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Walker Crips Group plc
29 July 2022
29 July 2022
Walker Crips Group plc
("Walker Crips", the "Company" or the "Group")
Final results for the year ended 31 March 2022
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 2022.
Financial Highlights
-- Total revenues increased 8.1% to GBP32.8 million (2021: GBP30.3 million).
-- A significant improvement in operating profit to GBP326,000
(2021: GBP22,000), being GBP1,866,000 (2021: GBP441,000) when
adjusted for operational exceptional items*.
-- Profit before tax GBP324,000 (2021: loss before tax
GBP114,000), being profit before tax GBP1,761,000 (2021:
GBP305,000) when adjusted for total exceptional items*.
-- Adjusted EBITDA increased 49% to GBP3.90 million (2021: GBP2.61 million) **.
-- Underlying cash generated from operations improves 71% to
GBP1.34 million (2021: GBP0.78 million)***.
-- Cash and cash equivalents GBP11.11 million (2021: GBP8.86 million).
-- Assets Under Management ("AUM") increased by 5.9% to GBP3.6 billion (2021: GBP3.4 billion).
-- Proposed final dividend of 1.20 pence per share (2021: 0.60
pence per share), bringing the total dividends for the year to 1.50
pence per share (2021: 0.75 pence per share).
* Exceptional items are disclosed in note 10 to the accounts and
a full reconciliation to IFRS results is presented in the Finance
Director's review.
** Adjusted EBITDA represents earnings before interest,
taxation, depreciation and amortisation, and exceptional items. The
Directors present this result as it is a metric widely used by
stakeholders when considering an entity's financial performance. A
full reconciliation to IFRS results is provided in the Finance
Director's review.
*** Underlying cash generated from operations represents the
cash generated from operations adjusted for lease liability
payments under IFRS 16, non-cyclical working capital movements and
exceptional items. The Directors consider that this metric helps
readers understand the cash generating performance of the Group. A
full reconciliation to the IFRS results is provided in the Finance
Director's review.
For further information, please contact:
Walker Crips Group plc Tel: +44 (0)20 3100 8000
Craig Harrison, Media Relations
Four Communications
Mark Knight Tel: +44 (0)20 3697 4200
walkercrips@fourcommunications.com
Singer Capital Markets
Will Goode / George Tzimas Tel: +44 (0)20 7496 3000
Further information on Walker Crips Group is available on the
Company's website: www.walkercrips.co.uk
Chairman's statement
Return to operational profitability and continued focus on
improving operating margins.
Martin Wright
Chairman
The combination of the recovery in financial markets and focus
on profit improvement has seen the Group return to profit for the
full year. The core business delivered a strong performance, and
continues to do so in the first part of our new financial year,
albeit the impact of good growth in revenues and improving margins
were marred by the exceptional costs we are reporting and which are
explained further below and in the CEO's report. At a strategic
level, we continue to progress a number of projects that will incur
additional costs in the near-term and, as I said in my statement
for the interim report, the Investment Management division's
project to improve operating margins will be a long-term exercise,
with the overall impact on operating margins expected to be
positive, but unlikely to be smooth from reporting period to
reporting period.
Overview of 2021/2022
The tumultuous events that accompanied my first year as Chairman
of your company have been succeeded by conditions that are,
mercifully, less traumatic but which, perhaps, still deserve to be
labelled as extraordinary. The rapid rise of inflation to 40-year
highs has made management strategy and investment conditions
tricky, to say the least, and markets are understandably struggling
to cope with the impact.
The rewards of management's efforts to reduce costs during the
pandemic, accompanied by the more-benign market conditions which
applied throughout the first three quarters of the financial year,
gave the Group breathing space to focus on improving operating
margins within the Investment Management division, in tandem with
the ongoing efforts to renew growth in the Wealth Management
division. That strategy is bearing fruit and should continue to do
so over the longer-term.
I am also pleased to report that the Structured Investments
business has bounced back from its annus horribilis of the previous
year, under the guidance of its new managers, and I wish them
continued success. The Investment Management division, which
includes the structured investment team, was the principal driver
of growth in operating profits during the year, and the division's
performance was also enhanced by the improved contributions of the
investment management teams in the firm's York, London and
Inverness offices and the Barker Poland Asset Management team in
London. We were disappointed that two investment managers from the
division's Truro office have departed. Having spent eight
successful years in Truro, we are committed to maintaining a local
presence, and will continue to serve our existing clients. I thank
our team members who have stepped in to provide continuity to our
clients, while we recruit locally.
As set out in the financial highlights, revenues for the year
grew by GBP2.5 million to GBP32.8 million and Adjusted EBITDA*
increased by GBP1.29 million to GBP3.90 million (2021: GBP2.61
million), an incremental operating margin of 51.6% and testament to
management's focus on margin improvement. It is therefore extremely
disappointing that the very welcome improvements in financial
performance generally have been undermined by a number of matters
that have given rise to significant exceptional costs. Although
certain exceptional costs relate to the restructuring initiated
during the pandemic, those required firstly to improve our
financial crime framework and separately for the estimated cost of
redress to a small number of customers caused by the actions of one
associate, were neither anticipated nor acceptable. We are making
the changes necessary to address these matters and the associate
concerned has been sanctioned. I would add that insurers have been
informed of the redress matter, although at this stage no recovery
has been recognised in the accounts pending finalisation of the
loss and insurer's confirmation of cover. The Group is taking all
appropriate measures to ensure losses in relation to this matter
are recovered. I can also confirm that the Executive Directors were
not awarded the discretionary bonuses approved by shareholders at
last year's annual general meeting.
Results have also been hampered by the residual effect of the
decline in Bank of England base rates during the previous year and
lower contributions from the Group's alternative businesses.
After exceptional costs, the Group's profit before tax for the
year is GBP324,000, an improvement on the loss of GBP114,000
reported in the previous year. The exceptional costs noted are
non-recurring and therefore, given the underlying improvement in
trading, the Directors are recommending a final dividend of 1.20
pence per share, doubling the previous year's final dividend.
Strategy
The pandemic demonstrated the resilience of the core Investment
Management business, which, exceptional costs aside, has bounced
back robustly. The Wealth Management business has rebounded from
adviser and client losses during the previous year and its
recruitment strategy has started to produce revenue growth. The
York office, which is home to our biggest Wealth Management team
and one of our largest Investment Management teams, leads the firm
in its ability to derive revenue-synergies from both types of
service, and points the way forward for the rest of the Group in
generating top-line growth. We hope to replicate that close working
relationship between the Wealth Management division's new
Southampton office and our other teams of investment managers
around the country.
The Group's seamless transition to flexible working, which is
now more entrenched than ever as a working practice at our own and
most other companies, justified our focus on technology. The Group
believes that continued investment in technology is crucial to
providing innovative and effective services to our clients,
investment managers and staff. EnOC Technologies Limited's project
to commercialise our technology remains a key limb of our growth
plan. The Group will therefore maintain its focus on revenue growth
and margin improvement, and continue keeping a tight rein on costs
in light of current inflationary pressures and the tight labour
markets.
Dividend
Our aim is always to reward our shareholders for their continued
support. In that light, having taken into account the Group's
improved profitability and potential for continuing improved
operating margins, capital headroom, and short-term and long-term
cash flow considerations, the Board will recommend for
shareholders' approval at the forthcoming AGM for a final dividend
of 1.20 pence per share (2021: 0.60 pence) payable on 7 October
2022 to those shareholders on the register at the close of business
on 23 September 2022, with an ex-dividend date of 22 September
2022. As noted earlier, this is a twofold increase on the previous
year's final dividend.
Our community
We believe that in challenging times, it is important that we
continue to support our chosen charities. In addition to financial
support, we try to do more by using our technology for good,
engaging in technology philanthropy, and using technology as a
catalyst to boost the efforts of those charities, working with them
to design, deploy and maintain those systems.
Our partner charity, www.twiningenterprise.org.uk, has a mission
to combat mental health stigma and to assist people who are
struggling with mental health issues around work. Their goal is to
ensure that everyone with a mental health issue can find employment
and cope with the challenges of working life, to support employers
and raise awareness around mental health in general and to reduce
stigma and discrimination.
This is a mission whose work is crucial, as has been highlighted
during this pandemic. We urge you to join us by signing on to
support Twining in their mission, staying informed of their latest
news and activities, and support them financially by going to
www.enoc.pro/community.
Directors, Account Executives and staff
Whilst I am hopeful that the challenging period of the pandemic
is behind us all, and pleased to have reported a return to profit,
the Group nevertheless faces challenges ahead. This includes
acknowledging and making the necessary changes to our culture,
leadership team, behaviours and controls to mitigate recurrence of
the failures that gave rise to the exceptional costs noted above.
We know these costs and the reasons therefore will be disappointing
news for our shareholders. Your Directors and the leadership team
are focused on the required changes and the need to make them
without distracting from the many positive actions being taken to
grow the business and improve margins. I would like to thank my
fellow Directors, our investment managers and advisers and all
members of staff for their efforts, resilience and continued
commitment to the highest levels of client service, support and
diligence.
Outlook
The rebound in the underlying trading performance this year
demonstrates the Group's potential to generate revenue growth and
improve profitability, which continues to bode well for the
future.
Martin Wright
Chairman
29 July 2022
* Adjusted EBITDA represents earnings before interest, taxation,
depreciation and amortisation, and exceptional items. The Directors
present this result as it is a metric widely used by stakeholders
when considering an entity's financial performance. A full
reconciliation to IFRS results is provided in the Finance
Director's review.
CEO's statement
Innovating, Digitising and Focussing on Customer Outcomes
Sean Lam
Chief Executive Officer
I am proud that our investment managers, financial planners,
advisers, and our staff have continued to serve our customers
diligently through the global challenges of the past few years.
There was a job to be done, and they got it done. I am thankful to,
and grateful for, all my colleagues for ensuring that our customers
were well taken care of, without interruption in service.
After nearly two years of working from home, we have now
comfortably settled into a hybrid working model where members can
either work all week in the office, desk-share a few days a week,
hot-desk once in a while, or work from home, depending on the needs
of the department while balancing the needs of the staff. This can
only work if there's mutual trust and responsibility, and I'm
pleased to say that we have both in spades. As long as our
performance and customer engagement remain high, hybrid working can
continue.
Group's Performance
In our Investment Management division, we were sensitive to the
dual risk of a simultaneous fall in asset values and a decline in
interest income, but we reviewed and streamlined certain parts of
our business during the past two years which led to significant
improvements in operating margins and profitability. We will
accelerate our effort to simplify and digitise our business
further, making our business more efficient, more scalable, but
still providing good outcomes to our customers. We will continue to
improve the revenue-growth potential of the existing businesses,
generate greater profitability from such growth opportunities,
while also maintaining a tight control of, and increasing the
productivity of, our cost-base. The division generally had a strong
year, with robust, double-digit growth in fee income offsetting the
decline in commissions and interest income.
Our Wealth Management and Barker Poland Asset Management
divisions have also had a year of strong revenue growth. Our new
Solent branch in Fareham has had a great start and contributed
strongly to the Wealth Management division. Our York office has
worked very well together, providing financial planning, investment
management and pensions (SIPP & SSAS) services, working
together for our customers. The investment team continues to manage
the firm's flagship Service First model portfolios, Inheritance Tax
Relief model portfolios, and has oversight over the Truro branch,
ensuring that we maintain our service offering to our customers in
Cornwall.
Our Structured Investments team contributed to the Investment
Management division's performance with significant growth in fee
income, as the industry bounced back vigorously from a very
difficult last financial year. Walker Crips is now the leading
structured products distributor in the UK and we thank the team for
holding fast during the difficulties of last year, where one of the
most significant players exited the market completely, and we are
now poised to capitalise on the opportunities of this year.
Challenges
We continue to invest heavily in our regulatory framework.
Regulation continues to move forward unabated and we must adapt
swiftly. The next big regulatory initiative is Consumer Duty which,
amongst other things, places emphasis on consumer outcomes and
firms' obligations to proactively deliver them. Firms are required
to take all reasonable steps to avoid causing foreseeable harm to
customers, enabling them to pursue their financial objectives, and
always act in good faith towards them.
During the year, the Investment Management division incurred
significant costs that have been designated exceptional in the
accounts that follow and explained in note 10 to the financial
statements, including two material items I want to address upfront.
The first relates to expenditure to upgrade and improve our
financial crime control framework, which was subject to an
independent review. I wish to stress that there has been no
evidence of financial crime, but our controls and procedures around
this area needed significant improvement. The remediation and
enhancement project commenced during the year and the total
estimated cost of GBP595,000 has been provided for. Secondly, and
separate from upgrading and improving our financial crime control
framework, we identified that there was inappropriate conduct by an
associate that caused financial detriment to a small number of
customers. The associate concerned has been sanctioned and their
contract terminated, and whilst we should have identified it in a
timelier manner, management is satisfied that this was an isolated
incident. All relevant parties have been informed, including the
regulator, and we are in the process of finalising the redress
calculation which is presently estimated to be GBP650,000 including
associated costs before any potential insurance recoveries. Any
future recovery will also be treated as an exceptional item.
In light of these weaknesses, management is embedding a broader
review of the Group's regulatory compliance framework to ensure our
processes are at industry standards and are able to adapt to the
changing regulatory landscape. Our financial planning and budgeting
reflect this planned step-up in risk and compliance costs. We are
also reinforcing a tenet of our core principles that "Compliance
and Risk are everybody's responsibility", renewing our emphasis and
setting the tone from the top.
During the year, the Group sold its one-third share of its
investment in Walker Crips Property Income Limited for GBP105,000.
This will have minimal impact on our future revenues. We stopped
onboarding new customers to the Tier 1 Investor Visa programme in
November 2021 and the government permanently closed the Tier 1
(Investor) Visa route for foreign nationals on 17 February 2022.
For customers who are already in the programme, we will continue to
service them until its natural conclusion.
Nevertheless, the Group is able to report a profit before tax of
GBP324,000 for the full year after all exceptional items, an
improvement on the GBP114,000 loss reported in the previous year.
This was assisted by the return to growth of the core businesses of
investment management, wealth management and structured
investments.
Technology Advantage
We will accelerate our vision to "Simplify and Digitise". We
will do what we do but we must do it better, faster, and more
economically. We will use our EnOC Pro Platform to create
technologies that will transform processes, create greater
efficiencies, reduce the use of paper, provide better services to
our customers, and allow our staff to do the more complex, thinking
work and less of the manual repetitive processes. We must continue
to adapt and innovate, and our dependence on technology will only
increase. We will continue to prioritise and invest in developing
our own technology, utilising our digital capabilities to create
and innovate for our customers and the firm. We are technology
makers, not just technology takers.
Reducing our Carbon Footprint
If we want our children to see tomorrow, like we saw yesterday,
then let's not screw up today. We must not pillage the earth like a
Ponzi scheme; it is unconscionable to plunder from the future to
satisfy today. Put simply, we must safeguard our planet for our
children, and for our children's children.
We consciously began our journey in small steps back in 2007
when we moved offices. We installed PIR lighting, refurbished the
old doors instead of buying new (surprisingly, it costs the same!),
and for the first time embarked on a de-papering exercise. In 2013,
we decided to better utilise cloud services which resulted in the
long-term reduction of our server room size by 75%, reducing heat
emissions by requiring fewer on-site servers, less air conditioning
and less electricity. Our lighting is powered by low-energy
consumption LEDs.
Hybrid working is here to stay, and we are currently merging
some of our offices to better utilise our available square footage.
We have turned off excess appliances like refrigerators and
dishwashers. It may seem minuscule, but it all adds up. We are also
persuading the landlords of our buildings to sign up with "green"
energy suppliers using sustainable resources. One of our mantras is
to "Simplify and Digitise"; digitisation increases efficiencies and
reduces the drain on resources. We have engaged carbon emission
auditors to determine our carbon output, and our goal is to
continue to reduce it each year. Time is running out for our
planet, so it needs to be more like a sprint, and less like a
marathon.
We can all do our part in reducing our carbon footprint:
-- REFUSE - Avoid buying harmful, wasteful or non-recyclable
products, e.g. unnecessary product packaging and single-use
plastics. Don't need, don't buy. Less painful on the pocket
too.
-- REDUCE - Reduce the use of harmful, wasteful, and
non-recyclable products so that fewer of them end up in landfill.
Use the minimum required to avoid unnecessary waste. E.g. don't
need, don't print. Reduce single-use plastics, plastic packaging,
and styrofoam cups.
-- REUSE - Get rid of the "buy and throw-away" mindset. Use what
you have as often, and for as long, as you can.
-- REPAIR - Try to repair things before tossing them out.
-- REPURPOSE - If something is no longer useful for its original
purpose, think creatively of ways it can be broken down and
reconstituted as something else. I am a big fan of upcycling!
-- ROT - Compost if you can, try not to let your trash end up in landfill.
-- RECYCLE - Make recycling your last step, after going through all the R's above.
We must purposefully and actively practise the seven "R"s at
home and in the office, so that they become automatic and
habitual.
Outward Focus
As a Group, we continue to support www.twiningenterprise.org.uk,
the mental health charity. In addition to financial support, we
also try to use our technology for good, through technology
philanthropy. If you wish to find out more, or want to support
Twining financially, please visit enoc.pro/community.
Conclusion
As I conclude, I wish to reiterate our mission: to make
investment rewarding for our customers, our shareholders and our
staff, and to give our customers a fair deal. And we support our
investment advisers and our staff by being a technology-driven
financial services company.
I wish to thank all my colleagues at Walker Crips for their
energy, enthusiasm, loyalty, dedication and their can-do attitude,
and for their unwavering focus on ensuring that our customers are
well looked after.
Sean Lam
Chief Executive Officer
29 July 2022
Chief Investment Officer's analysis
The persistence of speculative excess was the market's
undoing
Chris Darbyshire
Chief Investment Officer
Having reached peak exuberance during the year, investor
sentiment ended up accelerating into the trough of despair. But it
was a hard-fought contest and, for much of the year, the enormous
amounts of cash being pumped into the economy by central banks and
governments continued to find their way into financial assets. The
nature of the assets being bought showing very clearly who was
doing the buying: analysts at Bank of America estimated that
American retail investors poured nearly $900 billion into global
equity funds in the year to November 2021, more than the combined
total over the previous 19 years. Robust inflows continued right
through the inflation shock and the situation in Ukraine, with US
equity funds taking in an estimated $84 billion in the first
calendar quarter of 2022. Meanwhile, US corporate share buybacks
reached all-time highs during our financial year, and were still
accelerating as the year ended.
