REG - Walker Crips Group - Half-year Report
23/12/2022 10:00
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RNS Number : 9109K Walker Crips Group plc 23 December 2022
23 December 2022
Walker Crips Group plc
("Walker Crips", the "Company" or the "Group")
Results for the six months ended 30 September 2022
Highlights
● Total revenues increased by 2.3% to £16.06 million (2021: £15.69
million)
● Gross profit increased by 11.6% to £12.28 million (2021: £11.00
million)
● Operating profit of £162,000 (2021: £120,000) and profit before
tax of £145,000 (2021: £54,000)
● Operating profit pre-exceptional items ( 3 ) of £162,000 (2021:
£232,000)
● Profit before tax pre-exceptional items ( 3 ) of £145,000 (2021:
£166,000)
● Adjusted EBITDA of £1.13 million (2021: £1.29 million) ( 1 )
● Underlying cash generated from operations of £1,610,000 (2021:
£548,000) ( 2 )
● Cash and cash equivalents of £10.6 million (2021: £8.38 million)
● Assets Under Management ("AUM") decreased by 13.1% to £3.1 billion
(March 2022: £3.6 billion)
● Total Assets Under Management and Administration ("AUMA") decreased
by 10.8% to £4.9 billion (March 2022: £5.5 billion)
● Interim dividend 0.25 pence per share (2021: 0.30 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 cash 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:
"A strong contribution from our structured products business together with the
positive income effect of the rising interest rate environment helped mitigate
the reduction in investment management revenues and trading commissions that
are reflective of lower market levels, resulting in much improved reported
gross profits. However, this improvement has been offset by the inflationary
impact on costs, particularly salaries, reflecting the tight labour market,
and additional costs taken on in the period. The difficult economic
environment and inflationary cost pressures remain a challenging headwind and
our focus continues to be on revenue growth, improving operating efficiency
and systems, 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 3920 0555
Jonathan Atkins walkercrips@fourcommunications.com
Singer Capital Markets (Broker) Tel: +44 (0)20 7496 3000
Justin McKeegan / 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
Markets continue to be challenging on the back of falls in financial markets
that have led to AUMA reducing to £4.9 billion, down 10.9% from £5.5 billion
in March 2022. This has inevitably impacted our results, with traditional
trading commissions and investment management fees falling. However, this
reduction has been offset by the strong performance of our structured products
team and increased interest margins on client deposits, leading to much
improved reported gross profits. Pressures on our cost base, particularly
salaries, have dented this improvement such that the Group reports an
operating profit of £162,000 for the first six months compared to £120,000
in the same period last year (£232,000 when adjusted for exceptional items).
The results are further explained in the trading update below.
The Group balance sheet and capital base remain sufficiently robust to support
our short- and medium-term strategy and pay an interim dividend to
shareholders. As at the reporting date, the Group's net assets are £21.7
million (September 2021: £22.1 million; March 2022: £22.1 million) and cash
and cash equivalents £10.6 million (September 2021: £8.4 million; March
2022: £11.1 million). Our focus continues to be on revenue growth,
improving operating efficiency and the robustness of our infrastructure and
cost control.
During the period, the Group has made progress on a number of ongoing
initiatives, particularly the project to improve our regulatory and compliance
framework. In terms of strategy, your Board is clear that the Group needs to
grow its core business in both investment management and wealth management.
It is also clear and determined that the central infrastructure supporting
that business will be robust and fit for purpose, to avoid the repetition of
shortcomings resulting in exceptional costs that have beset the business over
the last eighteen months or so, as well as keeping pace with changes. This
has meant taking some decisions that are long term and which involve incurring
costs before the benefits are seen. In addition, during the period we have
made good progress on several other key areas of regulatory importance,
including a project to implement and embed the new regulatory initiative, "the
Consumer Duty'' which places increased emphasis on delivering good outcomes
for retail customers, a principle close to our heart and our mission.
Further, in the annual report and accounts for the year to 31 March 2022, I
explained that the Group had identified the need to make redress payments to a
small number of customers as a result of the inappropriate and unacceptable
actions of one associate. Significant progress with the redress calculation
methodology, discussions with insurers and importantly discussions with the
clients affected has been made and we expect to bring this matter to a final
resolution in the very near future.
