REG - Walker Crips Group - Half-year Report
16/12/2021 07:00
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RNS Number : 8126V Walker Crips Group plc 16 December 2021
Walker Crips Group plc
("Walker Crips", the "Company" or the "Group"),
Results for the six months ended 30 September 2021
Highlights
· Total revenues of £15.69 million representing growth of 9.3% on the
comparative period last year (2020: £14.35 million)
· Adjusted EBITDA £1.29 million (2020: £0.81 million) ( 1 )
· Underlying cash generated from operations £0.55 million (2020:
£0.17 million) ( 2 )
· Operating profit pre-exceptional items ( 3 )£232,000 (2020:
operating loss of £272,000) and operating profit post-exceptional items ( 3
)120,000 (2020: operating loss of £374,000)
· Profit before tax pre- exceptional items ( 3 ) £166,000 (2020:
loss before tax £349,000) and profit before tax post-exceptional items ( 3 )
£54,000 (2020: loss before tax £451,000)
· Net cash position of £8.38 million (2020: £7.81 million)
· Assets Under Management ("AUM") increased by 5.9% to £3.6 billion
from March 2021 (2020: £3.1 billion)
· Total Assets Under Management and Administration ("AUMA") increased
by 5.6% to £5.7 billion from March 2021 (2020: £4.8 billion)
· Interim dividend increased to 0.30 pence per share (2020: 0.15 pence
per share)
1 Adjusted EBITDA represents earnings before exceptional items ( 3 ),
interest, taxation, depreciation and amortisation on an IFRS basis. The
Directors present this result as it is a metric widely used by stakeholders
when considering an entity's financial performance. A full reconciliation is
provided in the Chairman's statement.
2 Underlying cash generated from operations shows 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 reported results is
presented in the Chairman's statement.
3 Exceptional items are disclosed in note 10 to the accounts and a full
reconciliation to reported results is presented in the Chairman's statement.
Martin Wright, Chairman of Walker Crips, commented:
The Group reports a small profit at the half-year compared to the prior period
loss, and continues to generate positive adjusted EBITDA ( 1 ) and underlying
operating cash ( 2 ), which enable continued support of our revenue and growth
initiatives. Headwinds include inflationary cost pressures and our focus
continues to be on revenue growth, improving operating efficiency and cost
control.
For further information, please contact:
Walker Crips Group plc Tel: +44 (0)20 3100 8000
Craig Harrison, Media Relations
Four Communications Tel: +44 (0)20 3697 4200
Mark Knight
walkercrips@fourcommunications.com (mailto:walkercrips@fourcommunications.com)
Singer Capital Markets Tel: +44 (0)20 7496 3000
Will Goode / George Tzimas
Further information on Walker Crips Group is available on the Company's website:
www.walkercrips.co.uk (http://www.walkercrips.co.uk)
Chairman's statement
Introduction
The Group reports an operating profit at the half-year, which is explained
more fully in the trading update below. Behind the headline figures, progress
is being made on a number of fronts. Specifically, the Group continues to
implement its restructuring strategy to improve operating margins for the
Investment Management division and its renewed growth strategy for the Wealth
Management division. Tangible progress is being made and we will remain
focused on this objective, noting that it will take time to execute fully and
bring further improvement in profitability, particularly given the cost
pressures we are currently experiencing. The increase in reported revenue is
pleasing and reflects the continuing broad improvement across most business
lines that we saw in the second half of last year.
AUMA recovered to £5.7 billion, up 5.6% from March 2021 (£5.4 billion). The
Group balance sheet and capital base remain sufficiently robust to support our
growth strategy and the payment of a modest interim dividend. As at the
reporting date, the Group's net assets are £22.1 million (September 2020:
£22.3 million; March 2021: £22.3 million) and net cash surplus is £8.4
million (September 2020: £7.8 million; March 2021: £8.9 million). The Group
capital surplus remains above 200%.