Reflection
The vast majority of flows were captured by index trackers,
reinforcing the dominance of the world's largest companies which,
in turn, reinforced the dominance of the technology sector. Flush
with money and enthusiasm, investors in the US ignored a growing,
global wave of anti-technology lawsuits and regulations. Indeed, as
recently as December, a three-times leveraged fund tracking the
Nasdaq 100 stock index saw record inflows (of $1.5 billion) in a
single day. At the same time, Apple's market value reached nearly
3% of the value of all the world's stock markets combined, and the
top five US technology companies represented over 10% of the
world's stock market value. Not only did the behemoths lead indexes
higher, but they did so with an unusual serenity for most of the
year: at one point in the fourth calendar quarter of 2021, the
S&P 500 rose to all-time highs for seven days in a row. Long
after the peak in equity markets, signs of speculation in the
mega-caps were still abundant, with announcements of stock splits
by US technology companies greeted by extremely outsized responses.
Alphabet (Google) enjoyed a $130 billion boost to its market value
on the day of the announcement, Amazon saw an $80 billion boost for
its stock split and, more recently, Tesla an $84 billion boost.
As a result, equity markets were able to maintain their relative
calm while bond markets entered an inflation-inspired meltdown, but
that's now history, of course. Within two months of the end of
2021, the capital markets were in panic mode, catalysed by
inflation and the war in Ukraine. Indeed, markets themselves have
now become the headlines, and not in a good way. Having spent most
of the last two years blithely ignoring any and all risks, many
investors have no choice but to focus only on risk.
Nothing captured the zeitgeist better than the cryptocurrency
universe, whose total market value exceeded $2 trillion in April
2021, supposedly driven by "institutional" demand as traditional
asset managers discovered its true value. To put that in
perspective, $2 trillion exceeded the cash in circulation of most
national currencies, and you could have bought the entire German
stock market with it. At one point the government of El Salvador
caught the speculative bug with its historic, but ultimately
botched, decision to make Bitcoin legal tender. Other governments
moved in the other direction: central banks in the developed world
began to encircle the technology with the threat of regulation, and
China went all-out when it declared all crypto-currency
transactions to be illegal. In case anybody missed it, this edict
was issued simultaneously by the People's Bank of China and nine
other government institutions, including the Supreme Court and the
police. Cryptos were already losing value by the end of the year as
the inflows of cash required to pump prices higher began to subside
and, subsequent to the year-end, there has been a more substantial
implosion caused by failures of the technologies involved. Books
about cryptocurrencies will soon take their place in the economic
literature about speculative bubbles.
The rise of inflation and the fall of central bankers
A sharp acceleration in inflationary forces first became visible
in the economic data in May 2021, but it was a full six months
before bond markets began to pay much attention. By then,
expectations for inflation had already doubled. Month after month,
as each inflation report trounced expectations, bonds refused to
concede defeat. In July 2021, for example, German government
10-year bonds rallied by the most since the start of the pandemic.
It was a similar story across the rest of the developed world, with
bonds rallying despite economic growth roaring back and inflation
surging towards its highs of the last two decades.
Central bankers were complicit in the delusion. As late as
August, Federal Reserve Chairman Jerome Powell was reiterating his
view that the surge in inflation was only temporary and, not only
would the asset purchases continue in the near-term, but any
"tapering" of asset purchases would not be accompanied by higher
interest rates. At that time, Chairman Powell was unwilling to pick
a fight with markets, even if that meant running more inflation
risk and further inflating asset-price bubbles. Everything was
priced for perfection, but with a massive, post-pandemic rebound in
the economy, record levels of corporate profits, and ultra-loose
monetary policy providing maximum support, perfection was still
very much on the menu. By the end of the year, inflation had more
than doubled but $300 billion a month was still being injected into
government bond markets via asset purchase programmes. The monetary
policy needle was still set to "maximum growth", and bond markets
had begun to reflect uncertainty around the extent, duration and
consequences of inflation.
The Federal Reserve's ("the Fed") credibility was further
undermined by reports in the media that Fed officials had front-run
crucial decisions by the central bank, and that the Chairman's own
portfolio had been advantaged by the choice of assets under the
Fed's asset purchase programme. The officials concerned immediately
liquidated their personal portfolios, and the Chairman initiated a
review of the rules on investments by Fed insiders. As a result,
Fed officials were forced to exit markets in their personal
portfolios, while simultaneously facing the biggest policy dilemma
since the Credit Crunch.
Within a couple of months, the energy crisis had begun to
materialise and central banks went from dismissing inflation as
being "transitory" to inflation being their main concern. At first,
only the tone changed, while the existing policy guidance was left
intact. However, bond markets weren't buying it, prompting
gut-wrenching shifts in rate expectations all around the world.
Such was the momentum that, at one point, investors were able to
observe in real time the President of the European Central Bank
("ECB") explaining at length why the ECB would not be raising rates
anytime soon while, simultaneously, Eurozone bond yields rocketed
into orbit. It was like a visit to the Hall of Mirrors.
By now, Fed governors were queuing up to signal a faster
withdrawal from the Fed's $120 billion a month asset-purchase
programme but, in a sign of the times, markets initially reacted
with exuberance. Equity markets hit new all-time highs in December
and even Bond markets managed a decent rally during the fourth
calendar quarter of 2021. It was January before they finally got
the message: bond markets shifted from steady eddies to screaming
demons in a regime change of record-breaking rapidity.
The mood darkened further, however, as successive inflation
reports outstripped forecasters' expectations, and inflation spread
from pandemic-affected goods to the broader service economy. With
higher house prices also feeding into higher rental costs, a major
component of inflation calculations, a higher trajectory for
inflation was locked in.
China went from investable to uninvestable, and back again
Having been the lead underwriter of global economic growth since
the Credit Crunch, China spent the year in reverse gear. China's
economy was the first to lose some momentum following the pandemic,
as the central bank acted early to tighten interest rates and the
costs of financing. The Chinese government, meanwhile, reined in
borrowing by heavily indebted local authorities to fund
infrastructure projects. A series of high-profile corporate
restructurings dealt a further blow to China's economic
credibility, starting with Huarong Asset Management, a state-owned
enterprise and one of China's biggest issuers. Huarong threatened
to default on $42 billion of debt, of which $23 billion was
denominated in US dollars and held by foreigners. This was followed
by the effective bankruptcy of the giant, debt-laden Chinese
property company Evergrande, whose debt burden was estimated by
some sources to be equivalent to 2-3% of Chinese GDP.
But what really scared investors was a year-long regulatory
crackdown on technology companies. First was the authorities'
cancellation of the flotation of Ant Financial, one of the largest
initial public offerings ever planned, apparently following public
criticisms by its founder, Jack Ma, of China's regulatory approach
to the finance sector. Jack Ma disappeared from view for several
months afterwards, but was back in the spotlight recently when
another of his creations, internet giant Alibaba Group Holdings,
was fined a record $2.8 billion by Chinese regulators for
anti-competitive practices.
These fears moved to a whole new level of intensity with the
announcement of probes into three Chinese companies that had listed
on US stock exchanges within the last few weeks. One of them, Didi
Global (the Chinese version of on-line taxi company Uber), had
listed on the New York Stock Exchange a mere two days previously.
All three companies were ordered to halt new user registrations,
and app stores were told to remove Didi's service from their
platforms. That the authorities were targeting Chinese companies
that have just raised money in the US should be seen in the context
of the broader trade war between China and the developed world. By
doing this, Beijing demonstrated its dislike of overseas listings,
discouraged Chinese technology firms from having foreign investors
and, moreover, undermined the credibility of the New York Stock
Exchange as a venue for Chinese listings. Capital markets became
weaponised. This would normally have subdued capital markets in the
developed world but, fortunately for investors, pandemic stimulus
had replaced Chinese government stimulus as the driver of
sentiment.
Meanwhile, the rapid downward spiral in US-China political and
trade relations continued. President Biden put another nail in the
coffin with a ban on investment in a blacklist of Chinese companies
with ties to China's military; US investors were given one year to
divest any holdings. The legislation was a continuation of an
initiative started by President Trump, but Biden took it a step
further, adding more companies to the list and strengthening it
against legal challenges. International investors and global
corporates were faced with a dilemma: Chinese markets are
attractive because the economic growth expectations are huge. But
to participate you have to bow-down to the powers in Beijing, while
running the gauntlet of western public opinion.
Adding to these issues, the pandemic continued to cause serious
problems for China's economy due to the government's zero-tolerance
approach to managing Covid risk. Although the onset of the Omicron
variant initially panicked markets all over the world, causing the
worst daily decline in more than a year, it took only a month for
developed world stock markets to shrug it off. This largely
reflected the response of western consumers, whose behaviour
(influenced by vaccination programmes) has been progressively less
affected by each wave of the virus. China's zero-Covid policy, on
the other hand, which was so effective at containing the first wave
of the pandemic, has led to a lack of acquired immunity. Moreover,
Sinovac, the Chinese Covid vaccine, was found to be relatively
ineffective against Omicron - a result that increases the risk of
any given variant causing a healthcare crisis. This makes it very
unlikely that China will be able to alter its zero-tolerance
approach to Covid even if it wanted to, and increases the
likelihood of Chinese factory closures, further global supply chain
blockages and persistent inflation.
The Chinese off-shore stock market, and its technology sector in
particular, reflected this sequence of disasters. The Hang Seng
China Enterprises Index, which measures the prices of Chinese
companies listed in Hong Kong, fell by 32% during our financial
year, and subsequently fell another 10% on top of that. The Nasdaq
Golden Dragon Index, an index of Chinese companies listed in the
US, fell 70% from peak-to-trough. Even the on-shore domestic equity
markets, which were reported to have benefited from government
support, traded below the levels reached in 2015.
Following our year-end, the pendulum swung back in favour of
investors, with a series of supportive statements from the
authorities, including from President Xi himself. First among them,
the top Chinese financial regulator committed to stability in
capital markets, supporting overseas stock listings, resolving
risks in the property market and to completing the crackdown on the
technology sector "as soon as possible." The Nasdaq Golden Dragon
Index of Chinese companies listed in America promptly rallied by a
third. At one point, the Hang Seng China Enterprises Index,
comprising Chinese companies listed in Hong Kong, rallied by 20% in
two days. Next, the central bank intervened to weaken the Chinese
yuan, and the Chinese government distanced itself from the conflict
in Ukraine. Finally, President Xi offered the prospect of a change
in the country's longstanding zero-Covid policy by committing to
reduce Covid's economic impact. Optimists described this as akin to
Draghi's "we will do whatever it takes" moment during the eurozone
crisis. While the pace of good news-flow has slowed somewhat since
then, such public statements are usually perceived by Chinese
investors as a state-sanctioned buy-signal.
How did we do?
The year started with our clients' portfolios enjoying some of
the best returns in years, with UK shares having been caught up in
the all-encompassing global stock market rally. The further down
the size-scale you went, the better it got: the FTSE 100 index had
rallied but was outshone by small and mid-sized British companies,
where our portfolios are typically overweight compared with
relevant benchmarks. The FTSE 250, which tracks the performance of
small and mid-sized British companies, reached new all-time highs
early in our financial year and the FTSE AIM, which tracks the
smallest UK listed companies, rose to 35% above its pre-pandemic
level.
The pound sterling was the missing piece, however, as
acrimonious post-Brexit dealings with the EU damaged confidence in
the prospects for what is still the UK's single biggest trading
relationship. Threats by the British government to walk away from
its treaty obligations with the EU set a worrying precedent and, at
the very least, are hardly likely to encourage investment from the
EU. Meanwhile the EU was aggressively encouraging providers of
financial services - one of the UK's biggest exports - to relocate
within the single market.
As the year went on, and the speculative fervour supporting
small-cap stocks wore off, the FTSE 100's bias towards energy,
mining and banking stocks meant it actually benefited from the
surge in inflation, while most other global stock market indices
slipped. Our portfolios benefited from an inherent overweight to UK
large-cap exposure and to old-economy dividend-payers. The decision
by European countries, notably Germany, to increase military
expenditure predictably sent defence-related stocks soaring. This
was a boon to a host of British companies. For the first time in
nearly two decades, investors seeking income outperformed those
seeking growth. It's tempting to say that the long-running
pre-eminence of growth stocks over value stocks has finally come to
an end, but there have been many false dawns of this kind in the
past.
Clients seeking growth have been impacted by the crash in the
valuations of growth stocks. However, the reversal in the market's
attitude to growth stocks has been indiscriminate, punishing some
companies whose prospects for revenues and profits remain undimmed
by inflationary trends. The ability of a company to prosper despite
inflation, or even during a recession, depends on the strength of
its brand, products and business model. It's extremely unlikely
that good companies become bad companies overnight, but that is
what the market is pricing. Good companies are now available on
very attractive valuations, and we are inclined to see this as an
opportunity. Time will tell whether we are correct, but, for now,
we do not believe that the current market swing towards value will
endure long enough to justify wholesale changes to portfolios. We
remain long term investors and believe the quality of the
underlying investments will outlast this uncertainty.
Where now for ESG?
Progress towards a parallel, Environmental, Social and
Governance ("ESG") conscious world for investors is accelerating.
Even central banks are getting in on the act. During our financial
year, the European Central Bank set out plans to involve climate
change considerations in its analysis of the economy and financial
markets, the Bank of Japan published a climate change strategy, in
which it will purchase foreign currency-denominated green bonds
issued by governments and other foreign institutions. Meanwhile,
the UK became the first country to introduce a green savings
product from a sovereign issuer.
Should investors be weighting portfolios towards ESG-friendly
investments? With extreme weather events affecting the harvests of
coffee, corn, wheat and sugar this year, sending their
commodity-market prices soaring, and with wildfires and other
extreme weather-events becoming seemingly commonplace, it's natural
to want to respond.
The war in Ukraine may have caused some governments to roll back
plans to mothball fossil fuel technologies, but it has also been a
boon to energy generators everywhere, including those of renewable
energy. Moreover, performance of ESG-friendly funds has been strong
over the past several years, though that has more to do with their
historically large allocations to the technology sector than their
inherent ESG qualities.
Ultimately, all types of risk end up being financial if they
cause asset prices to fluctuate. The ESG concept isolates and
unites particular sources of risk under a common banner, which is
increasingly being championed by governments, the financial
services sector and regulators worldwide. It's not unusual for
major risks to attract this level of attention - witness the
pandemic stimulus programmes that united governments and central
banks in a coordinated policy response.
The difference is that the "E" in ESG is going to be with us for
a very long time. Unlike social and governance issues,
climate-related risks have potentially profound and wide-ranging
consequences for asset prices. The good news is that these will
most likely unfold over a long horizon, giving investors - and
asset prices - the ability to react appropriately. Financial theory
says that competitive markets are very quick to assess and
incorporate threats and opportunities, so it should not be easier
to earn returns in ESG investments than in any other sector. But
it's worth considering the risks and potential rewards that are
specific to this sector, and which make it so distinctive. One is
the pace of climate change itself which, if it becomes very
volatile, raises the risk of abrupt, unforeseen shifts in
government policies. These would be reflected in increasing
volatility of prices of fossil fuel-dependent industries as well as
of green champions.
Another distinct risk is whether, and how, societies adapt to
the long-term goal of a zero-emissions world. After all, adapting
to the post-Covid world has not exactly gone smoothly. Like
vaccine-deniers, climate change-deniers abound, and society as a
whole must bear the cost of the transition to sustainable energy
production and consumption. With inflation already raging, that
looks unlikely to be a vote-winner in the short-term. Volatility in
the pace of policy change is therefore a distinct possibility,
despite the current momentum towards green goals.
Chris Darbyshire
Chief Investment Officer
29 July 2022
Finance Director's review
Building on the strength of the underlying business.
Sanath Dandeniya
Finance Director
The business responded well to the challenges caused by the
pandemic, and now we look to build on that resilience as the Group
continues its focus on revenue growth and margin improvement.
Financial performance
Our response to the pandemic challenged the Group to focus on
revenue generation, cost reduction and cash management in the core
business. These actions served us well and the resilience of the
core business, recovery in markets and actions taken have returned
the Group to profitability, notwithstanding the inflationary
pressures we now face and the significant investment we made and
continue to make in strengthening our risk and compliance
functions.
Total revenue
Total revenue increased by 8.1% to GBP32.8 million (2021:
GBP30.3 million), a record for the Group and more than offsetting
the loss in interest income that adversely impacted the results in
recent years. The increase was due to strong performances in our
core business. Management fee income was robust, rising by 9.7%.
The recovery in markets played a role in this, but most of our
businesses were also able to generate additional revenue growth,
strengthening our position against the heightened uncertainty
encountered in market conditions since the start of the current
calendar year. Our Structured Investment business recovered from an
extremely difficult year in 2020/21, and made a significant
contribution to revenue growth. Barker Poland Asset Management also
had another strong year, generating revenue growth of 19%. The
Wealth Management division began to see the benefits of its
recruitment drive, with revenue growth of 14.9%.
These sources of revenue growth compensated for other areas of
our business where performance was below that of the previous year.
Specifically, trading commissions decreased by 10.5% (equating to
GBP0.95 million) due to lower volumes, our arbitrage desk made a
positive but reduced contribution (GBP0.67 million down), and the
investor immigration business contracted by GBP0.1 million. This
latter business has subsequently closed to new applicants following
the government's decision to shut the Tier 1 Investor visa route
based on rising worldwide security concerns, but we will continue
to service our existing clients. The effects of the reduction in
base rates from the previous year continued to exert a residual
downward effect on revenues and operating profit, reducing both by
GBP0.1 million.
As a result of the strength in management fees and the changing
mix in our business, broking income fell to 24.5% of revenues, from
29.7% in 2021. Our gross operating margin also increased from 68.2%
to 72.4%, reflecting the changing mix and management actions to
improve profitability. Notwithstanding the increase in revenues,
commissions and fees paid reduced by GBP0.6 million, reflecting a
strong performance by the Private Client Department teams and
actions tilting the mix of revenue growth towards full-time
employees and away from self-employed associates. Commissions and
fees paid decreased as a percentage of revenues from 32% to 27.8%,
although some of this gain was offset by higher staff costs in
administrative expenses.
The Wealth Management division, excluding exceptional income and
the new Solent addition, has seen a marginal growth in revenue in
the year and the increase in both client numbers and Assets under
Administration ("AUA") bodes well for the future. Client numbers
increased by 144 to 1,117 and AUA increased by GBP61 million to
GBP579 million. The new Solent office (Southampton team) is now up
and running and continuing to onboard new clients and recorded
recurring revenues of GBP164,000 by the year-end.
The Wealth Management division is continuing its graduate
training plan which was successfully launched last year and due to
be replicated this July, with the idea of growing its talented
financial planners of the future. Additionally, the continual
search for advisers to join the firm who share the same ethos on
looking after clients' long-term and holistic needs. Working more
closely with the internal Investment Managers is gaining momentum
to facilitate greater client servicing for the wider Group.