Group performance
Revenue for the period was £16.06 million (2021: £15.69 million), an
increase of 2.3%. Breaking this down, broking income, on the back of
significant market uncertainties, reduced by £1.1 million compared to the
same period last year. Non-broking income, with improved performance from
our structured investment division and retained margin on managed deposits,
offset by a reduction in management fees and arbitrage profits, saw an
increase of £1.5 million in the same period. Improved performance from our
inhouse revenue generators helped in increasing the Group gross margin in the
period from 70.2% to 76.5%.
The Group reported an operating profit of £162,000 and a profit before tax of
£145,000, up 35.0% and up 168.5%, respectively, compared to the same period
last year (operating profit 2021: £120,000; profit before tax 2021:
£54,000). However, adjusting for exceptional items in the prior year, the
Group's operating profit and profit before tax were down £70,000 (30.2%) and
£21,000 (12.7%) respectively. I note that there are no exceptional items in
the current half-year results.
Adjusted EBITDA declined by £158,000 (or 12.3%) to £1.13m, caused by
pressures on costs which outweigh the increase in revenue. Administrative
expenses, excluding salaries and exceptional items, increased by £224,000 (or
4.7%). Salaries, whilst in line with the budget, saw an increase of
£1,121,000 (or 18.8%) in the period. It should be noted that, in line with
the strategy, this combination of inflationary pressures and the need to
reward our people fairly, coupled with our ongoing investment in key
personnel, training and systems, means we are likely to see further increases
in our cost-base in the second half of this financial year. Our cost base is
closely monitored by management who are very much focused on ways to improve
margins and operating efficiencies.
Reconciliation of operating profit to operating profit before exceptional
items
Unaudited Unaudited Audited
September
September
March
2022
2021
2022
£'000 £'000 £'000
Operating profit 162 120 326
Operating exceptional items (note 10) - 112 1,540
Operating profit before exceptional items 162 232 1,866
Reconciliation of profit before tax to profit before tax and exceptional items
Unaudited Unaudited Audited
September
September
March
2022
2021
2022
£'000 £'000 £'000
Profit before tax 145 54 324
Exceptional items (note 10) - 112 1,437
Profit before tax and exceptional items 145 166 1,761
Adjusted EBITDA
Unaudited Unaudited Audited
September
September
March
2022
2021
2022
£'000 £'000 £'000
Operating profit 162 120 326
Operating exceptional items (note 10) - 112 1,540
Amortisation / depreciation 560 563 1,165
Right-of-use-assets depreciation charge 408 493 873
Adjusted EBITDA 1,130 1,288 3,904
Underlying cash generated from operations
Unaudited Unaudited Audited
September
September
March
2022
2021
2022
£'000 £'000 £'000
Net cash inflow from operations 25 213 4,217
Working capital 1,559 768 (2,257)
Lease liability payments under IFRS 16 (278) (545) (1,052)
Cash outflow on operating exceptional items 304 112 435
Underlying cash generated in the period 1,610 548 1,343
Investment Management
The Group's Investment Management division saw its revenue increase by 2% to
£15.1 million (September 2021: £14.8 million) compared to the same period
last year. The increase was largely driven by the continuing success of our
Structured Investment division and the increased retained interest on managed
deposits offsetting declines in management fees and trading commissions. The
increase in revenue, however, did not translate directly to an increase in
operating profits. The division reported an operating profit of £616,000,
down 10.5% compared to last year (September 2021: £688,000), reflective of
the pressures on salaries and costs generally, including increased regulatory
compliance requirements.
The downturn in global market indices, as well as economic uncertainties, are
likely to impact the investment management division in the second half of this
financial year, however rising interest rates, our strong position in the
structured investments market and our steady Barker Poland arm should provide
us with much needed stability as we navigate through this period.
Wealth Management
Our Wealth Management division recorded total revenues of £949,000, up 11.6%
from the same period last year. The year-on-year increase in revenue is
partly down to our investment in new advisers last year. The Wealth
Management division is focused on generating revenue growth, both organically
and through the recruitment of new advisers. In the short-term, as noted,
the associated costs and time needed to bed-down new advisers, have a negative
short-term impact on profitability which, together with the inflationary
impact on costs, means the division reported an operating loss of £162,000
(September 2021: loss of £240,000 before exceptional items).