Group performance
The Group's revenue is £1.34 million (9.3%) up compared to the comparative
period last year, this has been principally driven by the recovery in markets
seen since the second half of the prior year. Breaking this down, broking
commissions income rose by £115,000 (2.9%) and non-broking income by £1.2
million (11.8%). Within non-broking income, an improved performance from our
structured products service was largely offset by reduced profitability from
our arbitrage desk and lower interest income on client deposits.
Pre-exceptional items, operating profit and profit before tax are £232,000
(2020: loss of £272,000) and £166,000 (2020: loss of £349,000),
respectively.
The increase in revenues and operating margin has led to a £481,000 (60%)
improvement in reported adjusted EBITDA and £378,000 (223%) improvement in
underlying cash generation. Although the actions we are taking to improve
operating margins are beginning to come through, with the reported gross
margin now 70.2% compared to 68.6% in the prior period, this improvement is
offset by a £659,000 increase in administrative expenses before exceptional
items. The period-on-period increase also reflects the fact that the
Directors took a three-month 20% voluntary pay reduction last year.
Additionally, the growth strategy for our Wealth Management division means we
invest in new teams before they start generating revenue. Adjusting the
investment made in new teams and the prior period voluntary pay reduction,
pre-exceptional administrative expenses have risen by 3%, which is in line
with the rise in CPI over the 12 months to September 2021. However, we are
experiencing inflationary pressures in many areas, including salaries. We are
also reviewing and investing in our business and compliance functions as we
implement improvements and respond to new regulations, which will add extra
costs to our operations in the second half of the year.
The reorganisation of our business continues, with further redundancies
concluded in the period in connection with the ongoing project to rationalise
the number of regulated entities. We report such related costs of £336,000
(2020: £102,000) as exceptional items. In addition, following a successful
legal challenge in connection with establishing client ownership, we
recognised exceptional income, net of related costs, of £224,000. After
exceptional items, the Group's operating result is a profit of £120,000
(2020: loss of £374,000), profit before tax of £54,000 (2020: loss of
£451,000) and profit after tax of £44,000 (2020: loss of £366,000).
Reconciliation of operating profit / (loss) to operating profit / (loss)
before exceptional items
Unaudited Unaudited Audited
September
September
March
2021
2020
2021
£'000 £'000 £'000
Operating profit / (loss) 120 (374) 22
Exceptional items (note 10) 112 102 419
Operating profit / (loss) before exceptional items 232 (272) 441
Reconciliation of profit / (loss) before tax to profit / (loss) before tax and
exceptional items
Unaudited Unaudited Audited
September
September
March
2021
2020
2021
£'000 £'000 £'000
Profit / (loss) profit before tax 54 (451) (114)
Exceptional items (note 10) 112 102 419
Profit / (loss) before tax and exceptional items 166 (349) 305
Adjusted EBITDA
Unaudited Unaudited Audited
September
September
March
2021
2020
2021
£'000 £'000 £'000
Operating profit / (loss) 120 (374) 22
Exceptional items (note 10) 112 102 419
Amortisation / depreciation 563 604 1,212
Right-of-use-assets depreciation charge 493 475 961
Adjusted EBITDA 1,288 807 2,614
Underlying cash generated by the Group
Unaudited Unaudited Audited
September
September
March
2021
2020
2021
£'000 £'000 £'000
Net cash inflow from operations 213 5 1,806
Working capital 768 618 (8)
Lease liability payments under IFRS 16 (545) (555) (1,133)
Exceptional items (note 10) 112 102 419
Underlying cash generated in the period 548 170 1,084
Investment Management
The Group's Investment Management division returned an operating profit of
£688,000 for the six-month period compared to £285,000 in the previous year.
As noted above, significantly higher income from fees, commissions and
structured products were partially offset by reduced income from the arbitrage
desk, reduced interest income and exceptional costs. The actions underlying
the significant exceptional costs should contribute positively in the second
half of the year, helping mitigate current cost pressures and initiatives
noted previously. There are likely to be further exceptional costs as we
continue to progress the Group restructuring programme.