Expenses
Administrative expenses, excluding exceptional items, increased
by GBP1.63 million, or 8.0%, but this increase does not represent a
like-for-like comparison due to various initiatives taken during
the height of the pandemic last year to reduce costs. In addition,
we have made further investments to develop our new Southampton
office. Adjusting for these factors, expenses increased by 5.4%,
largely driven by increases in staff costs, including the
restoration of directors' pay from a voluntary pay-cut taken in the
previous year. It should be noted that with tight labour markets,
we continue to experience inflationary wage pressures.
We are also reporting significantly increased exceptional costs
this year. These relate to the restructuring and redundancy
initiatives initiated during the pandemic along with specific items
noted in the CEO's report and the Chairman's Statement. These costs
were partially offset by the exceptional income from a confidential
settlement agreement also reported in the interim results. The
exceptional items are further explained in note 10.
Cash management
The Group is highly cash generative and recorded a cash inflow
from operations of GBP4.2 million (2021: GBP1.8 million).
Underlying cash generated from operations, principally reflecting
the impact of lease liability payments, non-cyclical working
capital movements and cash flows from exceptional items (see
adjacent reconciliation), was GBP1.34 million (2021: GBP0.78
million), demonstrating cash generative ability of the Group's
operating model. After deducting cash deployed in investing
activities and dividends paid, cash and cash equivalents increased
to GBP11.11 million at year-end (2021: GBP8.86 million).
Financial result and alternative performance measures
The Group's operating profit and profit before tax for the year
of GBP326,000 and GBP324,000, respectively (2021: GBP22,000 and a
loss of GBP114,000, respectively), reflect the continued momentum
from the first half of the year, although the pace of revenue
growth slowed as markets declined and volatility increased towards
the end of our financial year. Nevertheless, the Group was able to
report operating profit of GBP206,000 in the second half of the
financial year, up from GBP120,000 in the first half.
The annual results include operating exceptional charges of
GBP1,540,000, being total exceptional charges of GBP1,437,000
including the profit on disposal of our associated company Walker
Crips Property Income Limited (renamed Crystal Property Income
Limited) (2021: GBP419,000). Adjusting for exceptional items (see
adjacent reconciliations and further detail in note 10, the Group's
operating profit and profit before tax for the year are GBP1.87
million and GBP1.76 million, respectively (2021: GBP441,000 and
GBP305,000, respectively), and reflect the improvement in the
Group's core business.
The Group's adjusted EBITDA (being EBITDA adjusted for
exceptional items - see adjacent reconciliation) is GBP3.9 million
(2021: GBP2.6 million), an increase of 49.3% demonstrating a robust
current year trading performance.
Total Assets Under Management and Administration ("AUMA")
averaged GBP5.6 billion during the year, compared with GBP4.9
billion in the previous year, reflecting the recovery in equity
markets from the global pandemic. Discretionary and Advisory Assets
Under Management similarly benefited from the market recovery,
rising by the end of the year to GBP3.6 billion (2021: GBP3.4
billion). Total AUMA is up slightly from March 2021 levels to
GBP5.5 billion (2021: GBP5.4 billion).
Reconciliation of operating profit to operating 2022 2021
profit before exceptional items GBP'000 GBP'000
------------------------------------------------- --------- ---------
Operating profit 326 22
------------------------------------------------- --------- ---------
Operating exceptional items (note 10) 1,540 419
------------------------------------------------- --------- ---------
Operating profit before exceptional items 1,866 441
------------------------------------------------- --------- ---------
Reconciliation of profit/(loss) before tax to profit 2022 2021
before tax and total exceptional items GBP'000 GBP'000
------------------------------------------------------ --------- ---------
Profit/(loss) before tax 324 (114)
------------------------------------------------------ --------- ---------
Total exceptional items (note 10) 1,437 419
------------------------------------------------------ --------- ---------
Profit before tax and exceptional items 1,761 305
------------------------------------------------------ --------- ---------
2022 2021
Adjusted EBITDA GBP'000 GBP'000
--------------------------------------------------- --------- ---------
Operating profit 326 22
--------------------------------------------------- --------- ---------
Operating exceptional items (note 10) 1,540 419
--------------------------------------------------- --------- ---------
Amortisation/depreciation (note 31) 1,165 1,212
--------------------------------------------------- --------- ---------
Right-of-use assets depreciation charge (note 31) 873 961
--------------------------------------------------- --------- ---------
Adjusted EBITDA 3,904 2,614
--------------------------------------------------- --------- ---------
2022 2021
Underlying cash generated from operations GBP'000 GBP'000
--------------------------------------------------- --------- ---------
Net cash inflow from operations 4,217 1,806
--------------------------------------------------- --------- ---------
Working capital (note 31) (2,257) (8)
--------------------------------------------------- --------- ---------
Lease liability payments under IFRS 16 (note 31) (1,052) (1,133)
--------------------------------------------------- --------- ---------
Cash outflow on operating exceptional items (note
10, 27 and 31) 435 118
--------------------------------------------------- --------- ---------
Underlying cash generated in the period 1,343 783
--------------------------------------------------- --------- ---------
Divisional performance
The Investment Management division, including exceptional costs,
delivered an operating profit of GBP1.16 million for the year,
compared to GBP1.33 million in the previous year. Operating profits
when adjusted for exceptional costs grew by GBP1.2 million to
GBP2.9 million (2021: GBP1.27 million). This reflects the strong
performance of Investment Management and advisory fees, plus a
rebound in Structured Investments business, offset by reduced
activity in commissions, in the arbitrage and investor immigration
businesses, as well as the continuing drag from the reduction in
BoE base rate in the previous year. Regarding the latter: the
change in the interest rate cycle, with continued increases in base
rate expected, should exert a favourable impact on revenues and
profits during the next financial year. Nevertheless, management
will remain focused on initiatives to improve the division's
operating margins and reduce reliance on interest returns. The
prospects for the Structured Investments business remain positive
as pricing conditions have improved and certain competitors have
exited this sector, we believe that the Structured Investments team
is well-positioned to build on its prominent market position.
The Wealth Management division has cemented its recovery from
departures of several advisers in the previous year, and revenues
have been rejuvenated by the hiring of new advisers and the
acquisition of a client book with funds under management. The
cost-base should improve as recruitment-related costs subside but,
as yet, the division has not returned to profit, reporting a loss
before tax of GBP258,000 (2021: loss before tax of GBP127,000).
Our tech arm, EnOC Technologies Limited ("EnOC"), reported an
operating loss of GBP86,000 (2021: GBP122,000). EnOC's tech
capabilities are integral to the Group's operational efficiencies,
deploying cloud solutions to the business and we continue to invest
in its capabilities and prospects.
Capital resources, liquidity and regulatory capital
The Group's capital structure, comprising solely of equity
capital, provides a stable platform to support growth. At year end,
net assets are GBP22.11 million (2021: GBP22.32 million),
reflecting a net decrease of GBP0.21 million (2021: reduction of
GBP0.3 million), due to the reported profit after tax less
dividends paid. Liquidity remains strong with cash and cash
equivalents increasing over the year to GBP11.1 million (2021:
GBP8.9 million), testimony to the Group's underlying resilience and
the continued recovery from the pandemic. Regulatory capital at
year end, including audited reserves for the year, is GBP12.3
million (2021: GBP11.7 million), comfortably in excess of the
Group's capital requirements as shown in the tables below. The
finance team has also implemented the new prudential regulatory
regime.
2022 2021
Regulatory own funds and own funds requirements GBP'000 GBP'000
------------------------------------------------- --------- ---------
Own funds
Share capital 2,888 2,888
Share premium 3,763 3,763
Retained earnings 11,050 11,260
Other reserves 4,723 4,723
Less:
Own shares held (312) (312)
Regulatory adjustments (9,804) (10,584)
------------------------------------------------- --------- ---------
Total own funds 12,308 11,738
------------------------------------------------- --------- ---------
Total own funds requirement (4,676) (5,382)
------------------------------------------------- --------- ---------
Regulatory capital surplus 7,632 6,356
------------------------------------------------- --------- ---------
Cover on own funds as a % 263.2% 218.1%
------------------------------------------------- --------- ---------
Dividends
In view of the Group's financial performance, capital and
liquidity position, the Board is recommending a final dividend of
1.20 pence per share to be paid on 7 October 2022 for those members
on the shareholders' register on 23 September 2022. The ex-dividend
date of 22 September 2022. Including the interim dividend of 0.30
pence per share (2021: 0.15 pence per share), the total dividend
for the year is 1.50 pence per share (2021: 0.75 pence per
share).
Sanath Dandeniya
Finance Director
29 July 2022
Consolidated income statement
year ended 31 March 2022
2022 2021
Note GBP'000 GBP'000
-------------------------------------------- ------- --------- ----------
Revenue 5 32,820 30,348
Commissions and fees paid 7 (9,110) (9,702)
Share of associate after tax profit 8 57 66
-------------------------------------------- ------- --------- ----------
Gross profit 23,767 20,712
Administrative expenses 9 (21,901) (20,271)
Exceptional items 10 (1,540) (419)
-------------------------------------------- ------- --------- ----------
Operating profit 326 22
Investment revenue 11 9 10
Finance costs 12 (114) (146)
Exceptional item - Profit on disposal of
associate investment 8 & 10 103 -
-------------------------------------------- ------- --------- ----------
Profit/(loss) before tax 324 (114)
Taxation 14 (151) (144)
-------------------------------------------- ------- --------- ----------
Profit/(loss) for the year attributable to
equity holders of the Parent Company 173 (258)
-------------------------------------------- ------- --------- ----------
Earnings/(loss) per share
-------------------------------------------- ------- --------- ----------
Basic and diluted 16 0.41p (0.61)p
-------------------------------------------- ------- --------- ----------
The following Accounting Policies and Notes form part of these
financial statements.
Consolidated statement of comprehensive income
year ended 31 March 2022
2022 2021
GBP'000 GBP'000
------------------------------------------------------- ---------- ---------
Profit/(loss) for the year 173 (258)
------------------------------------------------------- ---------- ---------
Total comprehensive income/(loss) for the year
attributable to equity holders of the Parent Company 173 (258)
------------------------------------------------------- ---------- ---------
The following Accounting Policies and Notes form part of these
financial statements.
Consolidated statement of financial position
as at 31 March 2022
2022 2021
Note GBP'000 GBP'000
----------------------------------------- ----- ---------- ----------
Non-current assets
Goodwill 17 4,388 4,388
Other intangible assets 18 5,752 6,566
Property, plant and equipment 19 1,169 1,477
Right-of-use asset 20 2,597 3,612
Investment in associate 8 - 2
Investments - fair value through profit
or loss 21 - 37
----------------------------------------- ----- ---------- ----------
13,906 16,082
----------------------------------------- ----- ---------- ----------
Current assets
Trade and other receivables 22 50,003 49,098
Investments - fair value through profit
or loss 21 1,647 920
Cash and cash equivalents 23 11,113 8,855
----------------------------------------- ----- ---------- ----------
62,763 58,873
----------------------------------------- ----- ---------- ----------
Total assets 76,669 74,955
----------------------------------------- ----- ---------- ----------
Current liabilities
Trade and other payables 26 (49,625) (47,395)
Current tax liabilities (132) (123)
Deferred tax liabilities 24 (414) (400)
Provisions 27 (1,137) (205)
Lease liabilities 28 (245) (946)
Deferred cash consideration 36 (89) -
----------------------------------------- ----- ---------- ----------
(51,642) (49,069)
----------------------------------------- ----- ---------- ----------
Net current assets 11,121 9,804
----------------------------------------- ----- ---------- ----------
Long-term liabilities
Deferred cash consideration 36 (29) (33)
Lease liabilities 28 (2,300) (2,856)
Provision 27 (586) (675)
----------------------------------------- ----- ---------- ----------
(2,915) (3,564)
----------------------------------------- ----- ---------- ----------
Net assets 22,112 22,322
----------------------------------------- ----- ---------- ----------
Equity
Share capital 29 2,888 2,888
Share premium account 29 3,763 3,763
Own shares 30 (312) (312)
Retained earnings 30 11,050 11,260
Other reserves 30 4,723 4,723
----------------------------------------- ----- ---------- ----------
Equity attributable to equity holders
of the Parent Company 22,112 22,322
----------------------------------------- ----- ---------- ----------
The following Accounting Policies and Notes form part of these
financial statements.
The financial statements of Walker Crips Group plc (Company
registration no: 01432059) were approved by the Board of Directors
and authorised for issue on 29 July 2022.
Signed on behalf of the Board of Directors
Sanath Dandeniya FCCA
Director
29 July 2022
Consolidated statement of cash flows
year ended 31 March 2022
2022 2021
Note GBP'000 GBP'000
-------------------------------------------------- ----- --------- ---------
Operating activities
Cash generated from operations 31 4,217 1,806
Tax paid (120) (379)
-------------------------------------------------- ----- --------- ---------
Net cash generated from operating activities 4,097 1,427
-------------------------------------------------- ----- --------- ---------
Investing activities
Purchase of property, plant and equipment (119) (24)
(Purchase)/sale of investments held for
trading (342) 78
Consideration paid on acquisition of intangibles (93) -
Consideration paid on acquisition of client
lists - (100)
Consideration received on sale of associate 105 -
Dividends received 11 9 8
Dividends received from associate investment 8 57 64
Interest received 11 - 2
-------------------------------------------------- ----- --------- ---------
Net cash (used in)/generated from investing
activities (383) 28
-------------------------------------------------- ----- --------- ---------
Financing activities
Dividends paid 15 (383) (64)
Interest paid 12 (21) (12)
Repayment of lease liabilities* (959) (999)
Repayment of lease interest* (93) (134)
-------------------------------------------------- ----- --------- ---------
Net cash used in financing activities (1,456) (1,209)
-------------------------------------------------- ----- --------- ---------
Net increase in cash and cash equivalents 2,258 246
-------------------------------------------------- ----- --------- ---------
Net cash and cash equivalents at beginning
of period 8,855 8,609
-------------------------------------------------- ----- --------- ---------
Net cash and cash equivalents at end of
period 11,113 8,855
-------------------------------------------------- ----- --------- ---------
* Total repayment of lease liabilities under IFRS 16 in the
period was GBP1,052,000 (2021: GBP1,133,000)
The following Accounting Policies and Notes form part of these
financial statements.
Consolidated statement of changes in equity
year ended 31 March 2022
Share Own
Share premium shares Capital Retained Total
capital account held redemption Other earnings equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------- ---------- --------- --------- ------------ --------- ---------- ---------
Equity as at 31 March
2020 2,888 3,763 (312) 111 4,612 11,582 22,644
-------------------------- ---------- --------- --------- ------------ --------- ---------- ---------
Comprehensive loss
for the year - - - - - (258) (258)
-------------------------- ---------- --------- --------- ------------ --------- ---------- ---------
Total comprehensive
loss for the year - - - - - (258) (258)
-------------------------- ---------- --------- --------- ------------ --------- ---------- ---------
Contributions by and
distributions to owners
Dividends paid - - - - - (64) (64)
-------------------------- ---------- --------- --------- ------------ --------- ---------- ---------
Total contributions
by and distributions
to owners - - - - - (64) (64)
-------------------------- ---------- --------- --------- ------------ --------- ---------- ---------
Equity as at 31 March
2021 2,888 3,763 (312) 111 4,612 11,260 22,322
-------------------------- ---------- --------- --------- ------------ --------- ---------- ---------
Comprehensive income
for the year - - - - - 173 173
-------------------------- ---------- --------- --------- ------------ --------- ---------- ---------
Total comprehensive
income for the year - - - - - 173 173
-------------------------- ---------- --------- --------- ------------ --------- ---------- ---------
Contributions by and
distributions to owners
Dividends paid - - - - - (383) (383)
-------------------------- ---------- --------- --------- ------------ --------- ---------- ---------
Total contributions
by and distributions
to owners - - - - - (383) (383)
-------------------------- ---------- --------- --------- ------------ --------- ---------- ---------
Equity as at 31 March
2022 2,888 3,763 (312) 111 4,612 11,050 22,112
-------------------------- ---------- --------- --------- ------------ --------- ---------- ---------
The following Accounting Policies and Notes form part of these
financial statements.
Notes to the accounts
year ended 31 March 2022
1. General information
Walker Crips Group plc ("the Company") is the Parent Company of
the Walker Crips group of companies ("the Company"). The Company is
a public limited company incorporated in the United Kingdom under
the Companies Act 2006 and listed on the London Stock Exchange. The
Group is registered in England and Wales. The address of the
registered office is Old Change House, 128 Queen Victoria Street,
London EC4V 4BJ.
The significant accounting policies have been disclosed below.
The accounting policies for the Group and the Company are
consistent unless otherwise stated.
2. Basis of preparation
The consolidated financial statements have been prepared in
accordance with UK-adopted international accounting standards in
conformity with the requirements of the Companies Act 2006.
The principal accounting policies adopted in the preparation of
the consolidated financial statements are set out in note 3. The
policies have been consistently applied to all the years presented,
unless otherwise stated.
The Group financial statements are presented earlier in this
announcement.
The consolidated financial statements are presented in GBP
sterling (GBP). Amounts shown are rounded to the nearest thousand,
unless stated otherwise.
The consolidated financial statements have been prepared on the
historical cost basis, except for certain financial instruments
that are measured at fair value, and are presented in Pounds
Sterling, which is the currency of the primary economic environment
in which the Group operates. The principal accounting policies
adopted are set out below and have been applied consistently to all
periods presented in the consolidated financial statements.
The preparation of financial statements requires the use of
certain critical accounting estimates. It also requires management
to exercise its judgement in the process of applying the Group's
accounting policies. The areas involving a higher degree of
judgement or complexity, or areas where assumptions and estimates
are significant to the consolidated financial statements, are
disclosed in note 4.
Going concern
The financial statements of the Group have been prepared on a
going concern basis. At 31 March 2022, the Group had net assets of
GBP22.11 million (2021: GBP22.32 million), net current assets of
GBP11.1 million (2021: GBP9.8 million) and cash and cash
equivalents of GBP11.1 million (2021: GBP8.9 million). The Group
reported an operating profit of GBP326,000 for the year ended 31
March 2022 (2021: GBP22,000), inclusive of exceptional expense of
GBP1,540,000
(2021: GBP419,000), and net cash inflows from operating
activities of GBP4.2 million (2021: GBP1.8 million).
The Directors consider the going concern basis to be appropriate
following their assessment of the Group's financial position and
its ability to meet its obligations as and when they fall due. In
making the going concern assessment the Directors have taken into
account the following:
-- The Group's three-year base case projections based on current
strategy, trading performance, expected future profitability,
liquidity, capital solvency and dividend policy.
