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Walker Crips Group plc   -  WCW   

Final Results

Released 12:03 11-Jul-2019

RNS Number : 2543F
Walker Crips Group plc
11 July 2019
 

The information contained within this announcement is deemed to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014. Upon the publication of this announcement, this inside information is now considered to be in the public domain 

11 July 2019

News Release

Walker Crips Group plc

("Walker Crips", the "Company" or the "Group")

 

Final results for the year ended 31 March 2019

 

Walker Crips Group plc, the investment management and wealth management services, pensions administration and regulation technology Group, announces audited results for the year ended 31 March 2019.

 

Walker Crips has consolidated its position over the past year, laying the foundation for future growth through technology-led initiatives. As a result, our focus has expanded beyond the Group's traditional roots with a new emphasis on innovating the way we do business.

 

Highlights

§ Group annual revenue remained stable at £30.5 million (2018: £30.5 million)

§ Group Assets under management and Administration maintained at £5.0 billion (2018: £5.0 billion)

§ Discretionary and Advisory assets under management unchanged at £3.3 billion (2018: £3.3 billion)

§ Underlying operating profit, before tax and exceptional items decreased to £434,000 (2018: £906,000)

§ Reported profit before tax decreased to £489,000 (2018: £924,000)

 

Strategic highlights

§ Non-broking income as a percentage of total income has increased to 71.6% (2018: 64.1%)

§ Proposed final dividend reduced to 0.33 pence per share (2018: 1.29 pence per share), bringing total dividends for the year to 0.91 pence per share (2018: 1.87 pence per share)

 

Commenting upon these results, David Gelber, Chairman, Walker Crips, said:

 

"Notwithstanding this, reported revenue has remained stable with a significant improvement in fee income, offsetting the decline in broking commissions of £2.3 million."

 

"The Group continues its efforts to help clients achieve greater returns by transferring to our discretionary or portfolio-managed mandates, which also generates more stable fee-based revenue. These efforts, and the decline in less predictable transaction-based shared commission income during the year, mean the ratio of non-broking revenue to total income has improved to 71.6% (2018: 64.1%).

 

"We are closely monitoring the Government's progress around Brexit and the impact of the present uncertainty. Given the Group's predominantly UK centric customer base and operations, the impact of Brexit manifests in second order effects including lower trading volumes as the uncertainty influences investor sentiment. During this period, we continue to maintain a material cash buffer, regulatory capital headroom and a dividend policy that allows continued investment in new revenue stream initiatives, technologies to improve customer experience and achieve procedural and process efficiencies, and to build our 'Software as a Service' offering. We are committed to a programme of tightly controlling non development expenses, pushing through revenue initiatives and creating new product offerings."

 

Sean Lam, Chief Executive Officer, Walker Crips, said:

 

"Last year, we embarked upon a new vision - "Walker Crips, a Technology Driven Financial Services Company". All the core objectives of shareholder value, customer service, operational effectiveness and efficiency, are still there, but only by emphasising and investing in technology as the delivery mechanism will the core objective be achieved. Our transformation is underway and gathering pace as we progress toward this objective."

 

For further information, please contact:

 



Four Broadgate

Roland Cross/Anthony Cornwell

 

 

Tel:   +44 (0)20 3697 4200

 

Cantor Fitzgerald Europe

Tel: +44 (0) 20 7894 7625

Will Goode / Philip Davies


 

Person responsible:

The person responsible for arranging the release of this announcement on behalf of Walker Crips is Rodney Fitzgerald.

 

Further information on Walker Crips Group is available on the Company's website at www.walkercrips.co.uk  

 

 

 

 

Chairman's Statement

Although reporting lower year-on-year profits and reduction in the final dividend, the Group continues to make progress in its move to fee based revenue, delivery of new offerings and transition to a technology driven business.

 

Overview of 2018/2019

The Brexit-driven economic uncertainty, and the corresponding caution adopted by investors explained in my Interim Report, continued to depress the volume-driven broking component of our revenue during the remainder of the year. Accordingly, it is disappointing, but perhaps not unexpected, to be reporting full year profit before tax down by £435,000 or 47% on the prior year and, as also signalled at interim, a reduced final dividend.

 

Notwithstanding this, reported revenue has remained stable with a significant improvement in fee income, offsetting the decline in broking commissions of £2.3 million. This reflects resilience in the level of Assets Under Management and Administration notwithstanding difficult markets. The improved second half performance from our Structured Investments team and the rollout of new tariffs, which commenced during the last quarter, is expected to have a fuller and sustained impact next year, underpinned by the continuing loyalty and longevity of our clients.

 

The business continues to benefit substantially from improved interest margins on managed deposits which have hitherto been depressed for several years by the long run of record low UK Base Rates.

 

Also, although our reported cost base has increased by £0.8 million (4%), this includes £0.3 million invested in new products, service offerings and increased automation on our journey to being a technology driven financial services business, with additional new head office premises costs of £0.2 million being incurred during the year. A cost efficiency programme is under way which should result in savings flowing through in future years helping manage our cost base.

 

The Group continues its efforts to help clients achieve greater returns by transferring to our discretionary or portfolio-managed mandates, which also generates more stable fee-based revenue. These efforts, and the decline in less predictable transaction-based shared commission income during the year, mean the ratio of non-broking revenue to total income has improved to 71.6% (2018: 64.1%).

 

The changing revenue mix and tariff initiatives contributed to gross profit increasing by 1.65% to £20.8 million (2018: £20.5 million) and a higher gross margin percentage of 68.3% compared to 67.2% in the prior year. Total Assets Under Management and Administration at the year-end were £5.0 billion (31 March 2018: £5.0 billion) and Discretionary and Advisory assets under management also unchanged at £3.3 billion. Given the background of global trade friction, Brexit uncertainty and the resultant market challenges, our clients more than ever understand the importance of our experienced and capable investment advisers providing a sensible and reasoned approach as they serve them with bespoke discretionary and advisory management services.

 

The decrease in cash balances during the year is primarily due to the payment of a large brought forward creditor of £2.0 million. Cash generated by operations in the prior year benefited from several factors, including the acceleration of cash received by switching fee invoicing from half-yearly to quarterly, which amounted to an approximate additional inflow of £2.8 million and a further cashflow advantage was generated in the prior year from substantial rent-free periods attached to our new office leases amounting to £0.4 million. Capital expenditure on the new offices, incurred in 2017, was also recovered in 2018 from the landlord in the amount of £0.5 million. Taking all these non-recurring material movements into account, the underlying operating cash flows for both the current and prior year show a satisfactory positive result in the context of lower profitability.

 

At a more granular level, Walker Crips Investment Management saw an 11.7% increase in management fee revenues to £19.2 million (2018: £17.2 million), offset by the fall in commission income noted above such that overall revenues of the segment decreased by 0.71% year on year to £27.9 million (2018: £28.1 million).

 

The York-based Wealth Management team has seen an overall revenue increase of 12.3% on previous year, mainly due to revenues from the financial planning team increasing from £1.22 million to £1.43 million. Within this, recurring revenue has further increased by 8% compared to the prior year, driven by new business from existing and new clients whose number has risen by approximately one third.

