TIDMWCW
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 GBP30.5 million
(2018: GBP30.5 million)
-- Group Assets under management and Administration maintained
at GBP5.0 billion (2018: GBP5.0 billion)
-- Discretionary and Advisory assets under management unchanged
at GBP3.3 billion (2018: GBP3.3 billion)
-- Underlying operating profit, before tax and exceptional items
decreased to GBP434,000 (2018: GBP906,000)
-- Reported profit before tax decreased to GBP489,000 (2018:
GBP924,000)
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 GBP2.3 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 GBP435,000 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 GBP2.3 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 GBP0.8
million (4%), this includes GBP0.3 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 GBP0.2 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 GBP20.8 million (2018: GBP20.5
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 GBP5.0 billion (31 March 2018:
GBP5.0 billion) and Discretionary and Advisory assets under
management also unchanged at GBP3.3 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 GBP2.0
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 GBP2.8 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 GBP0.4 million. Capital expenditure on the new
offices, incurred in 2017, was also recovered in 2018 from the
landlord in the amount of GBP0.5 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 GBP19.2 million
(2018: GBP17.2 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 GBP27.9 million (2018: GBP28.1 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 GBP1.22 million to
GBP1.43 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 GBP199,000 to GBP348,000.
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
GBP239 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 GBP21,721,000, down GBP292,000 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 Reconciliation of operating profit
tax to adjusted to operating profit
before tax and exceptional
profit before tax items
2019 2018 2019 2018
GBP000 GBP000 GBP000 GBP000
------------------------ ------- ------- --------------------------- ------- -------
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 GBP134,000 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 GBP25
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 GBP000 GBP000
---------------------------------------------------------------- ------ -------------------- --------------------
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
GBP000 GBP000
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
GBP000 GBP000
------------------------------------------------------------- ---------------------- ----------------------
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
GBP000 GBP000
--------------------------------------------------------- ----------------- -----------------
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
Own
Share Share premium shares Total
capital account held Capital redemption Other Retained earnings equity
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
--------------- --------------------- --------------------- --------------------- --------------------- --------------------- ------------------- -------------------
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
GBP779,000 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 GBP5.9 million will be recognised as right-of-use
assets, with a corresponding lease liability of GBP6.4 million on
the date of transition (1 April 2019). There will also be an
approximate adjustment to equity of a credit of GBP0.5 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:
o the Group's right to receive payment of dividends is
established;
o when it is probable that economic benefits associated with the
dividend will flow to the Group; and
o 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
GBP10 and not greater than GBP150) 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 GBP4.4 million (2018: GBP4.4 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 GBP507,000 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, GBP63,000 of dilapidations provisions were
utilised and GBP42,000 was reversed, leaving a balance at the
year-end of GBP542,000.
4. Revenue
An analysis of the Group's revenue is as follows:
2019 2019 2019 2018 2018 2018
Broking Non-broking Total Broking Non-broking Total
income income income income
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
------------------------------------------ -------- ------------ ------- -------- ------------ -------
Stockbroking commission 8,667 - 8,667 10,953 - 10,953
Fees and other revenue(1) - 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 GBP000 GBP000 GBP000
--------------------------------------- ----------------------- ------------------------ ----------------------
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 GBP000 GBP000 GBP000
--------------------------------------- ----------------------- ------------------------ ----------------------
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 Contract Contract liabilities Contract liabilities
assets assets
2019 2018 2019 2018
GBP000 GBP000 GBP000 GBP000
------------- -------------------------- -------------------------- --------------------------- ---------------------------
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 Wealth Management Consolidated
Management year ended
31 March
2019
2019 GBP000 GBP000 GBP000
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 Wealth Management Consolidated
Management year ended
31 March
2019
2019 GBP000 GBP000 GBP000
-------------------- ----------------------------- ------------------------------ -----------------------------
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 Wealth Management Consolidated
Management year ended
31 March
2018
2018 GBP000 GBP000 GBP000
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 Wealth Management Consolidated
Management year ended
31 March
2018
2018 GBP000 GBP000 GBP000
-------------------- ----------------------------- ------------------------------ -----------------------------
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
GBP000 GBP000
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 GBP102,000 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 GBP134,000 have been
made for related costs.
During the prior year to 31 March 2018, the Group incurred
material costs of GBP388,000 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 GBP66,000 on the old head office. An
additional one-off refund of GBP63,000 was received for incorrect
custody charges incurred in prior years as well as significant
annual credits of GBP243,000 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 GBP333,000 (2018: GBP745,000) 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 GBP47,000, 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
GBP239 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
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR UAVRRKBABAAR
(END) Dow Jones Newswires
July 11, 2019 07:03 ET (11:03 GMT)
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