-- Outcome of stress scenarios applied to the Group's base case
projections prior to deployment of management actions.
-- The principal risks facing the Group and its systems of risk management and internal control.
-- The Group's ability to generate positive operating cash flow
during the year to 31 March 2022 and the projections over the next
three years.
Key assumptions that the Directors have made in preparing the
base case cash flow forecasts are that:
-- Revenues reflect the impact of (i) expected client and
revenue losses from Truro IM resignation, (ii) net interest income
from managing client deposits prudently capped at GBP1.2 million,
and (iii) no further significant impact from the pandemic other
than what is already known. The total revenue is expected to
increase by 1.27% with gains from fee income offset by the lower
trading commissions. Years two and three growth expectation set
conservatively at 2%.
-- Base case costs prudently reflect only the actions Management has taken to date.
Key stress scenarios that the Directors have then considered
include:
-- A "bear stress scenario": representing a further 10% fall in
income compared to the base case scenario in the reporting periods
ending 31 March 2023 and 31 March 2024.
-- A remote "severe stress scenario": representing a 20% fall in
commission income and 15% fall in fee income compared to the base
case for each forecast period.
-- Both stress scenarios assume no mitigating actions and
include a further prudent adjustment for the estimation uncertainty
in respect of certain provisions (see note 4).
Liquidity and regulatory capital resource requirements exceed
the minimum thresholds in both the base and bear scenarios.
However, in the severe stress scenario, although the Group has
positive liquidity throughout the period, the negative impact on
our prudential capital ratio is such that it is projected to fall
below the regulatory requirement in January 2024. The Directors
consider this scenario to be remote in view of the prudence built
into the base case planning and that further mitigations available
to the Directors are not reflected therein. Such mitigating actions
within Management control include reduction in proprietary risk
positions, delayed capital expenditure, further reductions in
discretionary spend and additional reduction in employee headcount.
Other mitigating actions which may be possible include seeking
shareholder support, sale of assets and stronger cost
reductions.
Following the assessment of the Group's financial position and
its ability to meet its obligations as and when they fall due,
including the financial implications of the pandemic, the Directors
are not aware of any material uncertainties that cast significant
doubt on the Group's ability to continue as a going concern.
Standards and interpretations affecting the reported results or
the financial position
The accounting standards adopted are consistent with those of
the previous financial year. Amendments to existing IFRS standards
did not have a material impact on the Group's Consolidated Income
Statement or the Statement of Financial Position.
The Group does not expect standards yet to be adopted by the UK
endorsement body ("UKEB") to have a material impact in future
years.
3. 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 intercompany 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. The
acquiree's identifiable assets, liabilities and contingent
liabilities that meet the conditions for recognition under IFRS 3
Business Combinations are recognised at their fair value at the
acquisition date.
Acquisition-related costs are expensed as incurred.
If the business combination is achieved in stages, the
acquisition date carrying value of the acquirer's previously held
equity interest in the acquiree is re-measured to fair value at the
acquisition date; any gains or losses arising from such
re-measurement are recognised in profit or loss.
Contingent consideration is classified either as equity or as a
financial liability. Amounts classified as a financial liability
are subsequently re-measured to fair value, with changes in fair
value recognised in profit or loss.
Interests in associate
An associate is an entity in which the Group has significant
influence, but not control or joint control. The Group uses the
equity method of accounting by which the equity investment is
initially recorded at cost and subsequently adjusted to reflect the
investor's share of the net assets of the associate.
The Group had a 33% associate investment in Walker Crips
Property Income Limited ("WCPIL"). This investment was disposed
fully during the period (see note 8).
Intangible assets
(a) Goodwill
Goodwill arises on the acquisition of subsidiaries and
represents the excess of the consideration transferred, the amount
of any non-controlling interest in the acquiree and the
acquisition-date fair value of any previous equity interest in the
acquiree over the fair value of the identifiable net assets
acquired. If the total of consideration transferred,
non-controlling interest recognised and previously held interest
measured at fair value is less than the fair value of the net
assets of the subsidiary acquired, in the case of a bargain
purchase, the difference is recognised directly in the income
statement.
Goodwill is initially recognised as an asset at cost and is
subsequently measured at cost less any accumulated impairment
losses. Goodwill is not amortised but is 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 acquired in a
business combination is allocated to each of the CGUs, or groups of
CGUs, that is expected to benefit from the synergies of the
combination. Each unit or group of units to which the goodwill is
allocated represents the lowest level within the entity at which
the goodwill is monitored for internal management purposes.
Goodwill is monitored at the operating segment level.
Goodwill impairment reviews are undertaken annually or more
frequently if events or changes in circumstances indicate a
potential impairment. The carrying value of the CGU containing the
goodwill is compared to the recoverable amount, which is the higher
of value-in-use and the fair value less costs of disposal. Any
impairment is recognised immediately as an expense and is not
subsequently reversed.
(b) 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, when separate payments
are made to acquire clients' assets by adding teams of investment
managers, or when acquiring the ownership of client relationships
from retiring inhouse self-employed 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 at inception. 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.
(c) Software licences
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 up to five years.
Impairment of non-financial assets
Intangible assets that have an indefinite useful life or
intangible assets not ready to use are not subject to amortisation
and are tested annually for impairment. Assets that are subject to
amortisation are reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount may not be
recoverable. An impairment loss is recognised for the amount by
which the asset's carrying amount exceeds its recoverable amount.
The recoverable amount is the higher of an asset's fair value less
costs of disposal and value-in-use. For the purposes of assessing
impairment, assets are grouped at the lowest levels for which there
are largely independent cash inflows (cash-generating units). Prior
impairments of non-financial assets (other than goodwill) are
reviewed for possible reversal at each reporting date.
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.
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.
-- Fees earned from software offering, Software as a Service
("SaaS"), are accrued evenly over the period to which they relate
with the performance obligation fulfilled over the same period.
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;
-- The amount of the dividend can be reliably measured; and
-- Gains or losses arising on disposal of trading book
instruments and changes in fair value of securities held for
trading purposes 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 include:
1. profits or losses on disposal or closure of 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 the
current period are explained in note 10.
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
re-translated 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.
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
Right-of-use assets held under contractual arrangements are
depreciated over the lengths of their respective contractual terms,
as prescribed under
IFRS 16.
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
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 for the period comprises current and deferred
tax.
Tax is recognised in the income statement, except to the extent
that it relates to items recognised directly in equity. In this
case the tax is also recognised directly in other comprehensive
income or directly in equity, respectively.
The current income tax charge is calculated on the basis of the
tax laws enacted or substantively enacted at the end of the
reporting period in the countries where the Company's subsidiaries
and associates operate and generate taxable income. Management
periodically evaluates positions taken in tax returns with respect
to situations in which applicable tax regulation is subject to
interpretation. It establishes provisions where appropriate on the
basis of amounts expected to be paid to the tax authorities.
Deferred income tax is recognised, using the liability method,
on temporary differences arising between the tax bases of assets
and liabilities and their carrying amounts in the consolidated
financial statements. However, the deferred tax is not accounted
for if it arises from initial recognition of an asset or liability
in a transaction other than a business combination that, at the
time of the transaction, affects neither accounting nor taxable
profit or loss. Deferred income tax is determined using tax rates
(and laws) that have been enacted, or substantially enacted, by the
end of the reporting period and are expected to apply when the
related deferred income tax asset is realised, or the deferred
income tax liability is settled.
Deferred income tax assets are recognised only to the extent
that it is probable that future taxable profit will be available
against which the temporary differences can be utilised.
Deferred income tax liabilities are provided on taxable
temporary differences arising from investments in subsidiaries,
associates and joint arrangements, except for deferred income tax
liability where the timing of the reversal of the temporary
difference is controlled by the Group and it is probable that the
temporary difference will not reverse in the foreseeable future.
Generally, the Group is unable to control the reversal of the
temporary difference for associates, unless there is an agreement
in place that gives the Group the ability to control the reversal
of the temporary difference not recognised.
Deferred income tax assets are recognised on deductible
temporary differences arising from investments in subsidiaries,
associates and joint arrangements only to the extent that it is
probable the temporary difference will reverse in the future and
there is sufficient taxable profit available against which the
temporary difference can be utilised.
Deferred income tax assets and liabilities are offset when there
is a legally enforceable right to offset current tax assets against
current tax liabilities, and when the deferred income tax assets
and liabilities relate to income taxes levied by the same taxation
authority on either the taxable entity or different taxable
entities where there is an intention to settle the balances on a
net basis.
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 ("FVTPL")
are expensed in the income statement. 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 ("FVTPL");
-- Fair value through other comprehensive income ("FVTOCI"); or
-- Amortised cost.
Financial assets are classified as current or non-current
depending on the contractual timing for recovery of the asset. The
classification depends on the purpose for which the financial
assets were acquired. Management determines the classification of
its financial assets at initial recognition.
(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 FVTPL, 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.
Fair value through profit or loss ("FVTPL"): Assets that do not
meet the criteria for amortised cost or fair value through other
comprehensive income ("FVTOCI") 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 12-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.
The Group adopts the simplified approach to trade receivables
and contract assets, which allows entities to recognise lifetime
expected losses on all assets, without the need to identify
significant increases in credit risk (i.e. no distinction is needed
between 12-month and lifetime expected credit losses).
(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 FVTPL are recognised in revenue within the
Consolidated Income Statement.
(iii) Cash and cash equivalents
Cash and cash equivalents include 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. Bank
overdrafts are shown within current liabilities in the statement of
financial position.
De-recognition
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 classified at amortised cost. Due to their
short-term nature, their carrying amount is considered to be the
same as their 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
Ordinary shares are classified as equity.
Incremental costs directly attributable to the issue of new
shares or options are shown in equity as a deduction, net of tax,
from the proceeds.
Where any Group company purchases the Company's equity share
capital (treasury shares), the consideration paid, including any
directly attributable incremental costs (net of income taxes) is
deducted from equity attributable to the Company's equity holders,
until the shares are cancelled or reissued. Where such shares are
subsequently reissued, any consideration received, net of any
directly attributable incremental transaction costs and the related
income tax effects, is included in equity attributable to the
Company's equity holders.
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.
In response to mitigate some perceived impacts from the pandemic
on the Group, the matching option was temporarily suspended during
the twelve-month period to 31 March 2021. On 1 April 2021, the
matching option was reinstated to one-half for every Partnership
Share purchased. This arrangement will continue until 31 March
2022. All shares awarded under this scheme have been purchased in
the market by the Trustees of the SIP.
Provisions
Provisions for environmental restoration, restructuring costs
and legal claims are recognised when the Group has a present legal
or constructive obligation as a result of past events, it is
probable that an outflow of resources will be required to settle
the obligation, and the amount has been reliably estimated.
Restructuring provisions comprise lease termination penalties and
employee termination payments. Provisions are not recognised for
future operating losses.
Provisions are measured at the present value of the expenditures
expected to be required to settle the obligation, using a pre-tax
rate that reflects current market assessments of the time value of
money and the risks specific to the obligation. The increase in the
provision due to the passage of time
is recognised as interest expense.
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.
Pension costs
The Group contributes to defined contribution personal pension
schemes for selected employees. For defined contribution schemes,
the Group pays contributions to publicly or privately administered
pension insurance plans on a mandatory, contractual or voluntary
basis. The Group has no further payment obligations once the
contributions have been paid. The contributions are recognised as
employee benefit expenses when they are due. Prepaid contributions
are recognised as an asset to the extent that a cash refund or a
reduction in the future payments is available. The contribution
rate is based on annual salary and the amount is charged to the
income statement on an accrual basis.
Dividends paid
Equity dividends are recognised when they become legally
payable. Dividend distribution to the Company's shareholders is
recognised as a liability in the Group's financial statements in
the period in which the dividends are approved by the Company's
shareholders. 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.
Leases
The Group leases various offices, software and equipment that
are recognised under IFRS 16. The Group's lease contracts are
typically made for fixed periods of 2 to 10 years and extension and
termination options enabling maximise operational flexibility are
included in a number of property and software leases across the
Group.
All leases are accounted for by recognising a right-of-use asset
and a lease liability except for:
-- Leases of low value assets; and
-- Leases with a duration of 12 months or less.
Payments associated with short-term leases and leases of
low-value assets are recognised on a straight-line basis as an
expense in profit or loss. Short-term leases are leases with a
lease term of 12 months or less. Low-value assets comprise IT
equipment and small items of office furniture.
Leases are recognised as a right-of-use asset and a
corresponding liability at the date at which the leased asset is
available for use by the Group. Each lease payment is allocated
between the liability and finance cost. The finance cost is charged
to profit or loss over the lease period so as to produce a constant
periodic rate of interest on the remaining balance of the liability
for each period. The right-of-use assets are depreciated over the
shorter of the asset's useful life and the lease term on a
straight-line basis.
Assets and liabilities arising from a lease are initially
measured on a present value basis. Lease liabilities include the
net present value of the following lease payments:
-- fixed payments (including in-substance fixed payments), less any lease incentives receivable;
-- variable lease payments that are based on an index or a rate;
-- amounts expected to be payable by the lessee under residual value guarantees;
-- the exercise price of a purchase option if the lessee is
reasonably certain to exercise that option; and
-- payments of penalties for terminating the lease, if the lease
term reflects the lessee exercising that option.
The lease payments are discounted using the interest rate
implicit in the lease. If that rate cannot be readily determined,
which is generally the case for leases held by the Group, the
lessee's incremental borrowing rate is used.
To determine the incremental borrowing rate, the Group:
-- where possible, uses recent third-party financing received by
the individual lessee as a starting point, adjust to reflect
changes in financing conditions since third-party financing was
received;
-- uses a build-up approach that starts with a risk-free
interest rate adjusted for credit risk for leases held by the
Group, which does not have recent third-party financing; and
-- make adjustments specific to the lease, for example term, country, currency and security.
Lease payments are allocated between principal and finance cost.
The finance cost is charged to profit and loss over the lease
period so as to produce a constant periodic rate of interest on the
remaining balance of the liability for each period.
Right-of-use assets are measured at cost comprising the
following:
-- the amount of the initial measurement of lease liability;
-- any lease payments made at or before the commencement date less any lease incentives received;
-- any initial direct costs; and
-- restoration costs.
Right-of-use assets are depreciated over the shorter of the
lease term and the useful economic life of the underlying asset on
a straight-line basis.
The Group does not have any leasing activities acting as a
lessor.
Earnings per share
Basic earnings per share is calculated by dividing:
-- the profit attributable to owners of the company, excluding
any costs of servicing equity other than ordinary shares;
-- by the weighted average number of ordinary shares outstanding
during the financial year, adjusted for bonus elements in ordinary
shares issued during the year and excluding treasury shares (note
16).
There are currently no obligations present that could have a
dilutive effect on ordinary shares.
Share-based payments
Share-based payments are remuneration payments to selected
employees that take the form of an award of shares in Walker Crips
Group plc. Employees are not able to exercise such awards in full
until three years after the award has been made (the vesting
period).
Equity-settled share-based payments to employees are measured at
fair value of the equity instruments at the date of grant. The fair
value excludes the effect of non-market-based vesting conditions.
Details regarding the determination of the fair value of
equity-settled share-based transactions are set out in note 37.
As the share-based payment awards are for fully paid free
shares, fair value is measured as the market value of the shares at
each grant date.
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 the
number of shares that will eventually vest. At each reporting date,
the Group revises its estimate of the shares expected to vest as a
result of the effect of non-market based vesting conditions. The
impact of the revision of the original estimates, if any, is
recognised in the Income Statement such that the cumulative expense
reflects the revised estimate.
4. Key sources of estimation uncertainty and judgements
The Group makes estimates and assumptions concerning the future.
The resulting accounting estimates will, by definition, seldom
equal the related actual results. The estimates and assumptions
that have a significant risk of causing a material adjustment to
the carrying amounts of assets and liabilities within the next
financial year are discussed below.
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 as described in note 17. The carrying
amount of goodwill at the balance sheet date was GBP4.4 million
(2021: GBP4.4 million) as shown in note 17.
Other intangible assets - judgement
Acquired client lists are capitalised based on current fair
values. During the year, one intangible asset, a client list, was
purchased by subsidiary Walker Crips Investment Management Limited.
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.
Key assumptions in this regard consist of the following:
1. The continuing going concern of the Company;
2. Life expectancy of clients based on the Office for National
Statistics;
3. Succession plans in place for staff and investment
managers;
4. Amounts of AUMA are consistent on average;
5. A growth rate of client list AUMA of a conservative 2%;
and
6. A discount rate of 12%.
Provisions - estimation and judgement
The Company has provided for the estimated cost of the project
relating to the upgrade of its financial crime control framework,
which was subject to an independent review that highlighted the
need for significant improvement. The costs of the review and to
implement the remediation are estimated to be GBP595,000, of which
GBP455,000 remains provided at year end. Management has a detailed
project plan underpinning the estimate for the remaining provision,
but this includes assumptions regarding required resources which
may change. A provision has also been made for Management's present
estimate for potential customer redress and associated costs
although the review remains at an early stage. Management has
engaged third-party legal and regulatory expert advice and opinion
to assist in this matter and ensure a fair customer outcome is
achieved. The Group's insurers have been kept informed of this
matter although at this time no asset has been recognised for any
potential insurance recovery until the extent of cover has been
formally agreed. As work remains ongoing the estimated provision is
subject to change. Areas of estimation uncertainty remain the
appropriateness of the methodology and validation of input
assumptions pending legal and regulatory expert advice.
In light of the uncertainty in respect of the above two
provisions, for the purposes of the going concern and viability
assessment, Management has prudently applied a 50% adverse stress
to the amounts provided. It is noted that there also may be
downward revisions to the estimates and, in respect of client
redress, insurance recoveries pending further discussions with and
the agreement of insurers.
Finally, the Company established dilapidation provisions based
on quotes and reasonable estimates of the amounts for works, as
well as appropriate rates of inflation and discount rates (see
below).
IFRS 16 "Leases" - estimation and judgement
IFRS 16 requires certain judgements and estimates to be made and
those significant judgements are explained below.
The Group has opted to use single discount rates for leases with
reasonably similar characteristics. The discount rates used have
had an impact on the right-of-use assets' values, lease liabilities
on initial recognition and lease finance costs included within the
income statement.
Where a lease includes the option for the Group to extend the
lease term, the Group has exercised the judgement, based on current
information, that such leases will be extended to the full length
available, and this is included in the calculation of the value of
the right-of-use assets and lease liabilities on initial
recognition and valuation at the reporting date.