Group strategy
The underlying performance of the Group and diversity of our product range
reflects a level of resilience in financial performance that enables the Group
to focus on its prime objectives of growing revenue and improving gross
margins in investment management and wealth management. As referenced above,
this is coupled with realising operational efficiencies and, at the same time,
taking decisions to invest to improve our central infrastructure regulatory
and compliance framework for the long term.
Dividends
The Board has declared an interim dividend of 0.25 pence per share (2021: 0.30
pence per share), which will be paid on 20 January 2023 to shareholders on the
register on 6 January 2023. The ex-dividend date will be 5 January 2023. The
reduced interim dividend reflects the reduction in performance compared to the
prior year when adjusted for exceptional items.
Our aim is always to reward shareholders for their continued support and pay
dividends when appropriate. 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.
Outlook
There is little doubt that we have a difficult period ahead. The second half
of the year will face headwinds from the various macro-economic uncertainties,
which are beyond the Group's control. Rising inflation and interest rates,
coupled with the uncertain UK political landscape, is unlikely to be market
friendly, but your Board remains cautiously optimistic that our strategy will
overcome these short-term issues and that the Group will emerge with an
improved infrastructure and a platform for growth across our disciplines.
Martin Wright
Chairman
23 December 2022
Walker Crips Group plc
Walker Crips Group plc
Condensed consolidated income statement
For the six months ended 30 September 2022
Unaudited Unaudited Audited
September
September
March
2022
2021
2022
Notes £'000 £'000 £'000
Revenue 4, 7 16,057 15,690 32,820
Commissions and fees paid 8 (3,774) (4,725) (9,110)
Share of after-tax profit of associate 9 - 43 57
Gross profit 12,283 11,008 23,767
Administrative expenses (12,121) (10,776) (21,901)
Exceptional items 10 - (112) (1,540)
Operating profit 4 162 120 326
Investment revenue 28 - 9
Finance costs (45) (66) (114)
Exceptional item - profit on disposal of associate investment - - 103
Profit before tax 145 54 324
Taxation (28) (10) (151)
Profit for the period attributable to equity holders of the Parent Company 117 44 173
Earnings per share
Basic and diluted 5 0.27p 0.10p 0.41p
Walker Crips Group plc
Condensed consolidated statement of comprehensive income
For the six months ended 30 September 2022
Unaudited Unaudited Audited
September
September
March
2022
2021
2022
£'000 £'000 £'000
Profit for the period 117 44 173
Total comprehensive income for the period attributable to equity holders of 117 44 173
the Parent Company
Walker Crips Group plc
Condensed consolidated statement of financial position
As at 30 September 2022
Unaudited Unaudited Audited
September September March
2022 2021 2022
Notes £'000 £'000 £'000
Non-current assets
Goodwill 4,388 4,388 4,388
Other intangible assets 5,387 6,169 5,752
Property, plant and equipment 1,015 1,330 1,169
Right-of-use-assets 2,336 3,120 2,597
Investment in associate 9 - 19 -
Investments - fair value through profit or loss 12 - 37 -
13,126 15,063 13,906
Current assets
Trade and other receivables 30,266 30,061 50,003
Investments - fair value through profit or loss 13 1,413 1,011 1,647
Cash and cash equivalents 10,623 8,376 11,113
42,302 39,448 62,763
Total assets 55,428 54,511 76,669
Current liabilities
Trade and other payables (29,528) (27,680) (49,625)
Current tax liabilities (225) (278) (132)
Deferred tax liabilities (349) (306) (414)
Provisions (27) (64) (1,137)
Lease liabilities (166) (621) (245)
Dividends payable (511) (53) -
Deferred cash consideration (37) - (89)
(30,843) (29,002) (51,642)
Net current assets 11,459 10,446 11,121
Long-term liabilities
Deferred cash consideration (16) (33) (29)
Lease liabilities (2,287) (2,690) (2,300)
Provisions (564) (675) (586)
(2,867) (3,398) (2,915)
Net assets 21,718 22,111 22,112
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 10,656 11,049 11,050
Other reserves 4,723 4,723 4,723
Equity attributable to equity holders of the Parent Company 21,718 22,111 22,112
Walker Crips Group plc
Condensed consolidated statement of cash flows
For the six months ended 30 September 2022
Unaudited Unaudited Audited
September September March
2022 2021 2022
Notes £'000 £'000 £'000
Operating activities
Cash generated from operations 15 25 213 4,217
Tax paid - - (120)
Net cash generated from operating activities 25 213 4,097
Investing activities
Purchase of property, plant and equipment (30) (24) (119)
(Purchase) / sale of investments held for trading (221) 63 (342)
Consideration paid on acquisition of intangibles (9) - (93)
Dividends received 24 - 9
Dividends received from associate investment - 26 57
Consideration received on sale of associate - - 105
Interest received 5 - -
Net cash (used in) / generated from investing activities (231) 65 (383)
Financing activities
Dividends paid - (202) (383)
Interest paid (6) (10) (21)
Repayment of lease liabilities * (239) (489) (959)
Repayment of lease interest * (39) (56) (93)
Net cash used in financing activities (284) (757) (1,456)
Net (decrease) / increase in cash and cash equivalents (490) (479) 2,258
Net cash and cash equivalents at beginning of period 11,113 8,855 8,855
Net cash and cash equivalents at end of period 10,623 8,376 11,113
* Total IFRS 16 lease liability payments of £278,000 (September 2021:
£545,000; March 2022: £1,052,000).