 

Pension administration fees have remained stable in the year but, having invested in the back office system, processes and people, is now actively looking to grow client numbers through new internal and external introducers by bringing all our capabilities and services into a more efficient single SIPP and converting both SSAS and SIPP product offerings into a more competitive tariff, enabling greater scalability and providing a platform for further growth.

 

The increase in revenue contributed to higher total profits for both strands of our Wealth Management proposition, increasing by 74.9% from £199,000 to £348,000.

 

The Structured Investments team ("WCSI") delivered a very strong second half to the year following disappointing volumes in the first half. WCSI is poised to build on this strength this year as a new product line in the form of structured deposits comes to fruition. WCSI has continued to build in its relationships with leading credit institutions enabling investors to choose from an increasingly wide range of product pay-offs and to further diversify credit risk.

 

Since the year end a team of advisers has decided to leave the Group on amicable terms, which will result in the transfer of £239 million of assets under management and administration. The transfer of clients and their assets will take place later this year with the consequent impact on future revenues and profits.

The Group's balance sheet remains strong, with reported net assets of £21,721,000, down £292,000 from the prior year and reflecting payment of last year's final and this year's interim dividends, which exceed the reported profit after tax for the year. The robust balance sheet provides a sound base underpinning our technology-based strategy.

 

We have incorporated EnOC Technologies Limited as our new technology arm to deliver our future 'Software as a Service' business. We expect this initiative to be contributing over the next twelve months.

 

Strategy

We remain committed to the strategy of being an innovative and technology driven financial services business.

 

We are constantly looking for ways to maintain and enhance the service we provide to clients, delivering a premium personal service. We will also continue to standardise, where it is appropriate to do so, and use investment in technology to reduce costs and generally to work more efficiently. We are therefore investing in technology to improve the customer experience and efficiency. During the year we have significantly improved the production process of our client packs, which moved from a half yearly to quarterly distribution. We designed our own fee charging system which computes fees daily and posted quarterly, instead of the previous method which priced and charged fees at six monthly intervals with no recognition of intervening price changes and the associated fluctuations in fee revenue. These are examples of customer-facing improvements that we will develop further and deploy.

 

Notwithstanding these positive elements, we are disappointed to be reporting reduced profits. As experienced by many of our peers, external national and global events outside our control bring risks which have a material and direct bearing on our revenue base through economic uncertainty-led volatility in transaction volume or market variations in the fee-sensitive valuations of our managed portfolios. The importance of expanding through growth of alternative revenue streams, which we are now heavily focused on achieving, has never been greater.

 

Dividend

In the absence of an upturn in trading volumes in the second half of the year, and as signalled in my Interim Report, the Board is now recommending a reduced final dividend of 0.33 pence per share (2018: 1.29 pence per share). Combined with the interim dividend of 0.58 pence per share (2018: 0.58 pence per share), the total dividend for the year is 0.91 pence per share (2018: 1.87 pence per share). The final dividend will be paid on 13 September 2019 to shareholders on the register at the close of business on 23 August 2019.

 

In making this decision, the Board has carefully considered a number of factors not least shareholders' expectation to receive dividends at the historically consistent level of recent years. Given the disappointing results for the year, a greater emphasis has been placed on the need for prudence, in particular the conservation of cash for re-investment into new more profitable initiatives and maintaining appropriate prudential capital headroom. We will constantly review our ability to restore dividends to higher levels when we have achieved an improvement in profitability alongside continued stability of other factors such as liquidity, regulatory capital adequacy and the wider market and economy.

 

Our people, culture and governance

By setting the right example at the top, the Board has prioritised good culture and conduct across all who represent the Group. We continue to encourage professionalism and the right behaviours in all we do. The end result is for a unified emphasis on achieving the right outcome for clients. The new Senior Managers & Certification Regime ("SM&CR") comes into force on 9 December 2019. We have embraced and adopted it as part of our culture of accountability rather than treating it as another regulatory burden. We have already built our own SM&CR system within our new company, EnOC Technologies Limited, and have expanded it to include not just the regulatory requirements but also our internal policies, governance and controls. This SM&CR system is also being offered as a service to other UK regulated financial services businesses, covered more fully in the Chief Executive Officer's report. Corporate governance and stewardship in accordance with the UK Corporate Governance regime provides assurance to external parties who rely on sound management of the business and its risks.

 

I would like to thank all my fellow Directors, investment managers and advisers and members of staff for their continued support and hard work during a challenging period. The efforts of our people in embracing change and dedication to delivering good customer outcomes is outstanding.

 

I would also like to take this opportunity to thank Mark Rushton again for his contribution to the Group and wish him well in his future endeavours.

 

Annual General Meeting

This year's Annual General Meeting will be held at Old Change House, 128 Queen Victoria Street, London EC4V 4BJ on 4 September 2019, at 11.00 a.m. 

 

Outlook

We are closely monitoring the Government's progress around Brexit and the impact of the present uncertainty. Given the Group's predominantly UK centric customer base and operations, the impact of Brexit manifests in second order effects including lower trading volumes as the uncertainty influences investor sentiment. During this period we continue to maintain a material cash buffer, regulatory capital headroom and a dividend policy that allows continued investment in new revenue stream initiatives, technologies to improve customer experience and achieve procedural and process efficiencies, and to build our 'Software as a Service' offering.

 

We are committed to a programme of tightly controlling non-development expenses, pushing through revenue initiatives and creating new product offerings.

 

 

D. M. Gelber                                                                                            

Chairman                                                                                                  

11 July 2019

 

 

 

 

CEO's Statement

 

Reflection

Last year, we embarked upon a new vision - "Walker Crips, a Technology Driven Financial Services Company". All the core objectives of shareholder value, customer service, operational effectiveness and efficiency, are still there, but only by emphasising and investing in technology as the delivery mechanism will the core objective be achieved. Our transformation is underway and gathering pace as we progress toward this objective.

 

Reconciliation of profit before tax to adjusted


Reconciliation of operating profit to operating profit

profit before tax




before tax and exceptional items




2019

2018



2019

2018


£000

£000



£000

£000

Profit before tax

489

924


Operating profit

402

890

Exceptional items

32

16


Exceptional items

32

16

Adjusted profit before tax

521

940


Adjusted operating profit

434

906

 

 

Three-pronged strategy for growth

1.   Core Investment Management Business

-     This is our largest revenue generating division, providing clients with investment, wealth, pensions, collectives advice and the creation of structured investments and structured deposits for clients, IFAs and counterparties

-     We continue to invest in our core business, enhancing our systems and processes to improve operational efficiencies, and to deliver services to our Investment Managers via our in-house developed client management system thereby enabling them to provide high quality tailored service to clients

-     Our fee revenues have out-performed the prior year, reflecting our shift to fee earning accounts. Our transaction commission income has declined partially due to that shift, and also due to lower trading activity in the market for both local and geopolitical reasons

-     The simplification and streamlining of service offering by our York office has concluded and we are now seeing an improvement in revenues

-     Our collectives investment management team maintained their performance levels while facing compression of margin pressures

-     Our structured deposit offering will now launch in 2019/20, slightly delayed from 2018/19 as we finalised and tested the operational arrangements

-     The increase in the cost of regulating and operating investment management businesses is a persistent headwind. We will continue to make this division more productive, managing our costs and improving our operational efficiency

-     We continue to look for good quality investment and wealth managers, either individually or as teams

