REG - Walker Crips Group - Results for the six months ended 30 September 2024
27/12/2024 09:45
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RNS Number : 4428R Walker Crips Group plc 27 December 2024
Walker Crips Group plc
("Walker Crips", the "Company" or the "Group")
Results for the six months ended 30 September 2024
Key Figures
● Total revenues increased 2.3% to £15.8 million (2023: £15.5
million).
● Gross profits (revenues net of commissions and fees paid out to
self-employed investment managers) increased by 4.1% to £13.1 million (2023:
12.6 million).
● Operating loss of £1,682,000 (2023: operating profit of £173,000)
and loss before tax of £1,452,000 (2023: profit before tax of £268,000).
● Adjusted EBITDA( 1 ) decreased to a negative £832,000 (2023:
positive £1,059,000).
● Underlying cash used in operations( 2 ) was £1,083,000 (2023: cash
generated from operations £1,606,000).
● Net cash position of £12.8 million (2023: £14.1 million).
● Assets Under Management ("AUM") remained flat at £2.7 billion (31
March 2024: £2.7 billion) and Total Assets Under Management and
Administration ("AUMA") reduced by 4.1% to £4.7billion (31 March 2024: £4.9
billion).
● The Directors do not propose to pay an interim dividend due to the
Group's trading performance during the period (2023: 0.25 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 used or generated from operations shows the cash
used or 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 9 to the accounts and a full
reconciliation to reported results is presented in the Chairman's statement.
For further information, please contact:
Walker Crips Group plc Tel: +44 (0)20 3100 8000
Craig Harrison, Media Relations
Four Agency Tel: +44 (0)20 3920 0555
Jonathan Atkins
walkercrips@four.agency
Singer Capital Markets Tel: +44 (0)20 7496 3000
Charles Leigh-Pemberton / Asha Chotai
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
As will be apparent from our half year results, this has been a difficult
period for the Group, both in terms of challenges for Walker Crips
specifically, and also of the wider environment.
The trading environment has been difficult, and I describe this below. As I
explained in my annual statement, the Board has been working on a strategic
plan with a view to return to profitability in the short and medium term and
achieve growth and shareholder value in the longer term. The first phase of
this was recently announced to transition the Walker Crips Investment
Management (WCIM) back-office operations to an outsourced solution. Further,
I have previously noted our strategic initiative to improve our regulatory and
compliance framework. The full extent of the task to achieve this became
apparent early in the new financial year. The team, including several new
recruits, has had to work extremely hard with significant support from outside
consultants to address the shortcomings and, as I detailed below, much
progress has been made. However, this process has come with a cost, both in
financial terms and senior management time and this is reflected in our
interim results.
Market Conditions
Trading conditions in the first half year were marked by considerable market
volatility, driven by a challenging blend of high interest rates, global
conflicts and political instability and, of course, a change of government in
the UK. In the current environment, investor confidence has also been mixed
due to economic pressures and central bank policy changes. The Bank of England
(BoE) took the decision to reduce the UK base rate by 0.25 percentage points
to 4.75% on 7 November 2024 following a similar cut in August, but the
forecasts as to the timing and extent of further rate cuts are uncertain.
There has been some success in cooling inflation, but the BoE had signalled a
readiness to further adjust its policies depending on inflationary trends and
economic data (albeit the Governor has recently suggested four rate cuts next
year). Higher borrowing costs have put pressure on both equity and
fixed-income markets, making investors more cautious as they seek safer
returns in higher-yielding but lower-risk assets.
The US election victory for Donald Trump also brings uncertainty, particularly
due to the threat of a trade war between the US and its trading partners. The
president-elect has not only presaged tariffs of up to 60% on imports from
China, but has also indicated tariffs of up to 25% on imports from other
nations. Tariffs largely have the impact of directly increasing prices for end
consumers, creating instant inflationary pressure, with the expectation of the
US Federal Reserve raising interest rates to combat this. The BoE and other
central banks would also be likely to follow suit as US inflation is
invariably exported to other nations around the world.
