Kingswood : 2021 Kingswood Group Annual Results

COMPANY REGISTRATION NO. 42316 (GUERNSEY)

KINGSWOOD HOLDINGS LIMITED

ANNUAL REPORT AND AUDITED FINANCIAL

STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2021

Company Registration No. 42316 (Guernsey)

KINGSWOOD HOLDINGS LIMITED

ANNUAL REPORT AND AUDITED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2021

KINGSWOOD AT A GLANCE

• Kingswood Holdings Limited and its subsidiaries (the "Group" or "Kingswood") is an international, fully integrated wealth and investment management business listed on the AIM market of the London Stock Exchange under ticker symbol (AIM: KWG).
• Kingswood offers a range of wealth planning and investment management solutions to its clients, which range from private individuals to some of the UK's largest universities and institutions. Kingswood is focussed on becoming a leading participant in its sector through targeted acquisitions in the UK and US, complemented by strong organic growth to create a global wealth management business.
• The Group's core proposition centres on primary offerings in wealth planning and investment management to deliver best in class financial solutions for clients.

The Kingswood Group today comprises:

Regional hubs

Satellite offices

Hull:

c.26 advisers

Sheffield:

c.18 advisers

London:

c.19 advisers

OSJ
Operational hubs	New York, NY:

c.96 Registered Reps

San Diego, CA:	Atlanta, GA:
c.100 Registered	Operational Hub
Reps

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2021 HIGHLIGHTS

Strategic Highlights

• Several key UK acquisitions were completed in 2021, including Admiral Wealth Management Ltd, Smythe and Walter Ltd, Money Matters (North-East) Ltd, contributing to an increase in Kingswood's reported Assets under Management and Advice (AUM/A) balance to £6.8bn at 31 December 2021. Metnor Holdings Limited was acquired on 31 December 2021 with AUM of £1.5bn, increasing the Group AUM/A to £8.3bn.
• A further five UK acquisitions have completed in 2022, as outlined in note 33 of the Notes to the Financial Statements, contributing to an increase in Group AUM/A to c.£9.0bn.
• In March 2022, we launched the 'Kingswood Go' app to provide clients with easier access to their investments. The app consolidates available financial data into one place to present a clear view of a client's finances, provides safe storage of key documents and a secure messaging system that allows clients to contact their investment manager and Kingswood adviser directly.
• 2021 was a year of growth for the Kingswood US Registered Investment Adviser (RIA) and Independent Broker Dealer (IBD) business. We increased the number of registered representatives by 37 to 211 and grew our total assets under management by $0.5bn to $2.5bn.
• The Kingswood US Investment Banking business completed over 100 transactions with over $9.0bn capital raised for clients.
• In January 2022, Kingswood Capital Partners and Skyway Capital Markets LLC announced an exclusive partnership in which the Skyway investment banking team will work closely with Kingswood advisors and their clients to execute M&A transactions.

2021 Financial Highlights

• Group revenue was £149.7m, a 488% increase on prior year (2020: £25.5m), reflecting growth in the US and the impact of 2020 and 2021 in-year acquisitions in the UK.
• 87% of the UK's revenue is recurring in nature, providing a strong, annuity-style fee stream. Investment Banking Fees are a larger portion of Kingswood US revenues, and transactional in nature, which mean that recurring revenue in the US was 7.4%. Combined, Group recurring revenue was 19.0%.
• Operating Profit of £6.3m was £5.5m higher compared to 2020. The Kingswood Board believes Operating Profit is the most appropriate indicator to explain the underlying performance of the Group. The definition of Operating Profit is profit before finance costs, amortisation and depreciation, gains and losses, and exceptional costs (business re- positioning and transaction costs).

£000's (Unless otherwise stated)	2021*	2020	2019
Total Revenue	149,716	25,477	10,053
Recurring Revenue %	19.0%	61.0%	83.0%
Operating Profit	6,327	862	211
Total Equity	76,898	50,152	28,201
AUM/A (£m)	6,772	5,912	2,471
# of Advisers - UK	70	64	40
# of Authorised Representatives - US		174	-
211

*AUM/A excludes the impact of Metnor Holdings Limited, which was acquired on 31 December 2021 with AUM of £1.5bn. Including Metnor 2021 AUM/A increases to £8.3bn

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CHAIRMAN'S STATEMENT

In my first year as Chair of Kingswood I have been impressed by the strong progress we are making in achieving our long- term strategy to become a leading international fully integrated wealth and investment management business. I am immensely proud of our dedicated team who have navigated the continued challenges of the pandemic in 2021, while delivering outstanding service to our clients both in the UK and US.