 

2.   Alternative Investments

-     This subset of our core Investment Management business is where we create innovative and higher margin new business lines

-     Our Tier 1 (Investor) Visa investment business continues to perform well, attracting ultra-high net worth individuals from the Far East to invest in the UK. Our assessment process is vigorous and thorough and has provided assurance to the UK Home office with 100% success rate since 2013

-     Our Short-Term Lending business delivers in line with targets for our institutional mandates. As part of the expansion of this business, the Group has invested in a planned launch of a listed bond available to institutional investors. This launch is presently delayed reflecting current political uncertainty affecting investor sentiment and therefore provisions totalling £134,000 have been made for related costs

-     Our international equity arbitrage business generates significant returns on our modest principal trading book

 

3.   Software as a Service ("SaaS")

-     Systems development is our core competency and we create much of our own technology, allowing us to build and integrate many of our systems into one central platform

-     We have therefore incorporated a wholly-owned subsidiary EnOC Technologies for the purpose of providing technology to the industry. Our first service on the platform is a system that will support FCA authorised companies operating within the Senior Managers & Certification Regime ("SM&CR"). It is a scalable and multi-tenanted SM&CR system that we have already been using for our own group of companies, and used also by a number of external companies

-     The objective of EnOC is to provide enterprise level systems to companies of all sizes, from the very large to the very small. By levying only a per-user/ per-month charge starting from £25 and decreasing as volume increases, it is accessible to even the smallest of companies. We aim to close the technology gap between those who can afford large systems, and those who cannot; removing the barriers to entry

-     EnOC was born in the cloud and will remain a cloud service, for all the benefits it brings to the service and to our partners

-     We must and we will Create > Innovate > Rejuvenate > Eliminate > Repeat

 

 

Driving forwards

We have always provided High-Touch service to our clients, and we also couple it with High-Tech service delivery. We will continue to manifest our vision that Walker Crips is a 'Technology Driven Financial Services Company'.

 

I am pleased with our achievements thus far, but I am frustrated that we did not achieve even more. We remain resolute and determined to follow through with our plans. We must keep on pursuing the principles of Kaizen: the discipline of continuous improvement. We must continuously innovate, all of us, one step at a time, all the time.

 

We have, and will always do our utmost to serve our clients, to deliver good customer outcomes and to make investment rewarding for them, our shareholders and our staff.

 

I am thankful for the talented and committed people that I have the pleasure of working with. Our Investment Managers, Wealth and Pensions Advisors are exemplary professionals and our staff are skilled, loyal and dedicated. I am truly grateful.

 

 

Sean Lam

Chief Executive Officer

11 July 2019

 

 

Consolidated income statement

year ended 31 March 2019



 2019


 2018


Notes

 £000


 £000

Revenue

4

        30,458


        30,456

Commission and fees paid


         (9,673)


      (10,001)

Share of after tax profit from joint venture


                14


                  7

Gross profit


        20,799


        20,462






Administrative expenses


      (20,365)


      (19,556)

Exceptional items

6

              (32)


              (16)

Operating profit


              402


              890






Investment revenue


                90


                41

Finance costs


                 (3)


                 (7)

Profit before tax


              489


              924

Taxation


            (156)


            (179)

Profit for the year attributable to equity holders of the Parent Company


              333


              745











Earnings per share





Basic

7

0.78p


1.77p

Diluted

7

0.78p


1.75p

 

 

Consolidated statement of comprehensive income

year ended 31 March 2019

 

 



2019


2018



£000


£000

Profit for the year


333


745

Total comprehensive income for the year attributable to equity holders of the Parent Company


333


745






 

 

Consolidated statement of financial position

as at 31 March 2019




 Group


 Group




 2019


 2018




 £000


 £000

Non-current assets






Goodwill



              4,388


              4,388

Other intangible assets



              7,262


              7,827

Property, plant and equipment



              2,520


              2,706

Investment in joint ventures



                   44


                   47

Investments - available for sale



                     -  


                 203

Investments - fair value through profit or loss



                   51


                     -  




           14,265


           15,171

Current assets






Trade and other receivables



           35,785


           37,427

Investments - fair value through profit or loss



              1,005


                     -  

Investments held for trading



                     -  


              1,851

Cash and cash equivalents



              6,916


              8,367




           43,706


           47,645

Total assets



           57,971


           62,816







Current liabilities






Trade and other payables



          (34,095)


          (38,567)

Current tax liabilities



               (178)


                     -  

Deferred tax liabilities



               (317)


               (341)

Bank overdrafts



               (127)


                     -  

Provisions



               (484)


               (461)

Shares to be issued - deferred consideration



                     -  


               (171)




          (35,201)


          (39,540)

Net current assets



              8,505


              8,105







Long-term liabilities






Deferred cash consideration



                  (47)


               (197)

Dilapidation provision



               (542)


               (543)

Landlord contribution to leasehold improvements



               (460)


               (523)




            (1,049)


            (1,263)

Net assets



           21,721


           22,013







Equity






Share capital



              2,888


              2,861

Share premium account



              3,763


              3,674

Own shares



               (312)


               (312)

Retained earnings



           10,659


           11,122

Other reserves



              4,723


              4,668

Equity attributable to equity holders of the Parent Company



           21,721


           22,013

 

 

 

Consolidated statement of cash flows

year ended 31 March 2019

 



2019


2018



£000


£000

Operating activities





Cash (used) / generated by operations


          (631)


        5,656

Tax received / (paid)


              66


          (500)

Net cash (used) / generated by operating activities


          (565)


        5,156

Investing activities





Purchase of property, plant and equipment


          (382)


      (1,642)

Sale / (Purchase) of investments held for trading


           789


          (710)

Purchase of available-for-sale investments


               -  


          (135)

Consideration paid on acquisition of client lists


          (111)


          (644)

Deferred consideration paid on acquisition of a company


          (600)


          (600)

Dividends received


              23


                8

Interest received


              67


              33

Net cash used by investing activities


          (214)


      (3,690)

Financing activities





Dividends paid


          (796)


          (786)

Interest paid


              (3)


              (7)

Net cash used by financing activities


          (799)


          (793)

Net (decrease) / increase in cash and cash equivalents


      (1,578)


           673

Net cash and cash equivalents at beginning of year


        8,367


        7,694

Net cash and cash equivalents at end of year


        6,789


        8,367

Cash and cash equivalents


        6,916


        8,367

Bank overdrafts


          (127)


               -  



        6,789


        8,367

 

 

Consolidated statement of changes in equity

year ended 31 March 2019

 

 


 Share
capital

 Share premium account

 Own
shares
held

 Capital redemption

 Other

 Retained earnings

 Total
equity


 £000

 £000

 £000

 £000

 £000

 £000

 £000

Equity as at 31 March 2017

             2,826

             3,502

              (312)

                111

             4,557

          11,163

          21,847

Total comprehensive income for the year

                    -  

                    -  

                    -  

                    -  

                    -  

                745

                745

Contributions by and distributions to owners







                      

Dividends paid

                    -  

                    -  

                    -  

                    -  

                    -  

              (786)

              (786)

Issue of shares as deferred consideration on acquisition of intangibles and business combinations