Inflation in the UK and Eurozone has proven more persistent than anticipated,
indicating that interest rates are unlikely to decline as quickly as
previously projected. Potential US tariffs will further exacerbate this
inflationary pressure.
The October budget introduced by our newly elected government includes an
increase in employer National Insurance contributions, which will have a
direct impact on our cost base. Additionally, we anticipate substantial
changes in the inheritance tax planning landscape, particularly concerning
pensions and AIM shares, which are expected to drive significant shifts across
the industry.
All the above factors continue to impact financial markets and investor
confidence and, consequently, our revenues.
Group performance
The interim results for the Group are obviously very disappointing. The
losses are attributable to a number of concurrent factors.
As noted, trading activity was impacted by the ongoing local and global
events. While it is consistent with our strategy of reducing the proportion of
revenue from self-employed associates, our year-on-year income was also
impacted by the departure of several such investment managers during the last
financial year and at the beginning of this year.
Overall, the factors that I describe below have resulted in the Group
reporting a first-half operating loss and loss before tax of £1,682,000 and
£1,452,000 respectively (30 September 2023: operating profit of £173,000 and
profit before tax of £268,000). We are fortunate that we have the resources
to absorb this loss, but it gives us no pleasure that the resources have to be
used in this manner.
While interest rates remained high in the period, the revenue on corporate
cash and from managing clients' trading cash balances reduced by 15.6% from
£2,668,000 to £2,253,000, as the Group aims to pay out higher rates of
interest to clients compared to the previous period, in keeping with
regulatory guidance.
Operating costs, excluding staff salaries and a provision for client redress,
increased by 24.5% compared to last year. I have set out below the various
factors that underly this.
Salary costs increased by 13.1% compared to last year, reflecting our
benchmarking (which I referenced in the annual report) to bring staff
remuneration in line with the market rates. Whilst the obvious consequence
of this is to increase our cost base, we consider it has to be the right
approach to retain and protect our most valuable asset, our people.
I referenced above the initiative to improve our regulatory and compliance
framework. This has been a recurring theme in our reports, partly reflecting
the increasing workload demands of regulation generally in our highly
regulated market, but also issues specific to the Group. More such issues
became apparent early in the financial year and the team has had to work very
hard to address these issues, including engaging significant support from
outside consultants. We have made some major changes and improvements in the
structure and staffing of our risk and compliance function, including the
recruitment of a new Chief Risk and Compliance Officer and a risk manager.
The path to bringing that facet of the business to being fully fit for purpose
is now much clearer. Inevitably, the cost of the exercise has been necessary
but painful.
In the course of this improvement, a further legacy suitability issue was
discovered that we are currently working through with external advisers and
the regulator to quantify. It is axiomatic that we are committed to provide
suitable redress to affected customers, should this prove appropriate.
Inevitably, this has also taken a significant amount of management time and
resource and further impacted the results.
Another major factor in the period was the conclusion of an agreement to
outsource a large part of our back-office operations to BNY Pershing, a global
custodian of client money and assets. This transition, scheduled to take
effect in March next year, will involve BNY Pershing providing clearing and
settlement, custody, nominee and associated services to WCIM's clients.
Under the arrangement, those members of our staff who have been involved in
those operations will transfer to Pershing. The Board obviously reflected
deeply upon the change, which involves both front-end cost as well as the
transfer of employment of back-office staff who have been with us for a long
time and have served the Group's customers and shareholders loyally for many
years.
However, we concluded that the change was a key step for our future. The
operational issues faced by the Group in the last few years and the constantly
evolving regulatory landscape were proving costly both financially and in
terms of management time and have become unsustainable. Rising costs
relating to self-clearing, systems and maintenance are disproportionate to the
size of our Group and became a hindrance to our growth strategy. Moving
these functions to BNY Pershing will ensure ongoing regulatory compliance and
management of risks within our business model. It will also enable
management to focus on our customers and delivering shareholder value and pave
the way to scale our operational capability.