The development of the Group's model portfolio service ("MPS") capabilities
continued during the period, with all MPS teams enjoying steady growth in AUM
due both to performance and organic growth. Our various MPS teams in Barker
Poland Asset Management LLP, and offices in York, London and Truro contributed
their knowledge and expertise to our 'Investment Senate', chaired by our CIO,
which oversaw the asset allocation and security selection of the Group's
York-based "Service First" model portfolio brand.
Wealth Management
Our Wealth Management division's turnover increased by 5.46% to £850,000 with
AUM increasing by 17.2% to £438 million compared to March 2021. The division
has also benefited from exceptional income arising from a successful legal
challenge relating to client ownership. Since the start of the financial year
a new team of financial planners has joined. Although the costs of the new
team have contributed to the division reporting a loss for the period, new
clients are now being onboarded and revenue is being generated, which should
contribute to improved performance in the second half of the year.
Group strategy
We remain confident in our strategy to grow our core business and
commercialise our technological capabilities. The Investment Management
division's project to improve operating margins will be a long-term exercise,
with the overall impact on operating margins likely to be positive, but is
unlikely to be smooth, from reporting period to reporting period. The Wealth
Management division is focused on generating organic revenue growth and
through the recruitment of new revenue-generating advisers, which may lead to
short-term drags due to recruitment costs and the time needed to bed-down new
advisers, and the acquisition of client-lists. Headwinds also include the
inflationary cost pressures we face, including salaries and recruitment, and
the investment in our compliance infrastructure. The initiatives are key to
building a business that is sustainably profitable and competitive, whilst
recognising the need to restore performance as quickly as possible.
Dividends
The Board has declared an interim dividend of 0.30 pence per share (2020: 0.15
pence per share), which will be paid on 7 January 2022 to shareholders on the
register on 24 December 2021. The ex-dividend date will be 23 December 2021.
Our aim is to always reward shareholders for their continued support. The
Board will continue to monitor the Group's progress, and set the final
dividend based on performance, capital headroom, market outlook and short-term
and long-term cash flow considerations.
Our community
We believe that even during challenging times, it is important that we
continue to support our chosen charities. In addition to providing financial
support, we endeavour to do more by using our technological capabilities for
good, by engaging in technology philanthropy, using technology as a catalyst
to boost the efforts of charitable organisations, working with them to design,
deploy and maintain those systems.
Our partner charity's mission, www.twiningenterprise.org.uk, is 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 suffering
from mental health issues 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. The mission and efforts of
Twining were proven to be especially crucial, as 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.
Outlook
There is little doubt that we have a difficult year ahead. Despite reporting
a small profit for the first half, we are clearly not out of the pandemic
driven uncertainties and there are inflationary and regulatory cost pressures
on the business. We are resolute in our determination to address these
challenges, to continue to progress our key initiatives and to maintain the
delivery of high standards of customer service.