                  35

                172

                    -  

                    -  

                    -  

                    -  

                207

Total contributions by and distributions to owners

                  35

                172

                    -  

                    -  

                    -  

              (786)

              (579)

Equity as at 31 March 2018

             2,861

             3,674

              (312)

                111

             4,557

          11,122

          22,013

Total comprehensive income for the year

                    -  

                    -  

                    -  

                    -  

                    -  

                333

                333

Contributions by and distributions to owners







                      

Dividends paid

                    -  

                    -  

                    -  

                    -  

                    -  

              (796)

              (796)

Issue of shares as deferred consideration on acquisition of intangibles and business combinations

                  27

                  89

                    -  

                    -  

                  55

                    -  

                171

Total contributions by and distributions to owners

                  27

                  89

                    -  

                    -  

                  55

              (796)

              (625)

Equity as at 31 March 2019

             2,888

             3,763

              (312)

                111

             4,612

          10,659

          21,721

 

Notes to the Accounts

year ended 31 March 2019

 

1. General information

 

Basis of preparation

The financial information set out in these financial statements does not constitute the Group's statutory accounts for the years ended 31 March 2019 and 2018. The statutory accounts for 31 March 2019 to which these non-statutory accounts relate have not been delivered to the registrar of companies.

 

The auditor's report has been signed and was unqualified.

 

This preliminary announcement is based on the Group financial statements which are prepared in accordance with IFRS.

 

Going concern

The Group's business activities together with the factors likely to affect its future development, performance and position has been rigorously assessed.

 

The Group has healthy financial resources together with a long established, proven and tested business model. As a consequence, the Directors believe that the Group is well placed to manage its business risks successfully despite the current difficult climate.

 

After conducting enquiries, the Directors believe that the Group and its subsidiaries have adequate resources to continue in existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the financial statements.

 

Standards and interpretations affecting the reported results or the financial position

In the current year, no standards or interpretations, new or revised, have been adopted that have had a significant impact on the amounts reported in these financial statements.

 

Changes in accounting policies and disclosures

The Group and its subsidiaries have adopted IFRS 9 "Financial instruments" and IFRS 15 "Revenue from contracts with customers" for the first time this period.

 

No significant judgements were required to be made in the application of these standards.

 

IFRS 9 changes the classification and measurement of financial assets, new hedge accounting requirements, enhanced disclosures in the financial statements and the timing and extent of credit provisioning. The Group does not use hedge accounting and this element of the new standard is not applicable.

 

Following a review of the capital framework of Short-Term Lending vehicle Topaz STL, the Group's debt investment, previously held as a debt investment, upon application of IFRS 9 has been reclassified as amortised costs within trade and other receivables in the period. The debt investment is now receivable within one year, it also represents a change in use of this this asset. There is no expected credit loss resulting from the transfer therefore no material impact on earnings per share nor on comparatives. An expected credit loss provision is recognised if the Group believes there has been a significant increase in credit risk, in which case the loss allowance is revised to the lifetime of the expected credit loss. Trade and other receivables and Cash and cash equivalents are now reclassified from Loans and other receivables under IAS 39 to Amortised cost with no expected credit loss arising.

IFRS 15 changes how and when revenue is recognised from contracts with customers and the treatment of the costs of obtaining a contract with a customer. The standard requires that the recognition of revenue is linked to the fulfilment of performance obligations that are enshrined in the contract with the customer. It also requires that the incremental cost of obtaining a customer contract should be capitalised if that cost is expected to be recovered.

 

The Group has assessed the impact of adopting the standard on its existing revenue streams, as well as on its policy of capitalising the cost of obtaining customer contracts.

 

Stockbroking commission and fees relating to portfolio management, financial planning and pension management

Included within Revenue are initial fees charged by some of our Group companies in relation to certain business activities. Under IFRS 15, the Group is required to make an assessment as to whether the work performed to earn such fees constitutes the transfer of service and therefore fulfils any performance obligations. If so then these fees should be recognised when the relevant performance obligation has been satisfied, if not then the fees can only be recognised in the period the services are provided. Included within commission and fee income is an amount representing initial fees, charged by a number of the Group's companies in relation to certain business activities. We have not identified any instances where the recognition of revenue will change materially from the current treatment in the consolidated financial statements.

 

Contract costs/Client relationship intangibles

Under the Group's current policy of capitalising contract costs, incremental payments that are made to newly recruited investment managers to secure investment management contracts are capitalised as client relationship intangibles if they are separable, reliably measured and expected to be recovered. The period during which such payments are capitalised and amortised is typically between three to twenty years.

 

The Group has assessed its current policy and has concluded that IFRS 15 reinforces the existing treatment of such incremental costs. Therefore, the Group does not believe the adoption of IFRS 15 will materially change the way it accounts for client relationship intangibles.

 

There is no impact on prior period reporting and no effect on earnings per share of either IFRS 9 or IFRS 15.

Several other amendments and interpretations apply for the first time in 2018, but do not have an impact on the consolidated financial statements of the Group. The Group has not early-adopted any standards, interpretations or amendments that have been issued but are not yet effective.

 

The following new and amended Standards and Interpretations are not currently relevant to the Group and its subsidiaries, however, they may have a significant impact in future years:

 

·      Amendments to IFRS 2: Classification and measurement of share-based payment transactions

 

Future new standards and interpretations

At the date of authorisation of these financial statements, the following standard and interpretations which have not been applied in these financial statements was in issue but not yet effective (and in some cases had not yet been adopted by the EU):

 

IFRS 16 "Leases"

IFRS 16 is effective for periods commencing on or after 1 January 2019. The standard was endorsed by the EU during 2017 and the Group has decided not adopt this standard early. The standard will be adopted by the Group on 1 April 2019, and will be initially reflected in the Group's audited accounts for the period ending 31 March 2020.

 

For lessees, IFRS 16 largely eliminates the classification of leases as either operating leases or financial leases. The Group will be required to recognise as a right-of-use lease asset on its balance sheet wherever it has a lease with a term of more than twelve months remaining, other than with respect to low value leases; for those leases where a right-of-use asset is recognised; the Group will also recognise a financial liability representing the present value of its obligation to make future lease payments.

 

 

Transition

Definition of a lease

On transition to IFRS 16, the Group can choose whether to:

 

·      apply the new definition of a lease to all its contracts as if IFRS 16 had always applied; or

·      apply a practical expedient approach and retain previous assessments of contracts which contain a lease obligation.

 

The Group intends to apply the practical expedient and, therefore, will not be reassessing those contracts that were not deemed to contain a lease based on the previous relevant account standards, i.e. IAS 17 and IFRIC 4.

 

Measurement approach

As a lessee, the Group can either apply the standard using a:

 

·      retrospective approach; or

·      modified retrospective approach with optional practical expedients.

 

The Group is assessing the impact of both approaches and intends to apply the modified retrospective approach. This will result in the comparatives to the financial statements in which IFRS 16 is first applied not being adjusted for the effects of IFRS 16, but instead the differences arising being taken through equity in retained earnings.

 

Potential impact

The Group has conducted an initial quantification of the impact of adopting the standard based on its review of all leases in the current portfolio which meet the definition of a lease. Based on the results of this impact assessment, the Group has elected to take the Modified retrospective approach to transition.