Walker Crips Group plc
Condensed consolidated statement of changes in equity
For the six months ended 30 September 2022
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 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 - - - - - (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
Total comprehensive income for the period - - - - - 129 129
Contributions by and distributions to owners
Dividends paid - - - - - (128) (128)
Total contributions by and distributions to owners - - - - - (128) (128)
Equity as at 31 March 2022 2,888 3,763 (312) 111 4,612 11,050 22,112
Total comprehensive income for the period - - - - - 117 117
Contributions by and distributions to owners
Dividends paid and payable - - - - - (511) (511)
Total contributions by and distributions to owners - - - - - (511) (511)
Equity as at 30 September 2022 2,888 3,763 (312) 111 4,612 10,656 21,718
Walker Crips Group plc
Notes to the condensed consolidated financial statements
For the six months ended 30 September 2022
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 2022 and
therefore should be read in conjunction with the Group's audited financial
statements for that year. 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 2022 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.
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 2022, the Group had net assets of £21.7 million (31 March
2022: £22.1 million), net current assets of £11.5 million (31 March 2022:
£11.1 million) and net cash and cash equivalents of £10.6 million (31 March
2022: £11.1 million). The Group reported an operating profit of £162,000
for the period to 30 September 2022 (30 September 2021: £120,000), and net
cash generated from operating activities of £25,000 (30 September 2021:
213,000).
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 2022;
- The base case and stressed cash flow forecasts over the financial
reporting periods ending 31 March 2023 and 31 March 2024;
- 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) reduced trading activity, (ii)
higher retained interest income from managing client deposits, (iii) no
further significant impact from the pandemic other than that already known,
and (iv) 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 and inflation of 10% over the period to 31 March 2024
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 2023
and 31 March 2024;
- 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 25.4% 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.
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 biannually 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 six months ending 30 September
2022. The carrying amount of goodwill at the statement of financial position
date was £4.4 million (31 March 2022: £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 2022.
Provisions - estimation and judgement
The Group has made provisions for dilapidations under four leases for its
offices. The Group did not enter into any new property leases in the period
but terminated two of its existing lease agreements. 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
obligations 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.
Remaining provisions made at the year ended 31 March 2022 in relation to
upgrading our financial crime control framework and customer redress and
associated costs have been transferred to trade and other payables given the
progress made during the period in resolving these matters.
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 asset 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.
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 2022.