Martin Wright
Chairman
16 December 2021
Walker Crips Group plc
Condensed consolidated income statement
For the six months ended 30 September 2021
Unaudited Unaudited Audited
September
September
March
2021
2020
2021
Notes £'000 £'000 £'000
Revenue 4, 7 15,690 14,350 30,348
Commissions and fees paid 8 (4,725) (4,543) (9,702)
Share of after-tax profit of associate 9 43 38 66
Gross profit 11,008 9,845 20,712
Administrative expenses (10,776) (10,117) (20,271)
Exceptional items 10 (112) (102) (419)
Operating profit / (loss) 4 120 (374) 22
Investment revenue - 2 10
Finance costs (66) (79) (146)
Profit / (loss) before tax 54 (451) (114)
Taxation (10) 85 (144)
Profit / (loss) for the period attributable to equity holders of the Parent 44 (366) (258)
Company
Earnings / (loss) per share
Basic and diluted 5 0.10p (0.86)p (0.61)p
Condensed consolidated statement of comprehensive income
For the six months ended 30 September 2021
Unaudited Unaudited Audited
September
September
March
2021
2020
2021
£'000 £'000 £'000
Profit / (loss) for the period 44 (366) (258)
Total comprehensive income / (loss) for the period attributable to equity 44 (366) (258)
holders of the Parent Company
Condensed consolidated statement of financial position
As at 30 September 2021
Unaudited Unaudited Audited
September September March
2021 2020 2021
Notes £'000 £'000 £'000
Non-current assets
Goodwill 4,388 4,388 4,388
Other intangible assets 6,169 6,397 6,566
Property, plant and equipment 1,330 2,076 1,477
Right-of-use-assets 3,120 4,049 3,612
Investment in associate 9 19 4 2
Investments - fair value through profit or loss 12 37 50 37
15,063 16,964 16,082
Current assets
Trade and other receivables 30,061 17,985 49,098
Investments - fair value through profit or loss 13 1,011 958 920
Cash and cash equivalents 8,376 7,831 8,855
39,448 26,774 58,873
Total assets 54,511 43,738 74,955
Current liabilities
Trade and other payables (27,680) (15,753) (47,395)
Current tax liabilities (278) (337) (123)
Deferred tax liabilities (306) (225) (400)
Bank overdrafts - (24) -
Provisions (64) (183) (205)
Lease liabilities (621) (1,131) (946)
Dividends payable (53) - -
(29,002) (17,653) (49,069)
Net current assets 10,446 9,121 9,804
Long-term liabilities
Deferred cash consideration (33) (15) (33)
Lease liabilities (2,690) (3,133) (2,856)
Dilapidation provision (675) (659) (675)
(3,398) (3,807) (3,564)
Net assets 22,111 22,278 22,322
Equity
Share capital 2,888 2,888 2,888
Share premium account 3,763 3,763 3,763
Own shares (312) (312) (312)
Retained earnings 11,049 11,216 11,260
Other reserves 4,723 4,723 4,723
Equity attributable to equity holders of the Parent Company 22,111 22,278 22,322
Condensed consolidated statement of cash flows
For the six months ended 30 September 2021
Unaudited Unaudited Audited
September September March
2021 2020 2021
Notes £'000 £'000 £'000
Operating activities
Cash generated from operations 15 213 5 1,806
Tax paid - (109) (379)
Net cash generated from / (used in) operating activities 213 (104) 1,427
Investing activities
Purchase of property, plant and equipment (24) (46) (24)
Sale / (purchase) of investments held for trading 63 (200) 78
Consideration paid on acquisition of client lists - - (100)
Dividends received - - 8
Dividends received from associate investment 26 34 64
Interest received - 2 2
Net cash generated from / (used in) from investing activities 65 (210) 28
Financing activities
Dividends paid (202) - (64)
Interest paid (10) (9) (12)
Government grant received (#) - 76 -
Repayment of lease liabilities * (489) (485) (999)
Repayment of lease interest * (56) (70) (134)
Net cash used in financing activities (757) (488) (1,209)
Net (decrease) / increase in cash and cash equivalents (479) (802) 246
Net cash and cash equivalents at beginning of period 8,855 8,609 8,609
Net cash and cash equivalents at end of period 8,376 7,807 8,855
Cash and cash equivalents 8,376 7,831 8,855
Bank overdrafts - (24) -
8,376 7,807 8,855
# Grant received of £76,000 under the Government backed Coronavirus Job
Retention Scheme repaid to HMRC in November 2020.
* Total IFRS 16 lease liability payments of £545,000 (30 September 2020:
£555,000; 31 March 2021: £1,133,000).