 

The Group's total assets and total liabilities will be increased by the recognition of lease assets and liabilities. The lease assets will be depreciated over the shorter of the expected life of the asset and the lease term. The lease liability will be reduced by lease payments, offset by the unwinding of the liability over the lease term.

 

The most significant impact is in respect of the Group's London, York and Romford offices. Annual total operating lease expenses of £779,000 which would have been recognised under the existing leases standard, will be replaced by anticipated higher levels of depreciation and interest expense in the early years of each lease, falling to lower levels as each lease heads towards expiry. The interest expense is based on the interest rate implicit in each lease as the lease unwinds but where the implicit rate is not readily available, an estimated incremental borrowing rate based on external sources will be applied.

 

As at 31 March 2020, the expected effects of the new standard will be to increase net assets, incur an increase in interest costs, also an increase in depreciation costs and a reduction in lease expenses.

 

On the Group's statement of comprehensive income, the profile of lease costs will be front-loaded, at least individually, as the interest charge is higher in the early years of a lease term as the discount rate unwinds. The total cost of the lease over the lease term is expected to be unchanged.

 

In addition, to the above impacts, it is worth noting that recognition of additional leased assets and adjustments to distributable reserves will have an immaterial impact on the Group's regulatory capital headroom.

 

Based on the information currently available, the Group estimates that £5.9 million will be recognised as right-of-use assets, with a corresponding lease liability of £6.4 million on the date of transition (1 April 2019). There will also be an approximate adjustment to equity of a credit of £0.5 million, resulting from the derecognition of the accrued rent free periods relating to the Group's leases for its Romford and London offices.

 

2. Significant accounting policies

 

Basis of consolidation

The Group financial statements consolidate the financial statements of the Group and companies controlled by the Group (its subsidiaries) made up to 31 March each year.

The Group controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its powers to direct relevant activities of the entity. Subsidiaries are fully consolidated from the date on which control is obtained and no longer consolidated from the date that control ceases; their results are in the consolidated financial statements up to the date that control ceases.

 

Entities where the interest is 49% or less are assessed for potential treatment as a Group company against the control tests outlined in IFRS 10, being power over the investee, exposure or rights to variable returns and power over the investee to affect the amount of investors' returns.

 

All intra-Group transactions, balances, income and expenses are eliminated on consolidation.

 

Business combinations

The acquisition of subsidiaries is accounted for using the acquisition method. The cost of the acquisition is measured at the aggregate of the fair values, at the date of exchange, of assets given, liabilities incurred or assumed, and equity instruments issued by the Group in exchange for control of the acquiree.

 

Interests in joint ventures

A joint venture is a contractual arrangement whereby the Group and other parties undertake an economic activity that is subject to joint control; that is when the strategic financial and operating policy decisions relating to the activities require the unanimous consent of the parties sharing control.

 

The Group's share of the assets, liabilities, income and expenses of jointly controlled entities are accounted for in the consolidated financial statements under the equity method.

 

Goodwill

Goodwill arising on consolidation represents the excess of the cost of acquisition over the Group's interest in the fair value of the identifiable assets and liabilities of a company or jointly controlled entity at the date of acquisition. Goodwill is initially recognised as an asset at cost and reviewed for impairment at least annually. Any impairment is recognised immediately in profit or loss and is not subsequently reversed in future periods.

 

For the purpose of impairment testing, goodwill is allocated to each of the Group's cash-generating units expected to benefit from the synergies of the combination. Cash-generating units to which goodwill has been allocated are tested for impairment annually, or more frequently when there is an indication that the unit may be impaired. On disposal of a company or jointly controlled entity, the attributable amount of goodwill is included in the determination of the profit or loss on disposal.

 

Intangible assets

(a) Client lists

Client lists are recognised when it is probable that future economic benefits will flow to the Group and the cost of the asset can be measured reliably whilst the risk and rewards have also transferred into the Group's ownership.

 

Intangible assets classified as client lists are recognised when acquired as part of a business combination or when separate payments are made to acquire clients' assets by adding teams of investment managers.

 

The cost of acquired client lists and businesses generating revenue from clients and investment managers are capitalised. These costs are amortised on a straight-line basis over their expected useful lives of three to twenty years. The amortisation period and amortisation method for intangible assets are reviewed at least each financial year end. All intangible assets have a finite useful life.

 

Amortisation of intangible fixed assets is included within administrative expenses in the consolidated income statement.

 

At each statement of financial position date, the Group reviews the carrying amounts of its intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where the asset does not generate cash flows that are independent from other assets, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs.

 

(b) Software Licenses

Computer software which is not an integral part of the related hardware is recognised as an intangible asset when the Group is expected to benefit from future use of the software and the costs are reliably measured and amortised using the straight line method over a useful life of five years.

 

Own shares held

Own shares consist of treasury shares which are recognised at cost as a deduction from equity shareholders' funds. Subsequent consideration received for the sale of treasury shares is also recognised in equity with any difference being taken to retained earnings. No gain or loss is recognised on sale of treasury shares.

 

Shares to be issued

Shares to be issued represent the Group's best estimate of the Ordinary Shares in the Group which are likely to be issued, following business combinations or the acquisition of client relationships which involve deferred payments in the Group's shares. Where shares are due to be issued within a year, the sum is included in current liabilities. Shares to be issued are dependent on the achievement of pre-defined targets and are treated as a liability until they are allotted and issued, at which time they are reclassified within equity. The Group had recognised as a liability the sum which has been issued and allotted to personnel associated with the Group in order to meet contractual commitments given as part of the recent expansion of its client base.

 

Revenue recognition

Revenue is measured at a fair value of the consideration or receivable and represents gross commissions, interest receivable and fees in the course of ordinary investment business, net of discounts, VAT and sales related taxes.

 

Revenues recognised under IFRS 15

Revenue from contracts with customers:

·      Gross commissions on stockbroking activities are recognised on those transactions whose trade date falls within the financial year, with the execution of the trade being the performance obligation at that point in time.

·      In Walker Crips Investment Management, fees earned from managing various types of client portfolios are accrued daily over the period to which they relate with the performance obligation fulfilled over the same period.

·      Fees in respect of financial services activities of Walker Crips Wealth Management are accrued evenly over the period to which they relate with the performance obligation fulfilled over the same period.

·      Fees earned from structured investments are recognised on the date the underlying security of the structured investment is traded and settled, with the execution of the trade being the performance obligation at that point in time.

 

Other incomes:

·      Interest is recognised as it accrues in respect of the financial year.

·      Dividend income is recognised when:

the Group's right to receive payment of dividends is established;

when it is probable that economic benefits associated with the dividend will flow to the Group; and

the amount of the dividend can be reliably measured.

·      Gains or losses arising on disposal of trading book instruments and changes in fair value of securities held for trading are both recognised in profit and loss.

 

The Group does not have any long-term contract assets in relation to customers of any fixed and/or considerable lengths of time which require the recognition of financing costs or incomes in relation to them.

 

Operating expenses

Operating expenses and other charges are provided for in full up to the statement of financial position date on an accruals basis.

 

Exceptional items

To assist in understanding its underlying performance, the Group identifies certain items of pre-tax income and expenditure and discloses them separately in the Consolidated income statement.