Provision for dilapidations - estimation and judgement
The Group has made provisions for dilapidations under six leases
for its offices. The Group did not enter into any new property
leases in the period. During the year, GBP16,000 of additional
provisions were recognised, including GBP4,000 of interest and
released a further GBP77,000 of excess provision, totaling
GBP618,000 provision at 31 March 2022.
The amounts of the provisions are, where possible, estimated
using quotes from professional building contractors. The property,
plant and equipment elements of the dilapidations are depreciated
over the terms of their respective leases. The liabilities in
relation to dilapidations are inflated using an estimated rate of
inflation and discounted using appropriate gilt rates to present
value. The change in liability attributable to inflation and
discounting is recognised in interest expense.
5. Revenue
An analysis of the Group's revenue is as follows:
2022 2021
--------- --------- --------- --------- --------- ---------
Non- Non-
Broking broking Broking broking
income income Total income income Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------- --------- --------- --------- --------- --------- ---------
Stockbroking commission 8,044 - 8,044 9,009 - 9,009
Fees and other revenue - 22,931 22,931 - 19,733 19,733
------------------------- --------- --------- --------- --------- --------- ---------
Investment Management 8,044 22,931 30,975 9,009 19,733 28,742
Wealth Management,
Financial Planning &
Pensions 15 1,830 1,845 - 1,606 1,606
Revenue 8,059 24,761 32,820 9,009 21,339 30,348
Investment revenue (see
note 11) - 9 9 - 10 10
------------------------- --------- --------- --------- --------- --------- ---------
Total income 8,059 24,770 32,829 9,009 21,349 30,358
------------------------- --------- --------- --------- --------- --------- ---------
% of total income 24.5% 75.5% 100.0% 29.7% 70.3% 100.0%
------------------------- --------- --------- --------- --------- --------- ---------
Timing of revenue recognition
The following table presents operating income analysed by the
timing of revenue recognition of the operating segment providing
the service:
Consolidated
year ended
Investment Wealth 31 March
Management Management SaaS 2022
2022 GBP'000 GBP'000 GBP'000 GBP'000
----------------------------------- ------------ ------------ --------- -------------
Revenue from contracts with
customers
Products and services transferred
at a point in time 11,894 260 38 12,192
Products and services transferred
over time 17,917 1,585 - 19,502
Other revenue
Products and services transferred
at a point in time 404 - - 404
Products and services transferred
over time 722 - - 722
----------------------------------- ------------ ------------ --------- -------------
30,937 1,845 38 32,820
----------------------------------- ------------ ------------ --------- -------------
Consolidated
year ended
Investment Wealth 31 March
Management Management SaaS 2021
2021 GBP'000 GBP'000 GBP'000 GBP'000
----------------------------------- ------------ ------------ ---------- -------------
Revenue from contracts with
customers
Products and services transferred
at a point in time 10,389 161 16 10,566
Products and services transferred
over time 16,393 1,425 - 17,818
Other revenue
Products and services transferred
at a point in time 1,089 20 - 1,109
Products and services transferred
over time 855 - - 855
----------------------------------- ------------ ------------ ---------- -------------
28,726 1,606 16 30,348
----------------------------------- ------------ ------------ ---------- -------------
6. Segmental analysis
For segmental reporting purposes, the Group currently has three
operating segments; Investment Management, being portfolio-based
transaction execution and investment advice; Wealth Management,
being financial planning and pensions administration; and Software
as a Service ("SaaS") comprising provision of regulatory and admin
software and bespoke cloud software to companies. Unallocated
corporate expenses, assets and liabilities are not considered to be
allocatable 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.
EnOC Technologies Limited ("EnOC") provides the regulatory and
admin software, Software as a Service ("SaaS"), to their business
partners, including all WCG's regulated entities. Fees payable by
subsidiary companies to EnOC have been eliminated on consolidation
and are excluded from segmental analysis.
Revenues between Group entities, and in turn reportable
segments, are excluded from the segmental analysis presented
below.
The Group does not derive any revenue from geographical regions
outside of the United Kingdom.
Consolidated
year ended
Investment Wealth 31 March
Management Management SaaS 2022
2022 GBP'000 GBP'000 GBP'000 GBP'000
--------------------------------- ------------ ------------ --------- -------------
Revenue
Revenue from contracts with
customers 29,811 1,845 38 31,694
Other revenue 1,126 - - 1,126
--------------------------------- ------------ ------------ --------- -------------
Total revenue 30,937 1,845 38 32,820
--------------------------------- ------------ ------------ --------- -------------
Results
Segment result 1,160 (258) (102) 800
Unallocated corporate expenses (474)
--------------------------------- ------------ ------------ --------- -------------
326
Investment revenue 9
Finance costs (114)
Profit on disposal of associate
investment 103
--------------------------------- ------------ ------------ --------- -------------
Profit before tax 324
Tax (151)
--------------------------------- ------------ ------------ --------- -------------
Profit after tax 173
--------------------------------- ------------ ------------ --------- -------------
Consolidated
year ended
Investment Wealth 31 March
Management Management SaaS 2022
2022 GBP'000 GBP'000 GBP'000 GBP'000
----------------------------------- ------------ ------------ --------- -------------
Other information
Capital additions 466 5 - 471
Depreciation 260 43 - 303
Statement of financial positions
Assets
Segment assets 71,823 77 390 72,290
Unallocated corporate assets 4,379
----------------------------------- ------------ ------------ --------- -------------
Consolidated total assets 76,669
----------------------------------- ------------ ------------ --------- -------------
Liabilities
Segment liabilities 52,189 235 237 52,661
Unallocated corporate liabilities 1,896
----------------------------------- ------------ ------------ --------- -------------
Consolidated total liabilities 54,557
----------------------------------- ------------ ------------ --------- -------------
Consolidated
year ended
Investment Wealth 31 March
Management Management SaaS 2021
2021 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------- ------------ ------------ --------- -------------
Revenue
Revenue from contracts with
customers 26,782 1,586 16 28,384
Other revenue 1,944 20 - 1,964
-------------------------------- ------------ ------------ --------- -------------
Total revenue 28,726 1,606 16 30,348
-------------------------------- ------------ ------------ --------- -------------
Results
Segment result 1,333 (127) (127) 1,079
Unallocated corporate expenses (1,057)
-------------------------------- ------------ ------------ --------- -------------
22
Investment revenue 10
Finance costs (146)
-------------------------------- ------------ ------------ --------- -------------
Loss before tax (114)
Tax (144)
-------------------------------- ------------ ------------ --------- -------------
Loss after tax (258)
-------------------------------- ------------ ------------ --------- -------------
Consolidated
year ended
Investment Wealth 31 March
Management Management SaaS 2021
2021 GBP'000 GBP'000 GBP'000 GBP'000
----------------------------------- ------------ ------------ --------- -------------
Other information
Capital additions 91 201 - 292
Depreciation 304 71 - 375
Statement of financial positions
Assets
Segment assets 67,297 1,138 369 68,804
Unallocated corporate assets 6,151
----------------------------------- ------------ ------------ --------- -------------
Consolidated total assets 74,955
----------------------------------- ------------ ------------ --------- -------------
Liabilities
Segment liabilities 48,486 328 10 48,824
Unallocated corporate liabilities 3,809
----------------------------------- ------------ ------------ --------- -------------
Consolidated total liabilities 52,633
----------------------------------- ------------ ------------ --------- -------------
7. Commissions and fees paid
Commissions and fees paid comprises:
2022 2021
GBP'000 GBP'000
------------------------------------ --------- ---------
To authorised external agents 61 63
To self-employed certified persons 9,049 9,639
------------------------------------ --------- ---------
9,110 9,702
------------------------------------ --------- ---------
8. Investment in associate
2022 2021
GBP'000 GBP'000
--------------------------- --------- ---------
Brought forward 2 -
Share of after-tax profit 57 66
--------------------------- --------- ---------
Dividends (57) (64)
Disposals (2) -
--------------------------- --------- ---------
Carried forward - 2
--------------------------- --------- ---------
The Group disposed of its 33.33% interest in its associate,
Walker Crips Property Income Limited ("WCPIL"), during the year for
a consideration of GBP105,000. The brought forward value of the
Group's share of net assets in WCPIL was GBP2,000. The Board of
WCPIL submitted management accounts to 31 December 2021 reporting
an after-tax profit of GBP171,000, giving the Group a GBP57,000
entitlement from which a dividend of GBP57,000 was paid to the
Group in the period.
9. Profit/(loss) for the year
Profit/(loss) for the year on continuing operations has been
arrived at after charging:
2022 2021
GBP'000 GBP'000
---------------------------------------------------- --------- ---------
Depreciation of property, plant and equipment (see
note 19) 303 375
Depreciation of right-of-use assets (see note 20) 873 961
Amortisation of intangibles (see note 18) 862 837
Staff costs (see note 13) 13,862 12,690
Recharge of staff costs (725) (710)
Settlement costs 1,143 1,148
Communications 1,260 1,195
Regulatory costs 765 756
Computer expenses 790 595
Other expenses 2,540 2,221
Auditor's remuneration 223 203
---------------------------------------------------- --------- ---------
21,901 20,271
---------------------------------------------------- --------- ---------
A more detailed analysis of auditor's remuneration is provided
below:
2022 2022 2021 2021
GBP'000 % GBP'000 %
Audit services
Fees payable to the Company's
auditor for the audit of its
annual accounts 51 23 57 28
The audit of the Company's subsidiaries
pursuant to legislation - current
year 119 53 133 66
Non-audit services
FCA client assets reporting 13 6 13 6
AAF Review 40 18 - -
----------------------------------------- ---------- ------ --------- -----
223 100 203 100
----------------------------------------- ---------- ------ --------- -----
10. Exceptional items
Certain amounts are disclosed separately in order to present
results which are not distorted by significant items of income and
expenditure due to their nature and materiality.
2022 2021
GBP'000 GBP'000
---------------------------------------------------------- --------- ---------
Exceptional items included within operating profit
Change in fair value of deferred consideration - 31
Restructuring, redundancy and other costs 516 388
Net compensation income (221) -
Financial crime control framework review and remediation 595 -
Client redress and associated costs 650 -
---------------------------------------------------------- --------- ---------
Operating exceptional items 1,540 419
---------------------------------------------------------- --------- ---------
Other
Profit on disposal of associate investment (103) -
---------------------------------------------------------- --------- ---------
Total exceptional items 1,437 419
---------------------------------------------------------- --------- ---------
In the prior year, the Group incurred professional fees and
other expenses relating to the actions taken in response to the
pandemic, including restructuring and redundancy costs, and a
contractual dispute. In addition, the Group recognised a change in
fair value of deferred consideration in respect of acquired client
relationships.
In the current year, the following items have been classified as
exceptions due to their materiality and non-recurring nature. These
are:
a) Completion of the Group's restructuring and redundancy
activity commenced during the pandemic;
b) The Group received compensation under a confidential
settlement agreement, without admission of liability by either
party in relation to a dispute;
c) The costs of an independent review and resulting actions to
remediate and enhance the Group's financial crime framework. See
notes 4 and 27;
d) The actions of an associate combined with an internal control
failure resulted in customer detriment. Provision has been made for
the present estimate of redress and associated costs. We are
working with our insurers to confirm scope of cover and any future
recovery will also be treated as an exceptional item. See notes 4
and 27; and
e) The Group disposed of its 33.33% interest in its associate,
Walker Crips Property Income Limited ("WCPIL").
In total, GBP1,437,000 has been expensed in the current year.
The directors acknowledge this is a significant amount but consider
transparent disclosure and explanation provides readers with an
improved understanding of the Group results.
11. Investment revenue
Investment revenue comprises:
2022 2021
GBP'000 GBP'000
---------------------------------- --------- ---------
Interest on bank deposits - 2
Dividends from equity investment 9 8
---------------------------------- --------- ---------
9 10
---------------------------------- --------- ---------
12. Finance costs
Finance costs comprises:
2022 2021
GBP'000 GBP'000
Interest on lease liabilities (93) (134)
Interest on dilapidation provisions (11) (2)
Interest on overdue liabilities (10) (10)
------------------------------------- --------- ---------
(114) (146)
------------------------------------- --------- ---------
13. Staff costs
Particulars of employee costs (including Directors) are as shown
below:
2022 2021
GBP'000 GBP'000
Wages and salaries 11,561 10,643
Social security costs 1,197 1,074
Share incentive plan 57 94
Other employment costs 1,047 879
------------------------ --------- ---------
13,862 12,690
------------------------ --------- ---------
Staff costs do not include commissions payable mainly to
self-employed account executives, as these costs are included in
total commissions payable to self-employed certified persons
disclosed in note 7. At the end of the year there were 39 certified
self-employed account executives (2021: 40).
The average number of staff employed during the year was:
2022 2021
Number Number
---------------------------------- -------- --------
Executive Directors 2 2
Certification and approved staff 54 60
Other staff 152 150
---------------------------------- -------- --------
208 212
---------------------------------- -------- --------
The table incorporates the new staff classification under Senior
Managers and Certification Regime ("SM&CR").
14. Taxation
The tax charge is based on the loss/profit for the year of
continuing operations and comprises:
2022 2021
GBP'000 GBP'000
------------------------------------------------ --------- ---------
UK corporation tax at 19% (2021: 19%) 131 96
Prior year adjustments (66) 111
Origination and reversal of timing differences
during the current period 86 (63)
------------------------------------------------ --------- ---------
151 144
------------------------------------------------ --------- ---------
Corporation tax is calculated at 19% (2021: 19%) of the
estimated assessable profit for the year.
The charge for the year can be reconciled to the (loss)/profit
per the income statement as follows:
2022 2021
GBP'000 GBP'000
--------------------------------------------------- --------- ---------
Profit/(loss) before tax 324 (114)
--------------------------------------------------- --------- ---------
Tax on profit/(loss) on ordinary activities at
the standard rate UK corporation tax rate of 19%
(2021: 19%) 62 (22)
Effects of:
Tax rate changes for deferred tax 108 -
Expenses not deductible for tax purposes 21 22
Prior year adjustment (66) 111
Fixed asset differences 26 63
Other - (30)
--------------------------------------------------- --------- ---------
151 144
--------------------------------------------------- --------- ---------
Current tax has been provided at the rate of 19%. Deferred tax
has been provided at 25% (2021: 19%).
The exceptional charge of GBP1,437,000 (2021: GBP419,000),
disclosed separately on the consolidated income statement, is tax
deductible to the value of GBP373,000 (2021: GBP80,000) of
corporation tax. Classifying these credits/costs as exceptional has
no effect on the tax liability.
In the Spring Budget 2021, the Government announced that from 1
April 2023 the UK corporation tax rate will increase from 19% to
25%. This will have a consequential effect on the Group's future
tax charge.
15. Dividends
When determining the level of proposed dividend in any year a
number of factors are taken into account including levels of
profitability, future cash commitments, investment needs,
shareholder expectations and prudent buffers for maintaining an
adequate regulatory capital surplus. Amounts recognised as
distributions to equity holders in the period:
2022 2021
GBP'000 GBP'000
----------------------------------------------------- --------- ---------
Final dividend for the year ended 31 March 2021
of 0.60p (2020: 0.00p) per share 255 -
Interim dividend for the year ended 31 March 2022
of 0.30p (2021: 0.15p) per share 128 64
----------------------------------------------------- --------- ---------
383 64
----------------------------------------------------- --------- ---------
Proposed final dividend for the year ended 31 March
2022 of 1.20p (2021: 0.60p) per share 511 256
----------------------------------------------------- --------- ---------
The proposed final dividends are subject to approval by
shareholders at the Annual General Meeting and have not been
included as liabilities in these financial statements.
16. Earnings/(loss) per share
The calculation of basic earnings/(loss) per share for
continuing operations is based on the post-tax profit for the
financial year of GBP173,000 (2021: post-tax loss of GBP258,000)
and divided by 42,577,328 (2021: 42,577,328) Ordinary Shares of
6(2) /(3) pence, being the weighted average number of Ordinary
Shares in issue during the year.
No dilution to earnings/(loss) per share in the current year or
in the prior year.
The calculation of the basic earnings/(loss) per share is based
on the following data:
2022 2021
GBP'000 GBP'000
---------------------------------------------------------- --------- ---------
Earnings/(loss) for the purpose of basic earnings/(loss)
per share
being net profit/(loss) attributable to equity
holders of the Parent Company 173 (258)
---------------------------------------------------------- --------- ---------
Number of shares
2022 2021
Number Number
------------------------------------------------ ----------- -----------
Weighted average number of Ordinary Shares for
the purposes of basic earnings per share 42,577,328 42,577,328
------------------------------------------------ ----------- -----------
This produced basic earnings per share of 0.41 pence (2021:
basic loss per share of 0.61 pence).
17. Goodwill
GBP'000
-------------------------- --------
Cost
At 1 April 2020 7,056
-------------------------- --------
At 1 April 2021 7,056
-------------------------- --------
At 31 March 2022 7,056
-------------------------- --------
Accumulated impairment
At 1 April 2020 2,668
-------------------------- --------
At 1 April 2021 2,668
Impaired during the year -
-------------------------- --------
At 31 March 2022 2,668
-------------------------- --------
Carrying amount
-------------------------- --------
At 31 March 2022 4,388
-------------------------- --------
At 31 March 2021 4,388
-------------------------- --------
Goodwill acquired in a business combination is allocated, at
acquisition, to the cash-generating units ("CGUs") that are
expected to benefit from that business combination or intangible
asset. The carrying amount of goodwill has been allocated as
follows:
2022 2021
GBP'000 GBP'000
------------------------------------------------- --------- ---------
London York Fund Managers Limited CGU ("London
York") 2,901 2,901
Barker Poland Asset Management LLP CGU ("BPAM") 1,487 1,487
------------------------------------------------- --------- ---------
4,388 4,388
------------------------------------------------- --------- ---------
The recoverable amounts of the CGUs have been determined based
upon value-in-use calculations for the London York CGU and fair
value, less costs of disposal for the BPAM CGU.
The London York computation was based on discounted five-year
cash flow projections and terminal values. The key assumptions for
these calculations are a pre-tax discount rate of 12%, terminal
growth rates of 2% and the expected changes to revenues and costs
during the five-year projection period based on discussions with
senior management, past experience, future expectations in light of
anticipated market and economic conditions, comparisons with our
peers and widely available economic and market forecasts. The
pre-tax discount rate is determined by management based on current
market assessments of the time value of money and risks specific to
the London York CGU. The base value-in-use cash flows were stress
tested for an increase in discount rates to 16% and a 20% fall in
net inflows resulting in no impairment.
The discount rate would need to increase above 16% for the
London York CGU value-in-use to equal the respective carrying
values. Revenues would need to fall by GBP341,000 per annum in
present value terms for the London York CGU value-in-use to equal
the respective carrying values.
