584	883	(24)	1,443
Share based payments	373	-	-	373
Exercise of share based payments	(957)	-	-	(957)
Exercise of Convertible loan notes	-	(883)	-	(883)
Fair value adjustment	-	44	-	44
Currency translation difference	-	-	(201)	(201)
	__________	__________	__________	__________
Balance as at 31 December 2019	-	44	(225)	(181)
	__________	__________	__________	__________

Fair value movement on convertible loan notes

The adjustment to reserves on issue of the stepped interest bond dated April 2016 and convertible bond dated March 2016 (which were separated into an equity and liability component) were recognised in other reserves. During the period the bonds converted releasing the equity element leaving £44,000 other reserves at 31 December 2019, which relate to warrants issued during the period (31 December 2018 and 30 June 2019: £883,000).

Share based payments

Employees of the Group are granted options to acquire shares in the Group. The charge for the period was £373,000 ended 31 December 2019 (£112,000 period to 30 June 2019; £189,000 period to 31 December 2018).  During the period all options vested releasing other reserves to retained earnings. 

8.	Business combinations

Acquisition of Saris B.V.

On 10 July 2019 the Group acquired 100% of Saris B.V. an environmental, social and corporate governance consultancy company based in the Netherlands for £3,605,000 paid in cash, shares and deferred consideration. The business was subsequently renamed to MJ Hudson Spring B.V.. The Group acquired MJ Hudson Spring B.V. in order extend the global reach of the Group and expand the services that are offered to its customers.

The goodwill represents the experience and expertise of the staff of MJ Hudson Spring B.V. and non-contractual relationships. In calculating the goodwill arising on acquisition, the fair values of net assets of Spring have been assessed and adjustments from book value have been made where necessary. The goodwill values recorded upon acquisition are not deductible for tax purposes.

				Fair value
				£'000
	Tangible fixed assets			26
	Trade and other receivables			592
				_________
	Total assets			618
	Trade and other payables due within one year			(299)
				_________
	Net assets			319
	Customer relationships			1,394
	Goodwill at cost			1,892
				_________
	Total purchase consideration			3,605
				_________

Of the total consideration of £3,605,000, £1,352,000 has been settled in the period and the remaining £2,253,000 is located within current and non-current liabilities depending on timing of payment. Included within the amount of total consideration above are amounts that are contingent upon certain performance thresholds being achieved by the acquired business discounted to their present value as at the date of exchange . The contingent consideration recognised is based on the estimated fair value where the consideration is probable and can be measured reliably. If these performance thresholds are not met the total consideration will decrease, or if the thresholds initially considered to not be probable are met the total consideration may increase.

The useful economic life of customer relationships has been estimated to be 12 years, based on estimates of the timing of the expected future net present cashflows attributable to the business.

The revenue generated at MJ Hudson Spring B.V. since its acquisition for the period ended 31 December 2019 was £576,000.

9 .	Post balance sheet event

On 31 January 2020 the Group acquired 100% of Anglo Saxon Trust an administrator based in Jersey. The approximate net value of the assets acquired (subject to performance of a full purchase price allocation) was £626,000 whilst the consideration payable for the acquisition is subject to further agreement. The expected impact of the acquisition on the results of the Group cannot yet be identified with any certainty.

 

END

 

 

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