 

Such items would include:

1. profits or losses on disposal, closure or impairment of assets or businesses;

2. corporate transaction and restructuring costs;

3. changes in the fair value of contingent consideration; and

4. non-recurring items considered individually for classification as exceptional by virtue of their nature or size.

 

The separate disclosure of these items allows a clearer understanding of the Group's trading performance on a consistent and comparable basis, together with an understanding of the effect of non-recurring or large individual transactions upon the overall profitability of the Group. The exceptional items arising in 2018/19 are explained in Note 6 and all fall under category 4 above.

 

Deferred income

Income received from clients in respect of future periods to the transaction or reporting date are classified as deferred income within creditors until such time as value has been received by the client.

 

Foreign currencies

The individual financial statements of each of the Group's companies are presented in Pounds Sterling, which is the functional currency of the Group and the presentation currency of the consolidated financial statements.

 

In preparing the financial statements of the individual companies, transactions in currencies other than the entity's functional currency (foreign currencies) are recorded at the rates of exchange prevailing on the dates of the transactions. At each statement of financial position date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the balance sheet date. Exchange differences arising on the settlement of monetary items, and on the re-translation of monetary items, are included in the consolidated income statement for the period. Where consideration is received in advance of revenue being recognised, the date of the transaction reflects the date the consideration is received.

 

Impairment of non-financial assets

At each balance sheet date, the Group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). If there is an indication of possible impairment, the recoverable amount of any affected asset (or group of related assets) is estimated and compared with its carrying amount. If the estimated recoverable amount is lower, the carrying amount is reduced to its estimated recoverable amount, and an impairment loss is recognised immediately in profit or loss.

 



 

Property, plant and equipment

Fixtures and equipment are stated at historical cost less accumulated depreciation and provision for any impairment. Depreciation is charged so as to write off the cost or valuation of assets over their estimated useful lives using the straight-line method on the following bases:

 

Computer hardware

33 1/3% per annum on cost

Computer software

Between 20% and 33 1/3% per annum on cost

Leasehold improvements

Over the term of the lease

Furniture and equipment

33 1/3% per annum on cost

 

The gain or loss on the disposal or retirement of an asset is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in income. The gain or loss on the disposal or retirement of an asset is determined as the difference between sales proceeds and the carrying amount of the asset and is recognised in income. The residual values and estimated useful life of items within property, plant and equipment are reviewed at least at each financial year end. Any shortfalls in carrying value are impaired immediately through profit or loss.

 

Taxation

The tax expense represents the sum of the tax currently payable and deferred tax.

 

The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group's liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the statement of financial position date.

 

Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised.

 

The carrying amount of deferred tax assets is reviewed at each statement of financial position date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

 

Deferred tax is calculated at the tax rates that are expected to apply in the period in which the liability is settled or the asset is realised. Deferred tax is charged or credited directly to the Income Statement, except when it relates to items charged or credited to 'Other Comprehensive Income' in which case the deferred tax is also dealt with in other comprehensive income.

 

Financial assets and liabilities

Financial assets and liabilities are recognised in the Consolidated statement of financial position when the Group becomes a party to the contractual provisions of the instrument.

 

At initial recognition, the Group measures a financial asset or financial liability at its fair value plus or minus transaction costs. Transaction costs of financial assets and financial liabilities carried at fair value through profit or loss ("FVPL") are expensed in the statement of comprehensive income. Immediately after initial recognition, an expected credit loss allowance ("ECL") is recognised for financial assets measured at amortised cost, which results in an accounting loss being recognised in profit or loss when an asset is newly originated.

The Group does not use hedge accounting.

 

a) Financial assets

Classification and subsequent measurement

The Group classifies its financial assets in the following measurement categories:

 

·      Fair value through profit or loss ("FVPL"); or

·      Amortised cost.

 

Financial assets are classified as current or non-current depending on the contractual timing for recovery of the asset.

 

i) Debt instruments

Classification and subsequent measurement of debt instruments depend on:

 

·      the Group's business model for managing the asset; and

·      the cash flow characteristics of the asset.

 

Business model: The business model reflects how the Group manages the assets in order to generate cash flows. That is, whether the Group's objective is solely to collect the contractual cash flows from the assets, to collect both the contractual cash flows and cash flows arising from the sale of assets, or solely or mainly to collect cash flows arising from the sale of assets. Factors considered by the Group include past experience on how the contractual cash flows for these assets were collected, how the assets' performance is evaluated, and how risks are assessed and managed.

 

Cash flow characteristics of the asset: Where the business model is to hold assets to collect contractual cash flows, the Group assesses whether the financial instruments' contractual cash flows represent solely payments of principal and interest ("the SPPI test"). In making this assessment, the Group considers whether the contractual cash flows are consistent with a basic lending instrument.

 

Based on these factors, the Group classifies its debt instruments into one of two measurement categories:

 

Amortised cost: Assets that are held for collection of contractual cash flows where those cash flows represent solely payments of principal and interest ("SPPI"), and that are not designated at FVPL, are measured at amortised cost. Amortised cost is the amount at which the financial asset is measured at initial recognition minus the principal repayments, plus or minus the cumulative amortisation, using the effective interest rate method, of any difference between that initial amount and the maturity amount, adjusted by any ECL recognised. The effective interest rate is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial asset to the gross carrying amount. Interest income from these financial assets is included within investment revenues using the effective interest rate method.

 

FVPL: Assets that do not meet the criteria for amortised cost or Fair value through other comprehensive income ("FVOCI") are measured at fair value through profit or loss.

 

Reclassification

The Group reclassifies debt instruments when and only when its business model for managing those assets changes. The reclassification takes place from the start of the first reporting period following the change.

 

Impairment

The Group assesses on a forward-looking basis the ECL associated with its debt instruments held at amortised cost. The Group recognises a loss allowance for such losses at each reporting date. On initial recognition, the Group recognises a twelve month ECL. At the reporting date, if there has been a significant increase in credit risk, the loss allowance is revised to the lifetime expected credit loss.

 

The measurement of ECL reflects:

·      an unbiased and probability weighted amount that is determined by evaluating a range of possible outcomes;

·      the time value of money; and

·      reasonable and supportable information that is available without undue cost or effort at the reporting date about past events, current conditions and forecasts of future economic conditions.

 

ii) Equity instruments

Investments are recognised and derecognised on a trade date basis where a purchase or sale of an investment is under a contract whose terms require delivery of the instrument within the timeframe established by the market concerned, and are initially measured at fair value.

 

The Group subsequently measures all equity investments at fair value through profit and loss. Changes in the fair value of financial assets at FVPL are recognised in revenue within the Consolidated Income Statement.

 

iii) Cash and cash equivalents

Cash and cash equivalents includes cash in hand, deposits held at call with financial institutions, other short-term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value, and bank overdrafts. Bank overdrafts are shown within current liabilities in the statement of financial position.

 

Derecognition

Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have been transferred and the Group has transferred substantially all the risks and rewards of ownership.

 

b) Financial liabilities

Classification and subsequent measurement

Financial liabilities are classified and subsequently measured at amortised cost.

Financial liabilities are derecognised when they are extinguished.

 

Financial liabilities and equity

Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities.

 

Trade payables

Trade payables are recognised and measured initially at fair value.