The BPAM CGU recoverable amount was assessed, in accordance with
IAS 36, by adopting the higher method of the fair value less cost
of disposal to determine the recoverable amount (as opposed to the
lower value-in-use). The recoverable amount at the year-end
calculated for the BPAM CGU, determined by the fair value less cost
of disposal, exceeded that produced by the value-in-use
calculation. The fair value less cost of disposal amounted to
GBP7.8 million (2021: GBP5.4 million) with headroom, after selling
costs, of GBP4.2 million (2021: GBP1.7 million) after applying
price earnings multiples based on the average of the Group's and
its peers' published results. Accordingly, this measurement is
classified as fair value hierarchy Level 3 having used valuation
techniques not based on directly observable market data. A 58%
decrease in BPAM's profit after tax would result in potential
impairment of GBP15,000.
18. Other intangible assets
Software Client
licences lists Total
GBP'000 GBP'000 GBP'000
----------------------------------------------- ---------- --------- ---------
Cost
At 1 April 2020 44 10,572 10,616
Re-classification of software as intangibles
* 2,783 - 2,783
Additions in the year 56 93 149
----------------------------------------------- ---------- --------- ---------
At 1 April 2021 2,883 10,665 13,548
Re-classification of assets relating to
IFRS 16 (45) - (45)
Additions in the year 61 32 93
----------------------------------------------- ---------- --------- ---------
At 31 March 2022 2,899 10,697 13,596
----------------------------------------------- ---------- --------- ---------
Amortisation
At 1 April 2020 25 3,890 3,915
Re-classification of software as intangibles* 2,230 - 2,230
Charge for the year 204 633 837
----------------------------------------------- ---------- --------- ---------
At 1 April 2021 2,459 4,523 6,982
Charge for the year 185 677 862
----------------------------------------------- ---------- --------- ---------
At 31 March 2022 2,644 5,200 7,844
----------------------------------------------- ---------- --------- ---------
Carrying amount
----------------------------------------------- ---------- --------- ---------
At 31 March 2022 255 5,497 5,752
----------------------------------------------- ---------- --------- ---------
At 31 March 2021 424 6,142 6,566
----------------------------------------------- ---------- --------- ---------
* During the previous year, the cost and accumulated
depreciation of software assets were reclassified as intangible
assets from property, plant and equipment. There was no impact to
the Consolidated Income Statement in the current or prior
years.
The intangible assets are amortised over their estimated useful
lives in order to determine amortisation rates. "Client lists" are
assessed on a client-by-client basis and are amortised over periods
of three to twenty years and "Software licences" are amortised over
five years. There are no indications that the value attributable to
client lists or software licences should be impaired.
19. Property, plant and equipment
Leasehold
improvement,
furniture
and Computer Computer
equipment software hardware Total
Owned fixed assets GBP'000 GBP'000 GBP'000 GBP'000
--------------------------------- -------------- ---------- ---------- ---------
Cost
1 April 2020 2,833 2,793 1,435 7,061
Re-classification of assets* (121) (10) 126 (5)
Re-classification of software
as intangibles** - (2,783) - (2,783)
Additions in the year 54 - 21 75
--------------------------------- -------------- ---------- ---------- ---------
At 1 April 2021 2,766 - 1,582 4,348
Re-classification of assets* (73) - - (73)
Dilapidation asset reassessment (50) - - (50)
Additions in the year 110 - 8 118
--------------------------------- -------------- ---------- ---------- ---------
At 31 March 2022 2,753 - 1,590 4,343
--------------------------------- -------------- ---------- ---------- ---------
Accumulated depreciation
1 April 2020 1,063 2,301 1,367 4,731
Re-classification of assets* 19 (71) 47 (5)
Re-classification of software
as intangibles** - (2,230) - (2,230)
Charge for the year 298 - 77 375
--------------------------------- -------------- ---------- ---------- ---------
1 April 2021 1,380 - 1,491 2,871
Charge for the year 253 - 50 303
--------------------------------- -------------- ---------- ---------- ---------
At 31 March 2022 1,633 - 1,541 3,174
--------------------------------- -------------- ---------- ---------- ---------
Carrying amount
--------------------------------- -------------- ---------- ---------- ---------
At 31 March 2022 1,120 - 49 1,169
--------------------------------- -------------- ---------- ---------- ---------
At 31 March 2021 1,386 - 91 1,477
--------------------------------- -------------- ---------- ---------- ---------
* Adjustments were made in the year to reclassify assets more
appropriately between asset classes. The net impact of these
adjustments in asset costs and accumulated depreciation was nil and
did not require changes or corrections to depreciation policy.
** The cost and accumulated depreciation of software assets were
reclassified as intangible assets from property, plant and
equipment. There was no impact to the Consolidated Income Statement
in the current or prior years.
20. Right-of-use assets
Computer Computer
Offices software hardware Total
GBP'000 GBP'000 GBP'000 GBP'000
-------------------------- -------- --------- --------- --------
Cost
1 April 2021 4,601 744 95 5,440
Additions 104 155 - 259
Lease reassessment (401) - - (401)
-------------------------- -------- --------- --------- --------
At 31 March 2022 4,304 899 95 5,298
-------------------------- -------- --------- --------- --------
Accumulated depreciation
1 April 2021 1,319 469 40 1,828
Charge for the year 649 204 20 873
-------------------------- -------- --------- --------- --------
At 31 March 2022 1,968 673 60 2,701
-------------------------- -------- --------- --------- --------
Carrying amount
-------------------------- -------- --------- --------- --------
At 31 March 2022 2,336 226 35 2,597
-------------------------- -------- --------- --------- --------
At 31 March 2021 3,282 275 55 3,612
-------------------------- -------- --------- --------- --------
21. Investments - fair value through profit or loss
Non-current asset investments
Investments
at fair
value
through
profit
or loss Total
GBP'000 GBP'000
-------------------------------- ------------ ---------
At 31 March 2020 51 51
-------------------------------- ------------ ---------
At 31 March 2021 37 37
-------------------------------- ------------ ---------
Loss from change in fair value (37) (37)
-------------------------------- ------------ ---------
At 31 March 2022 - -
-------------------------------- ------------ ---------
The Group's investment in unregulated collective investment
scheme ("UCIS") were written down in the period to GBPnil. The
investment was to cover a corresponding creditor of GBP25,000,
therefore a net write-down of GBP12,000 was recognised in the
Income Statement.
Current asset investments
As at As at
31 March 31 March
2022 2021
GBP'000 GBP'000
------------------------------------------------- ---------- ----------
Trading investments
Investments - fair value through profit or loss 1,647 920
------------------------------------------------- ---------- ----------
Financial assets at fair value through profit or loss represent
investments in equity securities and collectives that present the
Group with opportunity for return through dividend income, interest
and trading gains. The fair values of these securities are based on
quoted market prices.
The following provides an analysis of financial instruments that
are measured subsequent to initial recognition at fair value,
grouped into Levels 1 to 3 based on the degree to which the fair
value is observable:
Level 1 fair value measurements are those derived from quoted
prices (unadjusted) in active markets for identical assets or
liabilities. The Group's financial assets held at fair value
through profit and loss under current assets fall within this
category;
Level 2 fair value measurements are those derived from inputs
other than quoted prices included within Level 1 that are
observable for the asset or liability, either directly (i.e. as
prices) or indirectly (i.e. derived from prices). The Group does
not hold financial instruments in this category; and
Level 3 fair value measurements are those derived from valuation
techniques that include inputs for the asset or liability that are
not based on observable market data (unobservable inputs). The
Group's financial assets held at fair value through profit and loss
under non-current assets fall within this category.
Level
1 Level 2 Level 3 Total
GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------- --------- --------- --------- ---------
At 31 March 2022
Financial assets held at fair
value through profit and loss 1,647 - - 1,647
-------------------------------- --------- --------- --------- ---------
At 31 March 2021
Financial assets held at fair
value through profit and loss 920 - - 920
-------------------------------- --------- --------- --------- ---------
Further IFRS 13 disclosures have not been presented here as the
balance represents 2.148% (2021: 1.277%) of total assets. There
were no transfers of investments between any of the levels of
hierarchy during the year.
22. Trade and other receivables
2022 2021
GBP'000 GBP'000
------------------------------------------------ --------- ---------
Amounts falling due within one year:
Due from clients, brokers and recognised stock
exchanges at amortised cost 42,898 40,633
Other debtors at amortised cost 1,522 2,447
Prepayments and accrued income 5,583 6,018
------------------------------------------------ --------- ---------
50,003 49,098
------------------------------------------------ --------- ---------
23. Cash and cash equivalents
2022 2021
GBP'000 GBP'000
------------------------------------------------- --------- ---------
Cash deposits held at bank, repayable on demand
without penalty 11,113 8,855
------------------------------------------------- --------- ---------
11,113 8,855
------------------------------------------------- --------- ---------
Cash and cash equivalents do not include deposits of client
monies placed by the Group with banks and building societies in
segregated client bank accounts (free money and settlement
accounts). All such deposits are designated by the banks and
building societies as clients' funds and are not available to
satisfy any liabilities of the Group.
The amount of such net deposits which are not included in the
consolidated statement of financial position at 31 March 2022 was
GBP314,424,000 (2021: GBP274,145,000).
The credit quality of banks holding the Group's cash at 31 March
2022 is analysed below with reference to credit ratings awarded by
Fitch.
2022 2021
GBP'000 GBP'000
------------------------- --------- ---------
A+ 7,837 5,256
AA- 2,959 3,337
A- 45 25
Unrated or held in cash 272 237
------------------------- --------- ---------
11,113 8,855
------------------------- --------- ---------
24. Deferred tax liability
Short-term
temporary
Capital differences
allowances and other Total
GBP'000 GBP'000 GBP'000
------------------------------- ------------ ------------- ---------
At 1 April 2020 (65) (270) (335)
Use of loss brought forward - 32 32
Debit to the income statement (59) (38) (97)
------------------------------- ------------ ------------- ---------
At 1 April 2021 (124) (276) (400)
------------------------------- ------------ ------------- ---------
Use of loss brought forward 119 (170) (51)
Debit to the income statement - 37 37
------------------------------- ------------ ------------- ---------
At 31 March 2022 (5) (409) (414)
------------------------------- ------------ ------------- ---------
Deferred income tax assets are recognised for tax loss carried
forward to the extent that the realisation of the related tax
benefit through future taxable profits is probable. The Group did
not recognise deferred income tax assets of GBP152 (2021:
GBP11,000) in respect of losses amounting to GBP800 (2021:
GBP58,000) that can be carried forward against future taxable
income. Losses amounting to GBPnil (2021: GBPnil) and GBPnil (2021:
GBPnil) expire in 2021 and 2022, respectively.
25. Financial instruments and risk profile
Financial risk management
Procedures and controls are in place to identify, assess and
ultimately control the financial risks faced by the Group arising
from its use of financial instruments. Steps are taken to mitigate
identified risks with established and effective procedures and
controls, efficient systems and the adequate
training of staff.
The Group's risk appetite, along with the procedures and
controls mentioned above, are laid out in the Group's Internal
Capital Adequacy Assessment Process document prepared in accordance
with the requirements of the Financial Conduct Authority ("the
FCA").
The overall risk appetite for the Group is considered by
Management to be low, despite operating in a marketplace where
financial risk is inherent
in investment management and financial services.
The Group considers its financial risks arising from its use of
financial instruments to fall into three main categories:
(i) credit risk;
(ii) liquidity risk; and
(iii) market risk.
Financial risk management is a central part of the Group's
strategic management which recognises that an effective risk
management programme can increase a business's chances of success
and reduce the possibility of failure. Continual assessment,
monitoring and updating of procedures and benchmarks are all
essential parts of the Group's risk management strategy.
(i) Credit risk management practices
The Group's credit risk is the risk of loss through default by a
counterparty and, accordingly, the Group's definition of default is
primarily attributable to its trade receivables or pledged
collateral which is the risk that a client, market counterparty or
recognised stock exchange will be unable to pay amounts to settle a
trade in full when due. Other credit risks, such as free delivery
of securities or cash, are not deemed to be significant.
Significant changes in the economy or a particular sector could
result in losses that are different from those that the Group has
provided for at the year-end date.
All financial assets at the year-end were assessed for credit
impairment and no material amounts have arisen having evaluated the
age of overdue debtors, the quality of recourse to third parties
and the availability of mitigation through the disposal of liquid
collateral in the form of marketable securities. The Group's
write-off policy is driven by the historic dearth of instances
where material irrecoverable losses have been incurred. Where the
avenues of recourse and mitigation outlined above have not been
successful, the outstanding balance, or residual balance if sale
proceeds do not fully cover an exposure, will be written off.
The Board is responsible for oversight of the Group's credit
risk. The Group accepts a limited exposure to credit risk but aims
to mitigate and minimise the risk through various methods. There is
no material concentrated credit risk as the exposures are spread
across a substantial number of clients and counterparties.
Trade receivables (includes settlement balances)
Settlement risk arises in any situation where a payment of cash
or transfer of a security is made in the expectation of a
corresponding delivery
of a security or receipt of cash. Settlement balances arise with
clients, market counterparties and recognised stock exchanges.
In the vast majority of cases, control of the stock purchased
will remain with the Group until client monetary balances are fully
settled.
Where there is an absence of securities collateral, clients are
usually required to hold sufficient funds in their managed deposit
account prior to the trade being conducted. Holding significant
amounts of client money helps the Group to manage credit risks
arising with clients. Many of our clients also hold significant
amounts of stock and other securities in our nominee subsidiary
company, providing additional security should a specific
transaction fail to be settled and the proceeds of such securities
disposed of can be used to settle all outstanding obligations.
In addition, the client side of settlement balances are normally
fully guaranteed by our commission-sharing certified persons who
conduct transactions and manage the relationships with our mutual
clients.
Exposures to market counterparties also arise in the settlement
of trades or when collateral is placed with them to cover open
trading positions. Market counterparties are usually other
FCA-regulated firms and are considered creditworthy, some reliance
being placed on the fact that other regulated firms would be
required to meet the stringent capital adequacy requirements of the
FCA.
Maximum exposure to credit risk:
2022 2021
GBP'000 GBP'000
------------------------- --------- ---------
Cash 11,113 8,855
Trade receivables 42,898 40,633
Other debtors 1,522 2,447
Accrued interest income 108 55
------------------------- --------- ---------
55,641 51,990
------------------------- --------- ---------
An ageing analysis of the Group's financial assets is presented
in the following table:
Over
0-1 2-3 3 Carrying
Current month months months value
At 31 March 2022 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Trade receivables 42,459 245 179 15 42,898
Cash and cash equivalent 11,113 - - - 11,113
Other debtors 1,469 11 1 41 1,522
Accrued interest income 108 - - - 108
-------------------------- --------- --------- --------- --------- ---------
55,149 256 180 56 55,641
-------------------------- --------- --------- --------- --------- ---------
Expected credit loss
The Group applies the IFRS 9 simplified approach to measuring
expected credit losses using a lifetime expected credit loss
provision for trade receivables and contract assets. To measure
expected credit losses on a collective basis, trade receivables and
contract assets are grouped based on similar credit risk and
ageing. The contract assets have similar risk characteristics to
the trade receivables for similar types of contracts.
The Group undertakes a daily assessment of credit risk which
includes monitoring of client and counterparty exposure and credit
limits. New clients are individually assessed for their
creditworthiness using external ratings where available and all
institutional relationships are monitored at regular intervals.
As at 31 March 2022, the Directors of the Company reviewed and
assessed the Group's existing assets for impairment using the IFRS
9 simplified approach to measuring expected credit losses using a
lifetime expected credit loss provision for trade receivables and
contract assets and no additional impairments have been recognised
on application and no material defaults are anticipated within the
next 12 months.
Concentration of credit risk
In addition, daily risk management procedures to actively
monitor disproportionately large trades by a customer or market
counterparty are in place.
The financial standing, pattern of trading, type and size of
security or instrument traded are amongst the factors taken into
consideration.
(ii) Liquidity risk
Liquidity risk is the risk that the Group is unable to meet its
payment obligations associated with its financial liabilities when
they fall due.
Historically, sufficient underlying cash has been prevalent in
the business for many years as the Group is normally
cash-generative. The risk of unexpected large cash outflows could
arise where large amounts are being settled daily of which only a
fraction forms the commission earned by the Group. This could be
due to clients settling late or bad deliveries to the market or
CREST, also resulting in a payment delay from the market side.
The Group's policy with regard to liquidity risk is to carefully
monitor balance sheet structure and borrowing limits,
including:
-- monitoring of cash positions on a daily basis;
-- exercising strict control over the timely settlement of trade debtors; and
-- exercising strict control over the timely settlement of market debtors and creditors.
The Group holds its cash and cash equivalents spread across a
number of highly rated financial institutions. All cash and cash
equivalents are short-term highly liquid investments that are
readily convertible to known amounts of cash without penalty.
All the regulated Group subsidiaries are subject to the
provisions of FCA Liquidity standards if they are within the scope
of the rules in the FCA Handbook chapter IFPRU 7.
The table below analyses the Group's cash outflow based on the
remaining period to the contractual maturity date.
Less than
1 year Total
2022 GBP'000 GBP'000
-------------------------- ---------- ---------
Trade and other payables 49,625 49,625
-------------------------- ---------- ---------
49,625 49,625
-------------------------- ---------- ---------
2021
-------------------------- ---------- ---------
Trade and other payables 47,395 47,395
-------------------------- ---------- ---------
47,395 47,395
-------------------------- ---------- ---------
(iii) Market risk
Market risk is the risk that changes in market prices such as
foreign exchange rates or equity prices, on financial assets and
liabilities will affect the Group's results. They relate to price
risk on fair value through profit or loss trading investments and
are subject to ongoing monitoring.
Fair value of financial instruments
The fair values of the Group's financial assets and liabilities
are not materially different from their carrying values as they are
valued at their realisable values. The Group's financial assets
that are classed as current asset and non-current asset investments
(fair value through profit or loss) have been revalued at 31 March
2022 using closing market prices.
A 10% fall in global equity markets would, in isolation, result
in a pre-tax decrease to net assets of GBP164,700 (2021:
GBP92,000). A 10% rise would have an equal and opposite effect.
The impact of foreign exchange and interest rate risk is not
material and is therefore not presented.
26. Trade and other payables
2022 2021
GBP'000 GBP'000
------------------------------------------------- --------- ---------
Amounts owed to clients, brokers and recognised
stock exchanges 42,325 39,951
Other creditors 2,537 3,059
Contract liability 14 28
Accrued expenses 4,749 4,357
------------------------------------------------- --------- ---------
49,625 47,395
------------------------------------------------- --------- ---------
Trade creditors and accruals comprise amounts outstanding for
investment-related transactions, to customers or counterparties,
and ongoing costs. The average credit period taken for purchases in
relation to costs is 15 days (2021: 14 days). The Directors
consider that the carrying amount of trade payables approximates to
their fair value.