Condensed consolidated statement of changes in equity
For the six months ended 30 September 2021
Share Share premium account Own Capital redemption Other Retained earnings Total
capital
shares
equity
held
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Equity as at 31 March 2020 2,888 3,763 (312) 111 4,612 11,582 22,644
Total comprehensive loss for the period - - - - - (366) (366)
Contributions by and distributions to owners
Dividends paid - - - - - - -
Total contributions by and distributions to owners - - - - - - -
Equity as at 30 September 2020 2,888 3,763 (312) 111 4,612 11,216 22,278
Total comprehensive income for the period - - - - - 108 108
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
Total comprehensive income for the period - - - - - 44 44
Contributions by and distributions to owners
Dividends paid and payable - - - - - (255) (255)
Total contributions by and distributions to owners - - - - - (255) (255)
Equity as at 30 September 2021 2,888 3,763 (312) 111 4,612 11,049 22,111
Notes to the condensed consolidated financial statements
For the six months ended 30 September 2021
1. General information
Walker Crips Group plc ("the Company") is the Parent Company of the Walker
Crips group of companies ("the Group"). The Company is a public limited
company incorporated in England and Wales under the Companies Act 2006. The
Company's registered office is at Old Change House, 128 Queen Victoria Street,
London EC4V 4BJ.
2. Basis of preparation and significant accounting policies
Basis of preparation
The Group's consolidated financial statements are prepared in accordance with
International Financial Reporting Standards as adopted by the European Union
("IFRS"). These condensed financial statements are presented in accordance
with IAS 34 Interim Financial Reporting. They do not include all disclosures
that would otherwise be required in a complete set of financial statements,
however, selected explanatory notes are included for events and transactions
that are significant to an understanding of the Group's financial position and
performance.
The condensed consolidated financial statements have been prepared on the
basis of the accounting policies and methods of computation set out in the
Group's consolidated financial statements for the year ended 31 March 2021
therefore should be read in conjunction with the Group's audited financial
statements for the year ended 31 March 2021. The interim financial information
is unaudited and does not constitute statutory accounts as defined in section
434 of the Companies Act 2006.
The Group's financial statements for the year ended 31 March 2021 have been
reported on by the auditors and delivered to the Registrar of Companies. The
report of the auditors was unqualified and did not draw attention to any
matters by way of emphasis. They also did not contain a statement under
section 498 (2) or (3) of the Companies Act 2006. The interim financial
information has neither been audited nor reviewed pursuant to guidance issued
by the Audit Procedures Board.
The interim condensed consolidated financial statements are presented in GBP
sterling (£) and are rounded to the nearest thousand, unless stated
otherwise.
The Directors have considered the guidance of the UK Financial Reporting
Council and events relating to the spread of coronavirus (COVID-19) in
preparing these interim condensed consolidated financial statements.
Going Concern
The Directors are satisfied that the Group has sufficient resources to
continue in operation for a period of at least twelve months from the date of
this report. Accordingly, the Directors continue to adopt the going concern
basis in preparing the condensed consolidated financial statements.
As at 30 September 2021, the Group had net assets of £22.1m (31 March 2021:
£22.3m), net current assets of £10.5m (31 March 2021: £9.8m) and net cash
and cash equivalents of £8.4 million (31 March 2021: £8.9 million). The
Group reported an operating profit of £120,000 for the period to 30 September
2021, inclusive of exceptional expenses of £112,000 (30 September 2020:
operating loss of £374,000, inclusive of exceptional expenses of £102,000),
and net cash generated from operating activities of £213,000 (30 September
2020: net cash used in operating activities of £104,000).
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 the following into account:
- Capital structure and liquid resources;
- Trading performance in the six-month period to 30 September 2021;
- The base case and stressed cash flow forecasts over the financial
reporting periods ending 31 March 2022 and 31 March 2023;
- Stress tests, including reversed stress test scenarios, to assess
the Group's ability to withstand significant market-wide events; and
- The principal risks facing the Group.
Key assumptions that the Directors have made in preparing the base case cash
flow forecasts are that:
- Revenues reflect the impact of (i) continued low base rates on
income for managing client deposits, (ii) no further significant impact from
the pandemic other than what is already known, and (iii) the FTSE 100 index
remaining at the lower 7000 range for a large part of the next 12 months; and
- Base case costs prudently reflect only the actions Management has
taken to date.