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 cloud-based software solutions to
our business partners 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 2022 15,100 949 8 16,057
6 months to 30 September 2021 14,810 850 30 15,690
Year to 31 March 2022 30,937 1,845 38 32,820
Operating profit / (loss) Unallocated Operating
Costs
profit
£'000 £'000 £'000 £'000 £'000
6 months to 30 September 2022 616 (162) (61) (231) 162
6 months to 30 September 2021 688 (16) (41) (511) 120
Year to 31 March 2022 1,160 (258) (102) (474) 326
5. Earnings per share
The calculation of basic earnings per share for continuing operations is based
on the post-tax profit for the period of £117,000 (2021: post-tax profit of
£44,000) and on 42,577,328 (2021: 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 0.25 pence per share (2021: 0.30 pence per share) is
payable on 20 January 2023 to shareholders on the register at the close of
business on 6 January 2023. The associated ex-dividend date is 5 January
2023. 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
2022 2021 2022
£'000 £'000 £'000
Revenue from contracts with customers 15,138 15,221 31,694
Other revenue 919 469 1,126
16,057 15,690 32,820
Investment revenue 28 - 9
16,085 15,690 32,829
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 2022
ended
ended
30 September
31 March
2021
2022
Income £'000 £'000 £'000
( )
Broking 2,956 18 4,099 26 ( ) 8,059 25
Non-broking 13,129 82 11,591 74 ( ) 24,770 75
16,085 100 15,690 100 ( ) 32,829 100
8. Commissions and fees paid
Commissions and fees paid comprise:
Six months Six months
ended 30 ended 30 Year ended
September
September
31 March
2022 2021 2022
£'000 £'000 £'000
To authorised external agents 3 25 61
To self-employed certified persons 3,771 4,700 9,049
3,774 4,725 9,110
9. Investment in associate
Six months ended Six months ended Six months ended
30 September 31 March 30 September
2022 2022 2021
£'000 £'000 £'000
Brought forward - 19 2
Share of after-tax profit - 14 43
Dividends - (31) (26)
Disposals - (2) -
Carried forward - - 19
Associate
The Group disposed of its 33.33% interest in its associate, Walker Crips
Property Income Limited ("WCPIL"), in the previous financial year.
10. Exceptional items
As a result of their materiality, the Directors disclose certain amounts
separately in order to present results which are not distorted by significant
non-recurring events. There are no reported exceptional items for the six
months to 30 September 2022.
Exceptional items included within operating profit Six months Year ended
ended 30 September 2021
31 March
2022
£'000 £'000
Restructuring, redundancy and other costs (note a) 336 516
Net compensation income (note b) (224) (221)
Financial crime control framework review and remediation (note c) - 595
Client redress and associated costs (note d) - 650
Operating exceptional items 112 1,540
Other exceptional items
Profit on disposal of associate investment (note e) - (103)
Total exceptional items 112 1,437
During the year to 31 March 2022, the following items were classified as
exceptions due to their materiality and non-recurring nature.
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 estimated costs of an independent review and resulting actions to
remediate and enhance the Group's financial crime framework;
d) The estimated costs for redress and related costs resulting from the
actions of an associate.
e) The Group disposed of its 33.33% interest in its associate, Walker
Crips Property Income Limited ("WCPIL").
11. Tax
Tax is charged at 19% for the six months ended 30 September 2022 (2021: 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 2021 37 37
Change in value in the period (37) (37)
At 31 March 2022 - -
At 30 September 2022 - -
In the year to 31 March 2022, the Group's investment in unregulated collective
investment schemes ("UCIS") was written down to £nil.
13. Current investments - fair value through profit or loss
As at As at As at
30 September
30 September
31 March
2022 2021 2022
£'000 £'000 £'000
Trading investments
Investments - fair value through profit or loss 1,413 1,011 1,647
Financial assets at fair value through profit or loss represent investments in
equity securities and collectives that present the Group with an opportunity
for a 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
majority of 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). A small population of
trading investments 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 2022
Financial assets held at fair value through profit and loss 1,381 32 1,413
1,381 32 1,413
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 31 March 2022
Financial assets held at fair value through profit and loss 1,647 - 1,647
1,647 - 1,647
Further IFRS 13 disclosures have not been presented here as the balance
represents 2.550% (2021: 1.922%) of total assets.
15. Cash generated from operations
Unaudited Unaudited Audited
September September March
2022 2021 2022
£'000 £'000 £'000
Operating profit for the period 162 120 326
Adjustments for:
Amortisation of intangibles 374 397 862
Net change in fair value of financial instruments at fair value through profit 454 (152) (347)
or loss
Share of associate profit - (43) (57)
Depreciation of property, plant and equipment 186 166 303
Depreciation of right-of-use assets 408 493 873
Decrease / (increase) in debtors * 19,736 19,085 (915)
(Decrease) / increase in creditors * (21,295) (19,853) 3,172
Net generated from operations 25 213 4,217
* £1,559,000 cash outflow from working capital movement (30 September 2021:
£768,000 outflow; 31 March 2022: £2,257,000 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 2022, which have an
impact on these unaudited financial statements.
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-year Chairman's Statement (constituting the interim
management report) includes a fair review of the information required by DTR
4.2.7R; and
(c) The half-year Chairman's Statement 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
23 December 2022
Walker Crips Group plc
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