27. Provisions
Provisions included in other current liabilities and long-term
liabilities are made up as follows:
Professional Client
fees payments Dilapidations Total
GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------- ------------- ---------- -------------- ---------
Provisions falling due within
one year
At start of year - 205 - 205
Additions 595 650 16 1,121
Dilapidation provision transferred
from more than one year - - 16 16
Utilisation of provision 140 (205) - (205)
------------------------------------- ------------- ---------- -------------- ---------
455 650 32 1,137
------------------------------------- ------------- ---------- -------------- ---------
Provisions falling due after
one year
At start of year - - 675 675
Dilapidation provision transferred
to less than one year - - (16) (16)
Utilisation or release of provision - - (77) (77)
Interest - - 4 4
- - 586 586
------------------------------------- ------------- ---------- -------------- ---------
Total as at 31 March 2022 455 650 618 1,723
------------------------------------- ------------- ---------- -------------- ---------
Professional fees
The Group has provided for the costs to remediate and improve
its financial crime control framework. See notes 4 and 10.
Client payments
These provisions relate to expected payments to clients for
redress, claims or complaints together with associated costs which
in the opinion of the Board, need providing for after taking into
account the risks and uncertainties surrounding such events. The
timing of these settlements are unknown but it is expected that
they will be resolved within 12 months. See notes 4 and 10.
Dilapidations
The Group, based on revised estimates, has made an additional
provision of GBP16,000 for dilapidations in connection with
acquired leasehold premises (2021: total additional provision of
GBP16,000), which is due within one year. These costs are expected
to arise at the end of each respective lease. Provisions for
dilapidations payable on leases after more than one year amounted
to GBP586,000, including interest.
The Group had six leased properties, all of which had
contractual dilapidation requirements. The dilapidation provisions
in relation to these leases range from net present values as at the
year-end of GBP10,000 to GBP525,000 per lease.
28. Lease liabilities
Computer Computer
Offices software hardware Total
Lease liabilities GBP'000 GBP'000 GBP'000 GBP'000
--------------------- --------- ---------- ---------- ---------
At 1 April 2021 3,486 261 55 3,802
Additions 104 155 - 259
Lease reassessments (417) - - (417)
Interest 87 5 1 93
Lease payments (923) (248) (21) (1,192)
--------------------- --------- ---------- ---------- ---------
At 31 March 2022 2,337 173 35 2,545
--------------------- --------- ---------- ---------- ---------
Lease liabilities profile (statement of financial 2022 2021
position) GBP'000 GBP'000
--------------------------------------------------- --------- ---------
Amounts due within one year 245 946
Amounts due after more than one year 2,300 2,856
--------------------------------------------------- --------- ---------
2,545 3,802
--------------------------------------------------- --------- ---------
2022 2021
Undiscounted lease maturity analysis GBP'000 GBP'000
-------------------------------------- --------- ---------
Within one year 340 1,069
Between one and two years 491 266
Between two and five years 2,058 3,898
Over five years 54 65
-------------------------------------- --------- ---------
Total undiscounted lease liabilities 2,943 5,298
-------------------------------------- --------- ---------
29. Called-up share capital
2022 2021
GBP'000 GBP'000
-------------------------------------------------- --------- ---------
Called-up, allotted and fully paid
43,327,328 (2021: 43,327,328) Ordinary Shares of
6(2) /(3) p each 2,888 2,888
-------------------------------------------------- --------- ---------
The Group's Articles were amended in 2010 since when there has
been no authorised share capital. Shareholders have no restrictions
on their holdings except for certain investment managers who were
awarded shares in the Group soon after joining as part of the
consideration for their client relationships. These holdings cannot
be sold for a period of four to six years from commencement
date.
The following movements in share capital occurred during the
year:
Number Share Share
of capital premium Total
shares GBP'000 GBP'000 GBP'000
------------------ ----------- --------- --------- ---------
At 1 April 2021 43,327,328 2,888 3,763 6,651
------------------ ----------- --------- --------- ---------
At 31 March 2022 43,327,328 2,888 3,763 6,651
------------------ ----------- --------- --------- ---------
The Group's capital is defined for accounting purposes as total
equity. As at 31 March 2022, this totalled GBP22,299,000 (2021:
GBP22,322,000).
The Group's objectives when managing capital are to:
-- safeguard the Group's ability to continue as a going concern
so that it can continue to provide returns for shareholders and
benefits for other stakeholders;
-- maintain a strong capital base to support the development of the business;
-- optimise the distribution of capital across the Group's
subsidiaries, reflecting the requirements of each company;
-- strive to make capital freely transferable across the Group where possible; and
-- comply with regulatory requirements at all times.
Walker Crips Group plc is classified for capital purposes as an
investment management group and performs an Internal Capital
Adequacy Assessment Process ("ICAAP"), which is presented to the
FCA on request. Regulatory capital resources for ICAAP purposes are
calculated in accordance with published rules. These require
certain adjustments to and certain deductions from accounting
capital, the latter largely in respect of intangible assets. The
ICAAP compares regulatory capital resources against regulatory
capital requirements derived using the FCA's Pillar 1 and Pillar 2
methodology.
The Group has adopted the standardised approach to calculating
its Pillar 1 credit risk component and the basic indicator approach
to calculating its operational risk component. Capital management
policy and practices are applied at both Group and entity
level.
In addition to a variety of stress tests performed as part of
the ICAAP process, and daily reporting in respect of treasury
activity, capital levels are monitored and forecast to ensure that
dividends and investment requirements are appropriately managed and
appropriate buffers are kept against adverse business
conditions.
Regulatory capital
No breaches were reported to the FCA during the financial years
ended 31 March 2022 and 2021.
Treasury shares
The Group holds 750,000 of its own shares, purchased for total
cash consideration of GBP312,000. In line with the principles of
IAS 32 these treasury shares have been deducted from equity (note
30). No gain or loss has been recognised in the income statement in
relation to these shares.
30. Reserves
Apart from share capital and share premium, the Group holds
reserves at 31 March 2022 under the following categories:
Own shares held (GBP312,000) (2021:
(GBP312,000)) * the negative balance of the Group's own shares, which
have been bought back and held in treasury.
Retained earnings GBP11,050,000 (2021:
GBP11,260,000) * the net cumulative earnings of the Group, which have
not been paid out as dividends, are retained to be
reinvested in our core, or developing, companies.
Other reserves GBP4,723,000 (2021:
GBP4,723,000) * the cumulative premium on the issue of shares as
deferred consideration for corporate acquisitions
GBP4,612,000 (2021: GBP4,612,000) and
non-distributable reserve into which amounts are
transferred following the redemption or purchase of
the Group's own shares GBP111,000 (2021: GBP111,000).
31. Cash generated by operations
2022 2021
GBP'000 GBP'000
----------------------------------------------------- --------- ---------
Operating profit for the year 326 22
Adjustments for:
Amortisation of intangibles 862 837
Changes in the fair value of deferred consideration - 31
Net change in fair value of financial instruments
at fair value through profit or loss* (347) (362)
Share of associate after tax result (57) (66)
Depreciation of property, plant and equipment 303 375
Depreciation of right-of-use assets** 873 961
Decrease in debtors*** (915) (24,572)
Increase in creditors*** 3,172 24,580
----------------------------------------------------- --------- ---------
Net cash inflow 4,217 1,806
----------------------------------------------------- --------- ---------
* Revaluation (profit)/loss on proprietary positions.
** Lease liability payment associated with RoU assets were GBP1,052,000 (2021: GBP1,133,000).
*** Cash inflow from working capital movement of GBP2,257,000
(2021: GBP8,000). The movement in working capital includes
provisions made in respect of accrued exceptional costs of
GBP1,105,000 (2021: GBP301,000). Actual cash outflow relating to
exceptional costs in the year amounted to GBP435,000 (2021:
GBP118,000).
32. Financial commitments
Capital commitments
At the end of the year, there were capital commitments of GBPnil
(2021: GBPnil) contracted but not provided for and GBPnil (2021:
GBPnil) capital commitments authorised but not contracted for.
33. Related parties
Directors and their close family members have dealt on standard
commercial terms with the Group. The commission and fees earned by
the Group included in revenue through such dealings is as
follows:
2022 2021
GBP'000 GBP'000
------------------------------------------------- --------- ---------
Commission and fees received from Directors and
their close family members 15 15
------------------------------------------------- --------- ---------
Other related parties include Charles Russell Speechlys, of
which Martin Wright, Chairman, is a Partner. Charles Russell
Speechlys provides certain legal services to the Group on normal
commercial terms and the amount paid and expensed during the year
(including the fees paid to the firm for Mr. Wright's services as
Director) was GBP268,000 (2021: GBP154,000).
Fees of GBP30,000 (2021: GBP0) were received by EnOC
Technologies Ltd from CyberQuote Pte Ltd (a company, where Hua Min
Lim is a shareholder) for the service provided on normal commercial
terms.
Commission of GBP4,245 (2021: GBP7,587) was earned by the Group
from Phillip Securities (HK) Limited (a Phillip Brokerage Pte
Limited company, where Hua Min Lim is a shareholder) having dealt
on standard commercial terms. Additionally, some custody services
are provided by Phillip Securities Pte Ltd (in Singapore, where Hua
Min Lim is a Director), again all on standard commercial terms,
both these items being included in revenue. Transactions between
the Group and its subsidiaries, which are related parties, have
been eliminated on consolidation and are accordingly not disclosed.
Remuneration of the Directors who are the key Management personnel
of the Group are disclosed in the table below.
2022 2021
GBP'000 GBP'000
--------------------------------------- --------- ---------
Key management personnel compensation
Short-term employee benefits 458 432
Post-employment benefits 33 31
Share-based payment - -
--------------------------------------- --------- ---------
491 463
--------------------------------------- --------- ---------
34. Contingent liability
From time to time, the Group receives complaints or undertakes
past business reviews, the outcomes of which remain uncertain
and/or cannot be reliably quantified based upon information
available and circumstances falling outside the Group's control.
Accordingly, contingent liabilities arise, the ultimate impact of
which may also depend upon availability of recoveries under the
Group's indemnity insurance and other contractual arrangements.
Other than the complaints deemed to be probable, the Directors
presently consider a negative outcome to be remote or a reliable
estimate of the amount of a possible obligation cannot be made. As
a result, no disclosure has been made in these financial
statements. As explained in note 4, certain provisions remain
subject to estimation uncertainty which may result in material
variations in such estimates as matters are finalised.
35. Subsequent events
There are no material events arising after 31 March 2022, which
have an impact on these financial statements.
36. Deferred cash consideration
2022 2021
GBP'000 GBP'000
------------------------------------------------------------------ --------- ---------
Due within one year
Amounts due to personnel under recruitment contracts/acquisition
agreements 89 -
------------------------------------------------------------------ --------- ---------
Due after one year
Amounts due to personnel under recruitment contracts/acquisition
agreements 29 33
------------------------------------------------------------------ --------- ---------
These amounts are based on fixed contractual terms and the fair
value of the liability approximates carrying value, due to the
consistency of the prevailing market rate of interest when compared
to the inception of liability.
The presentation of this note was amended in this financial year
to show both current and non-current liabilities for deferred cash
consideration on the face of the statement of financial position.
In previous years, deferred cash consideration was only separately
disclosed on the statement of financial position under non-current
liabilities, with current elements of deferred cash consideration
being disclosed under other creditors in note 26.
37. Share-based payments
The Group recognised total expenses in the year of GBP19,431
(2021: GBPnil) related to equity-settled share-based payment
transactions.
Free share-based payment
The Group established a single scheme in the form of conditional
share awards with a three year vesting period. No performance
conditions were attached to the scheme except that the relevant
employee is employed at the vesting date. This was settled by the
purchase of shares in the open market in benefit of the employee
and no newly issued or treasury shares can be used to satisfy the
award.
One award was made in the financial year.
Share Incentive Plan ("SIP")
Employees who have been employed for longer than three months
and are subject to PAYE are invited to join the SIP. Employees may
use funds from their gross monthly salary (being not less than
GBP10 and not greater than GBP150) to purchase ordinary shares in
the Group ("Partnership Shares"). For every Partnership Share
purchased, the employee receives matching shares at a rate of 50%.
Employees are offered an annual opportunity to top up contributions
to the maximum annual limit of GBP1,800 (or 10% of salary, if
lower). All shares to date awarded under this scheme have been
purchased in the market monthly. It is the intention of the
Directors to continue this policy in the year to 31 March 2023.
Company balance sheet
as at 31 March 2022
2022 2021
Note GBP'000 GBP'000
------------------------------------------------- ----- --------- ---------
Non-current assets
Other intangible assets 41 - 3,215
Property, plant and equipment 40 - 856
Investments measured at cost less impairment 42 21,757 17,775
------------------------------------------------- ----- --------- ---------
21,757 21,846
------------------------------------------------- ----- --------- ---------
Current assets
Trade and other receivables 43 758 759
Deferred tax asset 44 - 74
Cash and cash equivalents 335 359
------------------------------------------------- ----- --------- ---------
1,093 1,192
------------------------------------------------- ----- --------- ---------
Total assets 22,850 23,038
------------------------------------------------- ----- --------- ---------
Current liabilities
Trade and other payables 45 (3,407) (3,162)
------------------------------------------------- ----- --------- ---------
(3,407) (3,162)
------------------------------------------------- ----- --------- ---------
Net current assets/(liabilities) (2,314) (1,970)
------------------------------------------------- ----- --------- ---------
Long-term liabilities
Landlord contribution to leasehold improvements 48 - (335)
------------------------------------------------- ----- --------- ---------
- (335)
------------------------------------------------- ----- --------- ---------
Net assets 19,443 19,541
------------------------------------------------- ----- --------- ---------
Equity
Share capital 47 2,888 2,888
Share premium account 47 3,763 3,763
Own shares 47 (312) (312)
Retained earnings 47 8,381 8,479
Other reserves 47 4,723 4,723
------------------------------------------------- ----- --------- ---------
Equity attributable to equity holders
of the Company 19,443 19,541
------------------------------------------------- ----- --------- ---------
As permitted by section 408 of the Companies Act 2006 the Parent
Company has elected not to present its own profit and loss account
for the year. Walker Crips Group plc reported an after-tax profit
for the financial year of GBP285,000 (2021: after-tax loss of
GBP523,000).
The financial statements of Walker Crips Group plc (Company
registration no: 01432059) were approved by the Board of Directors
and authorised for issue on 29 July 2022.
Signed on behalf of the Board of Directors:
Sanath Dandeniya FCCA
Director
Company statement of changes in equity
year ended 31 March 2022
Called
up Share Own
share premium shares Retained Total
capital account held Other earnings equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------ --------- --------- --------- --------- ---------- ---------
Equity as at 31 March 2020 2,888 3,763 (312) 4,723 9,066 20,128
------------------------------------ --------- --------- --------- --------- ---------- ---------
Total comprehensive loss
for the period - - - - (523) (523)
------------------------------------ --------- --------- --------- --------- ---------- ---------
Contributions by and distributions
to owners
Dividends paid - - - - (64) (64)
------------------------------------ --------- --------- --------- --------- ---------- ---------
Total contributions by and
distributions to owners - - - - (64) (64)
------------------------------------ --------- --------- --------- --------- ---------- ---------
Equity as at 31 March 2021 2,888 3,763 (312) 4,723 8,479 19,541
------------------------------------ --------- --------- --------- --------- ---------- ---------
Total comprehensive income
for the period - - - - 285 285
------------------------------------ --------- --------- --------- --------- ---------- ---------
Contributions by and distributions
to owners
Dividends paid - - - - (383) (383)
------------------------------------ --------- --------- --------- --------- ---------- ---------
Total contributions by and
distributions to owners - - - - (383) (383)
------------------------------------ --------- --------- --------- --------- ---------- ---------
Equity as at 31 March 2022 2,888 3,763 (312) 4,723 8,381 19,443
------------------------------------ --------- --------- --------- --------- ---------- ---------
The following Accounting Policies and Notes form part of these
financial statements.
Notes to the Company accounts
year ended 31 March 2022
37. Significant accounting policies
The separate financial statements of Walker Crips Group plc, the
Parent Company, are presented as required by the Companies Act
2006.
The financial statements have been prepared under the historical
cost convention except for the modification to a fair value basis
for certain financial instruments as specified in the accounting
policies below, and in accordance with Financial Reporting Standard
(FRS 102), the Financial Reporting Standard applicable in the UK
and the Republic of Ireland, and the Companies Act 2006.
The preparation of financial statements in compliance with FRS
102 requires the use of certain critical accounting estimates. It
also requires Management to exercise judgement in applying the
Parent Company's accounting policies (see note 38).
The financial statements are presented in the currency of the
primary activities of the Parent Company (its functional currency).
For the purpose of the financial statements, the results and
financial position are presented in GBP Sterling (GBP). The
principal accounting policies have been summarised below. They have
all been applied consistently throughout the year and the preceding
year.
The Parent Company has chosen to adopt the disclosure exemption
in relation to the preparation of a cash flow statement under FRS
102.
Going concern
After conducting enquiries, the Directors believe that the
Parent Company has adequate resources to continue in existence for
the foreseeable future. Accordingly, they continue to adopt the
going concern basis in preparing the financial statements. The
Parent Company's business activities, together with the factors
likely to affect its future development, performance and position,
has been rigorously assessed.
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
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.
Intangible assets
Client lists
Client lists are recognised when it is probable that future
economic benefits will flow to the Parent Company and the cost of
the asset can be measured reliably whilst the risk and rewards have
also transferred into the Parent Company'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.
Impairment of non-financial assets
At each reporting date, the Parent Company 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.
Taxation
The tax expense represents the sum of the tax currently payable
and any deferred tax.
Current tax, including UK corporation tax and foreign tax, is
provided at amounts expected to be paid or recovered using the tax
rates and laws that have been enacted or substantively enacted by
the balance sheet date. Current tax charges arising on the
realisation of revaluation gains recognised in the statement of
comprehensive income are also recorded in this statement.
Deferred tax is recognised in respect of all timing differences
that have originated but not reversed at the balance sheet date
where transactions or events that result in an obligation to pay
more tax in the future or a right to pay less tax in the future
have occurred at the balance sheet date.
A deferred tax asset is regarded as recoverable and therefore
recognised only when, on the basis of all available evidence, it
can be regarded as probable that there will be suitable taxable
profits from which the future reversal of the underlying timing
differences can be deducted. Deferred tax assets and liabilities
are not discounted.
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.