Key stress scenarios that the Directors have considered include:
- A 'bear stress scenario' representing a 10% fall in income compared
to the base case scenario in reporting periods ending 31 March 2022 and 31
March 2023;
- A '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; and
- Both stress scenarios assume no mitigating actions.
Our reverse stress testing further indicates that revenues would have to
decline by 26% over the next 18 months compared to base case to reach our
liquidity and pillar 1 regulatory capital ratio thresholds. These reverse
stresses make no allowance for any mitigating actions available to the Group
and the Directors consider them to be remote scenarios.
Although the pandemic remains a risk, the Directors believe that the stress
conditions assessed demonstrate the Group's financial resilience and operating
flexibility. At the report date, the Directors were not aware of any
material uncertainties that would cast doubt over the Group's ability to
continue as a going concern.
Government grant
The Group, initially having taken advantage of the Government backed
Coronavirus Job Retention Scheme ("CJRS"), repaid the grant in full in
November 2020.
Taxation
The tax charge in the income statement represents the sum of the tax currently
payable and deferred tax.
The tax currently payable is based on the taxable profit for the period.
Taxable profit differs from net profit as reported in the income statement
because it excludes items of income or expense that are taxable or deductible
in other years and it further excludes items that are never taxable or
deductible. The Group's liability for current tax is calculated using tax
rates that have been enacted or substantively enacted by the statement of
financial position date. The amount of taxable profit in the current period
has been estimated.
Deferred tax is calculated at the tax rates that are expected to apply in the
period in which the liability is settled or the asset is realised based on tax
rates that have been enacted or substantively enacted by the statement of
financial position date.
Deferred tax assets and liabilities are offset when the Group has a legally
enforceable right to do so and presented as a net number on the face of the
statement of financial position.
Use of estimates and judgements
Estimates and judgements used in the preparation of these interim condensed
consolidated financial statements are continually evaluated and are based on
historical experience and other factors, including expectations of future
events that are believed to be reasonable.
There have been no material revisions to the nature and amounts of estimates
of numbers reported in prior periods. The effects of COVID-19 have not made
any significant changes to various methodologies adopted by the Group in
assessing judgments and estimates made in the preparation of these interim
condensed consolidated financial statements.
Key sources of estimates and judgements that have a significant impact on the
carrying values of assets and liabilities are discussed below:
Impairment of goodwill - estimation and judgement
The Group tests annually whether goodwill allocated to each of the cash
generating units have suffered any impairment. Impairment tests are carried
out more frequently if there are events or changes in circumstances that
indicate that the carrying amount of the asset may exceed the recoverable
amount.
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 and inputs involve judgements and create estimation
uncertainty.
The last annual test was performed for the year ending 31 March 2021. The
carrying amount of goodwill at the statement of financial position date was
£4.4 million (31 March 2021: £4.4 million).
Other intangible assets - judgement
Acquired client lists are capitalised based on current fair values. 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 industry peers.
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.
No intangible asset acquisitions were made in the period to 30 September 2021.
IFRS 16 "Leases" - estimation and judgement
IFRS 16 requires certain judgements and estimates to be made and those
significant judgements are explained below:
- Following a review of all leases, 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 and statement of financial position.
- IFRS 16 defines a lease term as the non-cancellable period of a
lease, together with the options to extend or terminate a lease if the lessee
is reasonably certain to exercise the lease options available at the time of
reporting. 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.
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.
Impact of accounting standards to be applied in future periods
There are a number of standards and interpretations which have been issued by
the International
Accounting Standards Board that are effective for periods beginning subsequent
to 31 December
2021 that the Group has decided not to adopt early. The Group does not believe
these standards and interpretations will have a material impact on the
financial statements once adopted.