2021 has been a transformational year for Kingswood. Despite the challenges faced, I am pleased to report record levels of revenue and operating profit with significant growth across Wealth Planning (WP), Investment Management (IM), and the US. We have a strong, well-capitalised balance sheet and have benefited from our partnership with Pollen Street Capital which has now invested £77.4m to enable our acquisition and growth strategies. Through investment and growth, at the time of writing this report we employ 292 people across the globe and manage c.£9.0bn of client assets.

In the UK, Kingswood has completely transformed itself within the space of a few years creating a highly successful, fast growing, vertically integrated wealth and investment management business. The UK wealth management sector continues to exhibit strong, long-term growth characteristics supported by demographic trends, a complex regulatory environment, and ongoing consolidation within a fragmented industry. Our acquisition strategy takes advantage of this by providing a seamless transition process with a centralised support service and investment proposition that allows advisers to spend more of their time with their clients. Since 2018, the Group has acquired 14 UK wealth management businesses which are projected to deliver strong, sustainable revenues and operating profit. We now have over 85 financial advisers and investment managers operating across 18 regional offices to support our retail and institutional client base. Under the leadership of David Lawrence, growth is supported by a strong and unrelenting focus on our client experience, supported by a progressive investment in technology and an equal investment in our colleagues, all of which is underpinned by strong integration and operational excellence.

Under the leadership of Mike Nessim, our US CEO, the US business has delivered exceptional levels of growth in 2021 through three core divisions: Independent Broker Dealers, Registered Investment Advisers, and Investment Banking. The Investment Banking business completed over 100 transactions, raising c.$9.0bn capital for clients. The RIA and IBD business increased its advisor representatives to 211 by December 2021, managing c.$2.5bn of client assets. With a strong business model and an exceptional leadership team playing in the largest global wealth management market, the Kingswood US business is well set for further growth in the coming years.

The Board places great importance on building a business with strong governance and a culture that supports sustainable long-term success. With that in mind we focus on where we can make the largest positive impact on the environment, both in measuring and reducing our carbon footprint and offering clients a suite of ESG portfolios which consider environmental social and governance issues. We are committed to creating a workplace and culture that is welcoming and inclusive for everyone and have taken steps to enhance this in 2021 through the creation of an employee-led Diversity and Inclusion Forum. We will continue to make a significant investment in Learning and Development for all colleagues by launching career paths and supporting colleagues with their professional and career development.

We are investing in our client experience through technology and other means. We launched our client portal in 2021 in the UK, Kingswood Go, which allows clients to have single sign-on single client view across multiple platforms which has transformed our client experience. In the US we have invested in technology infrastructure to provide advisors with a superior integrated wealth management platform offering products such as Annuities, Equities, Alternatives, and Mutual Funds. In addition, Kingswood US has integrated a new fully automated alternative platform, a fully automated CRM and a leading back- office processing system.

The Board continues to operate a robust risk management framework so that we can maintain compliance with our regulatory responsibilities and ensure both customers and suppliers are always treated fairly. Jonathan Freeman, in his capacity as an independent Non-Executive Director, continues to assume responsibility for ensuring that the Group has appropriate corporate governance standards in place and that these standards are applied within the Group as a whole.

We were delighted to have recently announced that David Lawrence has been appointed to the Board as Chief Executive Officer. The Board is confident David will take the business to another level over the coming years to fully realise its potential. I would like to express huge thanks to Gary Wilder for stepping into the Group CEO role over three years ago and having the vision for what Kingswood can become both domestically and internationally. The Board will continue to benefit from this as Gary steps back into a non-executive role. Jon Millam was appointed to the role of Group Chief Financial Officer in August 2021, joining us with the credentials to lead our finance function through the next stage of our journey. I am also pleased to welcome Richard Avery-Wright to the Boards of our UK regulated subsidiaries, KW Wealth Planning Limited and KW Investment Management Limited. Richard will be a strong addition to the Group's governance and brings a deep and highly successful track record of building and creating value.

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