Financial instruments
Financial assets and financial liabilities are recognised in the
balance sheet when the Parent Company becomes a party to the
contractual provisions of the instrument. Section 11 of FRS 102 has
been applied in classifying financial instruments depending on the
nature of the instrument held.
Revenue
Income consists of profits distribution from Barker Poland Asset
management LLP, interest received or accrued over time and dividend
income recorded when received.
Investments in subsidiaries
Investments in subsidiaries are stated at cost less, where
appropriate, provisions for impairment.
Debtors
Other debtors are classified as basic financial instruments and
measured at initial recognition at transaction price. Debtors are
subsequently measured at amortised cost using the effective
interest rate method. A provision is established when there is
objective evidence that the Group will not be able to collect all
amounts due.
Cash and cash equivalents
Cash and cash equivalents comprise cash in hand and demand
deposits, together with other short-term highly liquid investments,
which are readily convertible to a known amount of cash and are
subject to an insignificant risk of changes in value.
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 Parent Company after
deducting all of its liabilities. Equity instruments issued by the
Parent Company are recorded at the proceeds received, net of direct
issue costs.
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.
38. Key sources of estimation uncertainty and judgements
The preparation of financial statements in conformity with
generally accepted accounting practice requires Management to make
estimates and judgements that affect the reported amounts of assets
and liabilities as well as the disclosure of contingent assets and
liabilities at the balance sheet date and the reported amounts of
revenues and expenses during the reporting period.
Intangible assets
Acquired client lists are capitalised based on current fair
values. 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 consider a life of up to 20 years to be both
appropriate and in line with our peers. There were no acquisitions
made in the period to 31 March 2022.
On 1 April 2021, the Company transferred the net book value of
client list assets, as well as corresponding liabilities to a fully
owned subsidiary Walker Crips Investment Management Limited to
reflect the correct substance of historical transactions that
created them on the balance sheet of the Company (see note 41). The
adjustment had no impact on the financial performance or position
of the Group.
39. Profit for the year
Profit for the financial year of GBP285,000 (2021: loss of
GBP523,000) is after an amount of GBP51,000 (2021: GBP57,000)
related to the auditor's remuneration for audit services to the
Parent Company.
Particulars of employee costs (including Directors) are as shown
below. Employee costs during the year amounted to:
2022 2021
GBP'000 GBP'000
--------------------------------------------- --------- ---------
Employee costs during the year amounted to:
Wages and salaries 175 147
Social security costs 25 12
Other costs - 3
--------------------------------------------- --------- ---------
200 162
--------------------------------------------- --------- ---------
In the current year, employee costs are those of the
Non-Executive Directors, a proportion of Executive Directors and
the cost of the Group's profit share scheme. The remaining
Executive Directors' employee costs are borne by Walker Crips
Investment Management Limited.
The monthly average number of staff employed during the year
was:
2022 2021
Number Number
------------------------- -------- --------
Executive Directors 2 2
Non-Executive Directors 4 4
------------------------- -------- --------
6 6
------------------------- -------- --------
40. Property, plant and equipment
Leasehold
improvements,
furniture
and Computer
equipment software Total
GBP'000 GBP'000 GBP'000
---------------------------------- --------------- ---------- ---------
Cost
At 1 April 2021 1,674 858 2,532
Asset transfers on 1 April 2021* (1,674) - (1,674)
---------------------------------- --------------- ---------- ---------
At 31 March 2022 - 858 858
---------------------------------- --------------- ---------- ---------
Depreciation
At 1 April 2021 818 858 1,676
Asset transfers on 1 April 2021* (818) - (818)
Charge for the year - - -
---------------------------------- --------------- ---------- ---------
At 31 March 2022 - 858 858
---------------------------------- --------------- ---------- ---------
Net book value
---------------------------------- --------------- ---------- ---------
At 31 March 2022 - - -
---------------------------------- --------------- ---------- ---------
At 31 March 2021 856 - 856
---------------------------------- --------------- ---------- ---------
* The cost and accumulated depreciation of leasehold additions,
property dilapidation assets and liabilities were transferred on 1
April 2021 to subsidiary Walker Crips Investment Management Limited
to reflect the real obligation of the subsidiary to pay for the
future works. The adjustment had no impact on the financial
performance or position of the Group, in the current year or prior
periods, due to the fact that Walker Crips Investment Management
Limited is a wholly owned subsidiary.
41. Other intangible assets
Client
lists Total
GBP'000 GBP'000
---------------------------------- --------- ---------
Cost
At 1 April 2021 5,076 5,076
Asset transfers on 1 April 2021* (5,076) (5,076)
---------------------------------- --------- ---------
At 31 March 2022 - -
---------------------------------- --------- ---------
Amortisation
At 1 April 2021 1,861 1.861
Asset transfers on 1 April 2021* (1,861) (1,861)
Charge for the year - -
---------------------------------- --------- ---------
At 31 March 2022 - -
---------------------------------- --------- ---------
Net book value
---------------------------------- --------- ---------
At 31 March 2022 - -
---------------------------------- --------- ---------
At 31 March 2021 3,215 3,215
---------------------------------- --------- ---------
* On 1 April 2021, the Company transferred the net book value of
client list assets, as well as corresponding liabilities to a fully
owned subsidiary Walker Crips Investment Management Limited to
reflect the correct substance of historical transactions that
created them on the balance sheet of the Company. The adjustment
had no impact on the financial performance or position of the
Group, in the current year or prior periods, due to the fact that
Walker Crips Investment Management Limited is a wholly owned
subsidiary.
42. Investments measured at cost less impairment
2022 2021
GBP'000 GBP'000
------------------------- --------- ---------
Subsidiary undertakings 21,757 17,775
------------------------- --------- ---------
During the year, the Company made an investment of GBP250,000 in
Walker Crips Wealth Management Limited, an indirect 100% owned
subsidiary of the Group. The Company also recognised at GBP41,352
the investment value at cost of Investorlink Limited, an
historically owned dormant subsidiary, which was not previously
recognised in monetary terms in investments.
In addition, on 1 April 2021, the Company transferred the
carrying value of intangible assets, property related assets and
related liabilities to its wholly owned subsidiary, Walker Crips
Investment Management Limited ("WCIM"). The transaction was funded
in WCIM by raising an amount of GBP3,690,000 by way of a capital
contribution from the Company. The Company recognised the capital
contribution as an increase in its investment in WCIM by
GBP3,690,000.
A complete list of subsidiary undertakings can be found in note
53.
43. Trade and other receivables
2022 2021
GBP'000 GBP'000
------------------------------------ --------- ---------
Amounts owed by Group undertakings 758 751
Prepayments and accrued income - 8
------------------------------------ --------- ---------
758 759
------------------------------------ --------- ---------
A presentational change was made in this note to exclude the
deferred tax asset from this grouping and to present it in its own
line on the face of the statement of financial position. The
deferred tax asset is presented separately in note 44.
44. Deferred taxation
2022 2021
GBP'000 GBP'000
----------------------------------------- --------- ---------
At 1 April 74 179
Use of Group Relief (14) (40)
(Charge)/credit to the income statement (60) (65)
----------------------------------------- --------- ---------
At 31 March - 74
----------------------------------------- --------- ---------
Deferred tax has been provided at 25% (2021: 19%).
In the Spring Budget 2021, the Government announced that from 1
April 2023, the UK corporation tax rate will increase from 19% to
25%. This will have a consequential effect on the Company's future
tax charge.
45. Trade and other payables
2022 2021
GBP'000 GBP'000
---------------------------------------- --------- ---------
Accruals and deferred income 61 142
Amounts due to subsidiary undertakings 3,270 2,730
Other creditors 76 290
---------------------------------------- --------- ---------
3,407 3,162
---------------------------------------- --------- ---------
46. Risk management policies
Procedures and controls are in place to identify, assess and
ultimately control the financial risks faced by the Parent Company
arising from its use of financial instruments. Steps are taken to
mitigate identified risks with established and effective procedures
and controls, efficient systems and the adequate training of
staff.
The Parent Company's risk appetite, along with the procedures
and controls mentioned above, are laid out in the Group's Internal
Capital Adequacy Assessment Process document prepared in accordance
with the requirements of the Financial Conduct Authority
("FCA").
The overall risk appetite for the Parent Company and for the
Group as a whole is considered by Management to be low, despite
operating in a market-place where financial risk is inherent in the
core businesses of investment management and financial
services.
The Group considers its financial risks arising from its use of
financial instruments to fall into three main categories:
(i) credit risk;
(ii) liquidity risk; and
(iii) market risk.
Further information on the disclosures and policies carried out
by the Parent Company and the Group are made in note 25 of the
consolidated financial statements.
(i) Credit risk
Maximum exposure to credit risk:
2022 2021
GBP'000 GBP'000
---------------- --------- ---------
Cash 335 359
Other debtors 758 751*
---------------- --------- ---------
As at 31 March 1,093 1,110
---------------- --------- ---------
The credit quality of banks holding the Group's cash at 31 March
2022 is analysed below with reference to credit ratings awarded by
Fitch.
2022 2021
GBP'000 GBP'000
---------------- --------- ---------
A - -
A+ 335 359
AA- - -
---------------- --------- ---------
As at 31 March 335 359
---------------- --------- ---------
Analysis of other debtors due from financial institutions:
2022 2021
GBP'000 GBP'000
-------------------------------- ------------ --------- ---------
Neither past due, nor impaired 758 751*
Amounts past due, but not
impaired < 30 days - -
> 30 days - -
> 3 months - -
--------------------------------------------- --------- ---------
- -
--------------------------------------------- --------- ---------
* These disclosures were omitted in the prior year. The
correction of these items in prior year do not affect profit or
loss or the statement of financial position in the prior or current
year. These amounts are for disclosure purposes only.
(ii) Liquidity risk
The tables below analyse the Parent Company's future
undiscounted cash outflows based on the remaining period to the
contractual maturity date:
2022 2021
GBP'000 GBP'000
---------------------------------------- --------- ---------
Creditors due within one year 3,407 3,162
Creditors due after more than one year - -
---------------------------------------- --------- ---------
As at 31 March 3,407 3,162
---------------------------------------- --------- ---------
2022 2021
GBP'000 GBP'000
---------------------------- --------- ---------
Within one year 3,407 3,162
Within two to five years - -
After more than five years - -
---------------------------- --------- ---------
As at 31 March 3,407 3,162
---------------------------- --------- ---------
(iii) Market risk
Market risk is the risk that changes in market prices such as
foreign exchange rates or equity prices will affect the Group's
income.
These relate to price risk breached on available-for-sale and
trading investments and closely monitored using limits to prevent
significant losses.
Fair value of financial instruments
No financial instruments at fair value were held by the Parent
Company in the current or prior financial year.
47. Called-up share capital
2022 2021
GBP'000 GBP'000
-------------------------------------------------- --------- ---------
Called-up, allotted and fully paid
43,327,328 (2021: 43,327,328) Ordinary Shares of
6(2) /(3) p each 2,888 2,888
-------------------------------------------------- --------- ---------
No new shares were issued in the year to 31 March 2022 or the
prior year.
The Parent Company holds 750,000 of its own shares, purchased
for a total cash consideration of GBP312,000. In line with the
principles of FRS 102, section 11, these treasury shares have been
deducted from equity. No gain or loss has been recognised in the
profit and loss account in relation to these shares.
The following movements in share capital occurred during the
year:
Share Share
Number capital premium Total
of shares GBP'000 GBP'000 GBP'000
------------------ ----------- --------- --------- ---------
At 1 April 2021 43,327,328 2,888 3,763 6,651
------------------ ----------- --------- --------- ---------
At 31 March 2022 43,327,328 2,888 3,763 6,651
------------------ ----------- --------- --------- ---------
Walker Crips is classified for capital purposes as an Investment
Management group and performs an Internal Capital Adequacy
Assessment Process ("ICAAP"), which is presented to the FCA on
request. Regulatory capital resources for ICAAP purposes are
calculated in accordance with published rules. These require
certain adjustments to and certain deductions from accounting
capital, the latter largely in respect of intangible assets. The
ICAAP compares regulatory capital resources against regulatory
capital requirements derived using the FCA's Pillar 1 and Pillar 2
methodology. The Group has adopted the standardised approach to
calculating its Pillar 1 credit risk component and the basic
indicator approach to calculating its operational risk component.
Capital management policy and practices are applied at both Group
and entity level.
In addition to a variety of stress tests performed as part of
the ICAAP process, and daily reporting in respect of treasury
activity, capital levels are monitored and forecast to ensure that
dividends and investment requirements are appropriately managed and
appropriate buffers are kept against adverse business
conditions.
Apart from share capital and share premium, the Parent Company
holds reserves at 31 March 2022 under the following categories:
Own shares held (GBP312,000) (2021:
(GBP312,000)) * the negative balance of the Parent Company's own
shares that have been bought back and held in
treasury.
Retained earnings GBP8,381,000 (2021:
GBP8,479,000) * the net cumulative earnings of the Parent Company,
which have not paid out as dividends, retained to be
reinvested in our core or new business.
Other reserves GBP4,723,000 (2021:
GBP4,723,000) * the cumulative premium on the issue of shares as
deferred consideration for corporate acquisitions
GBP4,612,000 (2021: GBP4,612,000) and
non-distributable reserve into which amounts are
transferred following the redemption or purchase of
the Group's own shares GBP111,000 (2021: GBP111,000).
48. Creditors: amounts falling due after more than one year
2022 2021
GBP'000 GBP'000
------------------------------------------------- ---------- ---------
Landlord contribution to leasehold improvements - 335
------------------------------------------------- ---------- ---------
- 335
------------------------------------------------------------ ---------
The landlord contribution towards leasehold improvements was
transferred on 1 April 2021 to subsidiary Walker Crips Investment
Management Limited to reflect the real obligation of the subsidiary
to pay for the future works. The adjustment had no impact on the
financial performance or position of the Group, in the current year
or prior periods, due to the fact that Walker Crips Investment
Management Limited is a wholly owned subsidiary.
49. Financial commitments
Capital commitments
At the end of the year, there were capital commitments of GBPnil
(2021: GBPnil) contracted but not provided for and GBPnil (2021:
GBPnil) capital commitments authorised but not contracted for.
Lease commitments
The Company did not have any annual commitments under
non-cancellable operating leases (2021: GBPnil).
50. Related party transactions
Key Management are those persons having authority and
responsibility for planning, controlling and directing the
activities of the Parent Company and Group. In the opinion of the
Board, the Parent Company and Group's key Management are the
Directors of Walker Crips Group plc.
Total compensation to key management personnel is GBP491,000
(2021: GBP463,000).
51. Contingent liability
From time to time, the Company receives complaints or undertakes
past business reviews, the outcomes of which remain uncertain
and/or cannot be reliably quantified based upon information
available and circumstances falling outside the Company's control.
Accordingly contingent liabilities arise, the ultimate impact of
which may also depend upon availability of recoveries under the
Company's indemnity insurance and other contractual arrangements.
Other than the complaints deemed to be probable, the Directors
presently consider a negative outcome to be remote or a reliable
estimate of the amount of a possible obligation cannot be made. As
a result, no disclosure has been made in these financial
statements.
52. Subsequent events
There are no material events arising after 31 March 2022, which
have an impact on these financial statements.
53. Subsidiaries and associates
Principal place Class and percentage
of business Principal activity of shares held
-------------------------- ---------------- ---------------------- ---------------------
Group
-------------------------- ---------------- ---------------------- ---------------------
Trading subsidiaries
-------------------------- ---------------- ---------------------- ---------------------
Walker Crips Investment United Kingdom Investment management Ordinary Shares
Management Limited(1) 100%
-------------------------- ---------------- ---------------------- ---------------------
London York Fund United Kingdom Management services Ordinary Shares
Managers Limited(2) 100%
-------------------------- ---------------- ---------------------- ---------------------
Walker Crips Wealth United Kingdom Financial services Ordinary Shares
Management Limited(2) advice 100%
-------------------------- ---------------- ---------------------- ---------------------
Ebor Trustees Limited(2) United Kingdom Pensions management Ordinary Shares
100%
-------------------------- ---------------- ---------------------- ---------------------
EnOC Technologies United Kingdom Financial regulation Ordinary Shares
Limited(1) and other software 100%
-------------------------- ---------------- ---------------------- ---------------------
Barker Poland Asset United Kingdom Investment management Membership 100%
Management LLP(1)
-------------------------- ---------------- ---------------------- ---------------------
Non-trading subsidiaries
-------------------------- ---------------- ---------------------- ---------------------
Walker Crips Financial United Kingdom Financial services Ordinary Shares
Services Limited(1) 100%
-------------------------- ---------------- ---------------------- ---------------------
G & E Investment United Kingdom Holding company Ordinary Shares
Services Limited(2) 100%
-------------------------- ---------------- ---------------------- ---------------------
Ebor Pensions Management United Kingdom Dormant company Ordinary Shares
Limited(2) 100%
-------------------------- ---------------- ---------------------- ---------------------
Investorlink Limited(1) United Kingdom Agency stockbroking Ordinary Shares
100%
-------------------------- ---------------- ---------------------- ---------------------
Walker Cambria Limited(1) United Kingdom Dormant company Ordinary Shares
100%
-------------------------- ---------------- ---------------------- ---------------------
Walker Crips Trustees United Kingdom Dormant company Ordinary Shares
Limited(1) 100%
-------------------------- ---------------- ---------------------- ---------------------
W.B. Nominees Limited(1) United Kingdom Nominee company Ordinary Shares
100%
-------------------------- ---------------- ---------------------- ---------------------
WCWB (PEP) Nominees United Kingdom Nominee company Ordinary Shares
Limited(1) 100%
-------------------------- ---------------- ---------------------- ---------------------
WCWB (ISA) Nominees United Kingdom Nominee company Ordinary Shares
Limited(1) 100%
-------------------------- ---------------- ---------------------- ---------------------
WCWB Nominees Limited(1) United Kingdom Nominee company Ordinary Shares
100%
-------------------------- ---------------- ---------------------- ---------------------
Walker Crips Consultants United Kingdom Dormant company Ordinary Shares
Limited(1) 100%
-------------------------- ---------------- ---------------------- ---------------------
Walker Crips Ventures United Kingdom Financial services Ordinary Shares
Limited(1) advice 100%
-------------------------- ---------------- ---------------------- ---------------------
The registered office for companies and associated undertakings
is:
1 Old Change House, 128 Queen Victoria Street, London, England, EC4V 4BJ.
2 Apollo House, Eboracum Way, York, England, YO31 7RE.
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END
FR UKVORUKUBUAR
(END) Dow Jones Newswires
July 29, 2022 10:01 ET (14:01 GMT)
Walker Crips (LSE:WCW)
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