3. Changes in significant accounting policies
The accounting policies applied in these interim condensed consolidated
financial statements are consistent with those applied in the Group's
consolidated financial statements as at and for the year ended 31 March 2021.
4. Revenue and 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 pension advice; and
- Software as a Service ("SaaS"), comprising provision of regulatory
and admin software to regulated companies.
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, to regulated companies including all Walker Crips
Group's regulated entities. Fees payable by subsidiary companies to EnOC have
been eliminated on consolidation.
These activities are the basis on which the Group reports its primary segment
information. Unallocated corporate expenses are disclosed separately. Revenues
between Group entities and reportable segments are excluded from the below
analysis.
Revenue Investment Management Wealth Management SaaS Total
£'000 £'000 £'000 £'000
6 months to 30 September 2021 14,810 850 30 15,690
6 months to 30 September 2020 13,542 806 2 14,350
Year to 31 March 2021 28,726 1,606 16 30,348
Operating profit / (loss) Unallocated Operating
Costs
profit / (loss)
£'000 £'000 £'000 £'000 £'000
6 months to 30 September 2021 688 (16) (41) (511) 120
6 months to 30 September 2020 285 (17) (78) (564) (374)
Year to 31 March 2021 1,333 (127) (127) (1,057) 22
5. Earnings / (loss) per share
The calculation of basic earnings / (loss) per share for continuing operations
is based on the post-tax profit for the period of £44,000 (2020: post-tax
loss of £366,000) and on 42,577,328 (2020: 42,577,328) ordinary shares of 6
2/3p, being the weighted average number of ordinary shares in issue during the
period. There is no dilution applicable to the current period.
6. Dividends
The interim dividend of 0.30 pence per share (2020: 0.15 pence per share) is
payable on 7 January 2022 to shareholders on the register at the close of
business on 24 December 2021. The associated ex-dividend date is 23 December
2021. The interim dividend has not been included as a liability in this
interim report.
7. Total income
Six months Six months
ended 30 ended 30 Year ended
September
September
31 March
2021 2020 2021
£'000 £'000 £'000
Revenue from contracts with customers 15,221 13,360 28,384
Other revenue 469 990 1,964
15,690 14,350 30,348
Investment revenue - 2 10
15,690 14,352 30,358
The Group's income can also be categorised as follows for the purpose of
measuring a key performance indicator; the ratio of non-broking income to
total income.
Six months ended % Six months % ( ) Year %
30 September 2021
ended
ended
30 September
31 March
2020
2021
Income £'000 £'000 £'000
( )
Broking 4,099 26 3,984 28 ( ) 9,009 30
Non-broking 11,591 74 10,368 72 ( ) 21,349 70
15,690 100 14,352 100 ( ) 30,358 100
8. Commissions and fees paid
Commissions and fees paid comprise:
Six months Six months
ended 30 ended 30 Year ended
September
September
31 March
2021 2020 2021
£'000 £'000 £'000
To authorised external agents 25 36 63
To self-employed certified persons 4,700 4,507 9,639
4,725 4,543 9,702
9. Investment in associate
Six months ended Six months ended Six months ended
30 September 31 March 30 September
2021 2021 2020
£'000 £'000 £'000
Brought forward 2 4 -
Share of after-tax profit 43 28 38
Dividends (26) (30) (34)
Carried forward 19 2 4
Associate
The Group has a 33% (2020: 33%) interest in its associate, Walker Crips
Property Income Limited ("WCPIL"), a company incorporated and operating in the
United Kingdom. The Board of WCPIL submitted management accounts to 30
September 2021 reporting a profit after tax of £129,000, from which a
dividend of £26,000 was paid to the Group in the period.
10. Exceptional items
As a result of their materiality, the Directors have decided to disclose
certain amounts separately in order to present results which are not distorted
by significant non-recurring events.