 

Bank overdrafts

Interest-bearing bank overdrafts are initially measured at fair value and shown within current liabilities. Finance charges are accounted for on an accrual basis in profit or loss using the effective interest rate method and are added to the carrying amount of the instrument to the extent that they are not settled in the period in which they arise.

 

Equity instruments

Equity instruments issued by the Group are recorded at the proceeds received, net of direct issue costs.

 

Share Incentive Plan ("SIP")

The Group has an incentive policy to encourage all members of staff to participate in the ownership and future prosperity of the Group. All employees can participate in the SIP following three months of service. Employees may contribute a maximum of 10% of their gross salary in regular monthly payments (being not less than £10 and not greater than £150) to acquire Ordinary Shares in the Parent Company (Partnership Shares). Partnership Shares are acquired monthly. For every Partnership Share purchased, the employee receives one Matching Share. All shares awarded under this scheme have been purchased in the market by the Trustees of the SIP. a policy which will continue to at least 31 March 2020.

 

Provisions

Provisions are recognised when the Group has a present obligation as a result of a past event, and it is probable that the Group will be required to settle that obligation. Provisions are measured at the Directors' best estimate of the expenditure required to settle the obligation at the statement of financial position date, and are discounted to present value where the effect is material.

 

Long-term liabilities - deferred cash and shares consideration

Amounts payable to personnel under recruitment contracts in respect of the client relationships, which transfer to the Group, are treated as long-term liabilities if the due date for payment of cash consideration is beyond the period of one year after the year end date. The value of shares in all cases is derived by a formula based on the value of client assets received in conjunction with the prevailing share price at the date of issue which in turn determines the number of shares issuable.

 

Share-based payments

The Group issues equity-settled share-based payments to certain employees and other personnel. Equity-settled share-based payments are measured at fair value (excluding the effect of non-market-based vesting conditions) at the date of grant. The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over the vesting period, based on the Group's estimate of shares that will eventually vest and adjusted for the effects of non-market-based vesting conditions.

 

The Group also issues shares as part of deferred consideration for client relationships acquired under arrangements agreed with investment managers when they join the Group. Equity-settled share-based payments are awarded if assets under management or revenue targets for incoming clients have been achieved. The fair value is estimated at the date of transfer of the assets and are amortised on a straight line basis over their estimated useful lives.

 

Pension costs

The Group contributes to defined contribution personal pension schemes for selected employees. The contribution rate is based on annual salary and the amount is charged to the income statement on an accrual basis.

 

Leases

Rentals under operating leases are charged on a straight-line basis over the lease term, even if the payments are not made on such a basis. Benefits received as an incentive to enter into an operating lease are also spread on a straight-line basis over the lease term. These benefits include rent-free periods and landlord contributions to leasehold improvements.

 

Dividends paid

Equity dividends are recognised when they become legally payable. There is no requirement to pay dividends unless approved by the shareholders by way of written resolution where there is sufficient cash to meet current liabilities, and without detriment of any financial covenants, if applicable.

 

3. Key sources of estimation uncertainty and judgements

 

Impairment of goodwill - estimation and judgement

Determining whether goodwill is impaired requires an estimation of the fair value less costs to sell and the value-in-use of the cash-generating units to which goodwill has been allocated. The fair value less costs to sell involves estimation of values based on the application of earnings multiples and comparison to similar transactions. The value-in-use calculation requires the entity to estimate the future cash flows expected to arise from the cash-generating unit and apply a discount rate in order to calculate present value. The assumptions used and inputs involve judgements and create estimation uncertainty. These assumptions have been stress-tested. The carrying amount of goodwill at the balance sheet date was £4.4 million (2018: £4.4 million)..

 

Other intangible assets - judgement

Acquired client lists are capitalised based on current fair values. During the year the Group acquired one investment manager and the business of their clients. When the Group purchases client relationships from other corporate entities, a judgement is made as to whether the transaction should be accounted for as a business combination, or a separate purchase of intangible assets. In making this judgement, the Group assesses the acquiree against the definition of a business combination in IFRS 3. Payments to newly recruited investment managers are capitalised when they are judged to be made for the acquisition of client relationship intangibles. The useful lives are estimated by assessing the historic rates of client retention, the ages and succession plans of the investment managers who manage the clients and the contractual incentives of the investment managers. The Directors conduct a review of indicators of impairment and also consider a life of up to twenty years to be both appropriate and in line with peers.

 

Short Term Lending Administration - judgement

The Group provides administrative services to Special Purpose Vehicles who in turn make loans to specialist lenders in the residential housing construction industry. Having considered the requirements of IFRS 10, the Directors have also obtained independent advice to support our conclusion that no additional consolidation is required as a result of these arrangements and the structure in which the Group provides this service.

 

Provision for dilapidations - judgement

The Group has made provisions for dilapidations under three leases for its offices. Two new leases were entered into during the prior year for which a total liability of £507,000 to restore the premises at the end of the term is crystallised. These amounts have been provided in full based on valuations prepared by the office fit-out companies who carried out our office improvements.

 

During the year, £63,000 of dilapidations provisions were utilised and £42,000 was reversed, leaving a balance at the year-end of £542,000.

 



 

4. Revenue

An analysis of the Group's revenue is as follows:

 


2019


2019


2019


2018


2018


2018


Broking
income


Non-broking
income


Total


Broking
income


Non-broking
income


Total


£000


£000


£000


£000


£000


£000

Stockbroking commission

8,667


-


8,667


10,953


-


10,953

Fees and other revenue1

-

 

19,190

 

19,190


-

 

17,186

17,186

Investment Management

8,667


19,190


27,857


10,953


17,186


28,139

Wealth Management, Financial Planning & Pensions

-


2,601


2,601


-


2,317


2,317

Revenue

8,667


21,791


30,458


10,953


19,503


30,456

Net investment revenue

-


87


87


-


34


34

Total income

8,667


21,878


30,545


10,953


19,537


30,490

% of total income

28.4


71.6


100


35.9


64.1


100

 

1 Includes Investment Management, Structured Investments and Alternative Investments.

 

 



 

Timing of revenue recognition

The following table presents operating income analysed by the timing of revenue recognition of the operating segment providing the service:

 


 Investment Management


 Wealth Management


 Consolidated
year ended
31 March 2019

2019

 £000


 £000


 £000

Revenue from contracts with customers






Products and services transferred at a point in time

              10,360


                   459


              10,819

Products and services transferred over time

              15,477


                2,082


              17,559







Other revenue






Products and services transferred at a point in time

                   234


                      60


                   294

Products and services transferred over time

                1,786


                       -  


                1,786








              27,857


                2,601


30,458














 Investment Management


 Wealth Management


 Consolidated
year ended
31 March 2018

2018

 £000


 £000


 £000

Revenue from contracts with customers






Products and services transferred at a point in time

              12,783


                   417


              13,200

Products and services transferred over time

              14,249


                1,900


              16,149







Other revenue






Products and services transferred at a point in time

                   370


                       -  


                   370

Products and services transferred over time

                   737


                       -  


                   737








              28,139


                2,317


              30,456

 



 


Contract

assets

Contract

assets

Contract liabilities

Contract liabilities


2019

2018

2019

2018


£000

£000

£000

£000

b/f

                  4,005

                  5,313

                        (3)

                        (8)

Amounts included in contract liabilities that was recognised as revenue during the period

                         -  

                         -  

                          3

                          8

Settlement of contract assets brought forward

               (4,005)

               (5,313)

                         -  

                         -  

Cash received in advance of performance and not recognised as revenue during the period

                         -  

                         -  

                        (4)

                        (3)

Amounts included in contract assets that was recognised as revenue during the period

                  4,623

                  4,005

                         -  

                         -  

At 31 March

                  4,623

                  4,005

                        (4)

                        (3)

 

5. Segmental analysis

For segmental reporting purposes, the Group currently has two operating segments, Investment Management, being portfolio-based transaction execution and investment advice, and Wealth Management, being financial planning and pension advice. Unallocated corporate expenses, assets and liabilities are not considered to be allocable accurately, or fairly, under any known basis of allocation and are therefore disclosed separately.