Six months Six months Year ended
ended 30
ended 30 September 2020
31 March
September 2021
2021
£'000 £'000 £'000
Changes in the value of deferred consideration - - 31
Redundancies 336 102 388
Compensation income (net) (224)
112 102 419
During the period to 30 September 2021, as part of the restructuring programme
the Group continued to make certain positions redundant. The cost of the
redundancy exercise is classified as exceptional due to its nature and
materiality. Also, the Group recognised the monetary value of settlement terms
net of costs, which were agreed post-period-end, following a successful legal
challenge relating to client ownership, which the Group takes very seriously.
In the period to 31 March 2021, the financial impact of a change in the fair
value of deferred consideration resulting from latest financial performance
was classified as exceptional due to its nature.
In the period to 31 March 2021, the Group incurred professional fees and other
expenses relating to the actions taken in response to the pandemic, including
redundancy costs and those relating to the Group reorganisation. These costs
were classified as exceptional due to its nature and materiality.
11. Tax
Tax is charged at 19% for the six months ended 30 September 2021 (2020: 19%)
representing the best estimate of the average annual effective tax rate
expected to apply for the full year, applied to the pre-tax income of the
six-month period.
12. Non-current investments - fair value through profit or loss
Investments at Total
fair value through
profit or loss
£'000 £'000
At 30 September 2020 50 50
Disposals in the period (10) (10)
Change in value in the period (3) (3)
At 31 March 2021 37 37
At 30 September 2021 37 37
Investments at fair value through profit or loss
The Group's investments include £37,000 unregulated collective investment
scheme ("UCIS") investments held in relation to a number of customer
complaints.
13. Current investments - fair value through profit or loss
As at As at As at
30 September
30 September
31 March
2021 2020 2021
£'000 £'000 £'000
Trading investments
Investments - fair value through profit or loss 1,011 958 920
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.
14. Fair values
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
trading investments 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 investments held
in non-current assets fall within this category.
The following tables analyse within the fair value hierarchy to the Group's
investments measured at fair value.
Level 1 Level 3 Total
£'000 £'000 £'000
At 30 September 2021
Financial assets held at fair value through profit and loss 1,011 37 1,048
1,011 37 1,048
At 30 September 2020
Financial assets held at fair value through profit and loss 958 50 1,008
958 50 1,008
At 31 March 2021
Financial assets held at fair value through profit and loss 920 37 957
920 37 957
Further IFRS 13 disclosures have not been presented here as the balance
represents 1.922% (2020: 2.305%) of total assets.
15. Cash generated from operations
Unaudited Unaudited Audited
September September March
2021 2020 2021
£'000 £'000 £'000
Operating profit / (loss) for the period 120 (374) 22
Adjustments for:
Amortisation of intangibles 397 304 837
Changes in the fair value of deferred consideration - - 31
Net change in fair value of financial instruments at fair value through profit (152) (120) (362)
or loss
Share of associate profit (43) (38) (66)
Depreciation of property, plant and equipment 166 300 375
Depreciation of right-of-use assets 493 475 961
Decrease / (increase) in debtors * 19,085 6,533 (24,572)
(Decrease) / increase in creditors * (19,853) (7,075) 24,580
Net generated from operations 213 5 1,806
* £768,000 cash outflow from working capital movement (30 September 2020:
£542,000 outflow; 31 March 2021: £8,000 inflow).
16. 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.
17. Subsequent events
There are no material events arising after 30 September 2021, which have an
impact on these unaudited financial statements save in respect of the
compensation income explained in note 10.
Directors' responsibility statement
The Directors confirm that to the best of their knowledge:
(a) The condensed set of financial statements contained within the half yearly
financial report has been prepared in accordance with IAS 34 'Interim
Financial Reporting' as adopted by the EU;
(b) The half yearly report from the Chairman (constituting the interim
management report) includes a fair review of the information required by DTR
4.2.7R; and
(c) The half yearly report from the Chairman includes a fair review of the
information required by DTR 4.2.8R as far as applicable.
On Behalf of the Board
Sean Lam
Chief Executive Officer
16 December 2021
Walker Crips Group plc
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