 

 

Walker Crips Investment Management's activities focus predominantly on investment management of various types of portfolios and asset classes.

 

Walker Crips Wealth Management provides advisory and administrative services to clients in relation to their financial planning, life insurance, inheritance tax and pension arrangements. These companies are the basis on which the Group reports its primary segment information.

 


 Investment Management


 Wealth Management


 Consolidated
year ended
31 March 2019

2019

 £000


 £000


 £000

Revenue






Revenue from contracts with customers

                    25,837


                      2,541


                    28,378

Other revenue

                      2,020


                            60


                      2,020

Total revenue

                    27,857


                      2,601


                    30,458







Results






Segment result

                      1,013


                          348


                      1,361

Unallocated corporate expenses





                        (959)






                          402

Investment revenue





                            90

Finance costs





                             (3)

Profit before tax





                          489

Tax





                        (156)

Profit after tax





                          333

 


 Investment Management


 Wealth Management


 Consolidated
year ended
31 March 2019

2019

 £000


 £000


 £000

Other information






Capital additions

                          318


                            93


                          411

Depreciation

                          522


                            71


                          593







Statement of financial positions






Assets






Segment assets

                    50,698


                      2,726


                    53,424

Unallocated corporate assets





                      4,603

Consolidated total assets





                    58,027







Liabilities






Segment liabilities

                    35,072


                          774


                    35,846

Unallocated corporate liabilities





                          460

Consolidated total liabilities





                    36,306

 

 








 Investment Management


 Wealth Management


 Consolidated

year ended

31 March 2018

2018

 £000


 £000


 £000

Revenue






Revenue from contracts with customers

                    27,032

                      2,317


                    29,349

Other revenue

                      1,107

                             -  


                      1,107

Total revenue

                    28,139

                      2,317


                    30,456






Results





Segment result

                      2,097

                          199


                      2,296

Unallocated corporate expenses




                     (1,406)






                          890

Investment revenue





                            41

Finance costs





                             (7)

Profit before tax





                          924

Tax





                        (179)

Profit after tax





                          745

 

 


 Investment Management


 Wealth Management


 Consolidated
year ended
31 March 2018

2018

 £000


 £000


 £000

Other information






Capital additions

                      2,182


                          213


                      2,395

Depreciation

                          500


                            17


                          517







Statement of financial positions






Assets






Segment assets

                    53,878


                      2,407


                    56,285

Unallocated corporate assets





                      6,531

Consolidated total assets





                    62,816







Liabilities






Segment liabilities

                    39,475


                          855


                    40,330

Unallocated corporate liabilities





                          473

Consolidated total liabilities





                    40,803

 

 

6. Exceptional items

As a result of their materiality the Directors decided to disclose certain amounts separately in order to present results which are not distorted by significant items of income and expenditure.

 



 2019


 2018



 £000


 £000

Property relocation expenses


                     -  


                  322

Non-recurring rebate


                     -  


                  (63)

Change of VAT partial exemption special method


                     -  


                (243)

Changes in the fair value of deferred consideration


                (102)


                     -  

Transaction cost in relation to a launch of a public issuance


                  134


                     -  



                    32


                    16

 

Cash consideration payable for acquired client relationships over a number of years is estimated at the outset based on the expected number of clients and associated revenue which will be acquired. Each year these amounts are re-assessed based on the actual values of these metrics and accordingly, an exceptional credit, being one-off and exceptional in nature and size, has been recorded in the year representing the reversal of an over-estimation of £102,000 of such consideration.

 

As part of the expansion of its short term lending facility business, the Group has invested in a planned launch of a listed bond available to retail investors. This launch has currently been delayed due to political uncertainty which is impacting investor sentiment and therefore provisions totalling £134,000 have been made for related costs.

 

During the prior year to 31 March 2018, the Group incurred material costs of £388,000 under its existing leases related to the relocation of the head office and the York office to new premises in December 2017 and April 2018, offset by an unusually high service charge credit of £66,000 on the old head office. An additional one-off refund of £63,000 was received for incorrect custody charges incurred in prior years as well as significant annual credits of £243,000 relating to the Group's agreement with HMRC to a revised input VAT recovery method (partial exemption special method).

 

 

7. Earnings per share

 

The calculation of basic earnings per share for continuing operations is based on the post-tax profit for the financial year of £333,000 (2018: £745,000) and on 42,509,997 (2018: 42,025,970) Ordinary Shares of 6 2/3 pence, being the weighted average number of Ordinary Shares in issue during the year.

 

No dilution to earnings per share in the current year. In the prior year, the calculation of diluted earnings per share was based on 42,476,107 Ordinary Shares, being the weighted average number of Ordinary Shares in issue during the period, adjusted for dilutive potential Ordinary Shares, issued in May 2018, to the sellers of Barker Poland Asset Management LLP ("BPAM") in order to satisfy the Group's obligation in connection with the payment of year three deferred consideration. A further dilution adjustment was made for the effect of shares issued in May 2018 to other personnel associated with the Group in order to meet contractual commitments made by the Group as part of the ongoing recruitment of investment advisers and expansion of its client base.

 

8. Subsequent events

On 1 April 2019, the Group purchased the share capital ownership of JWPCreers Wealth Management Limited owned by JWPCreers LLP for the sum of £47,000, giving the Group 100% ownership of both 'A' and 'B' shares. JWPCreers Wealth Management Limited changed its name to Walker Crips Ventures Limited on 2 April 2019.

 

Since the year end a team of advisers has decided to leave the Group on amicable terms, which will result in the transfer of £239 million of assets under management and administration. The transfer of clients and their assets will take place later this year with the consequent impact on future revenues and profits.

There are no further material events arising after 31 March 2019, which have an impact on these financial statements.

 

Extract from Statement of Directors' Responsibilities

Pursuant to Rule 4 of the Disclosure Guidance and Transparency Rules, each of the Directors, whose names and functions are listed on page 24 of the Annual Report and Accounts confirm that, to the best of their knowledge:

·      The Group Financial Statements have been prepared in accordance with IFRSs as adopted by the EU and Article 4 of the IAS Regulation and give a true and fair view of the assets, liabilities, financial position and profit and loss of the Group.

·      The Annual Financial Report includes a fair review of the development and performance of the business and the financial position of the Group and the Company, together with a description of the principal risks and uncertainties that they face.

 

This RNS has been approved on behalf of the Board

 

 

 

D. M. Gelber                                                                                            

Chairman                                                                                                  

11 July 2019


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