Although we have not disclosed any exceptional costs in the half year, within
the figures there are costs that were incurred specifically to address the
aforementioned legacy weaknesses, as well as transitioning our operations and
client money functions to BNY Pershing. These costs totalled £1.2 million in
the period, consisting predominantly of legal, professional and recruitment
fees.
In our Annual Report to March 2024, I reported a disclosure made to HMRC
regarding the underpayment of Stamp Duty Reserve Tax on certain trades. I
can confirm that settlement (within the provisions previously made) has been
reached with HMRC and the case has now been successfully closed.
Reported EBITDA and underlying operating cash generation were negative in the
period compared to the previous period.
Reconciliation of operating (loss)/profit to operating profit before
exceptional items
Unaudited Unaudited Audited
September September March
2024 2023 2024
£'000 £'000 £'000
Operating (loss)/profit (1,682) 173 63
Exceptional items (note 9) - - (225)
Operating (loss)/profit before exceptional items (1,682) 173 (162)
Reconciliation of (loss)/profit before tax to profit before tax and
exceptional items
Unaudited Unaudited Audited
September September March
2024 2023 2024
£'000 £'000 £'000
(Loss)/profit before tax (1,452) 268 387
Exceptional items (note 9) - - (225)
(Loss)/profit before tax and exceptional items (1,452) 268 162
Adjusted EBITDA
Unaudited Unaudited Audited
September September March
2024 2023 2024
£'000 £'000 £'000
Operating (loss)/profit (1,682) 173 63
Exceptional items (note 9) - - (225)
Amortisation / depreciation 536 564 1,299
Right-of-use-assets depreciation charge 314 322 636
Adjusted EBITDA (832) 1,059 1,773
Underlying cash (used)/generated from operations
Unaudited Unaudited Audited
September September March
2024 2023 2024
£'000 £'000 £'000
Net cash (outflow)/inflow from operations (618) 563 970
Working capital (373) 372 1,124
Lease liability payments under IFRS 16 (432) (166) (722)
Cash outflow on operating exceptional items 340 837 928
Underlying cash (used)/generated in the period (1,083) 1,606 2,300
Investment Management
The investment management division reported an operating loss of £985,000
compared to an operating profit of £911,000 in the prior period. The factors
that drove this significant decrease in profitability are explained in the
Group Performance section. Commission income, as a result of the
aforementioned market conditions and the loss of a number of revenue
generators, declined 13.4% from £2,555,000 to £2,213,000. Fee income,
despite the loss of those revenue generators, increased by 8.0% from
£8,537,000 to £9,219,000.
The systems-related costs and investments referred to earlier applied
predominantly to the Group's main subsidiary, WCIM, which is why the Group's
loss is primarily reported in this division.
Barker Poland Asset Management (BPAM) had a stable performance, with revenues
going up marginally by 0.9%. On the other hand, the operating profit
slightly declined by 1.0% compared to the previous year. The reduction in
the operating profit is the result of inflation-related increases to the cost
base. BPAM is a discretionary investment manager and financial planner which
operates under restricted status and deploys its own investment models.
Financial Planning
As noted by the CEO in our annual report, the financial planning division has
been growing through recruitment. The subsidiary has increased revenues by
53.7% to £1,640,000 from £1,067,000 in the prior period. This large
increase in revenues is the result of the contribution of recently recruited
financial planners bringing new clients into the division.
The division's operating loss decreased by 70.9% to £87,000 compared to
£299,000 last year. While the significant increase in revenues has not
returned the division to profit yet, management remains confident that the
continuing growth in revenues will bring this about in the financial period to
31 March 2026.
EnOC Technologies
Our software as a service (SaaS) division, represented by our subsidiary EnOC
Technologies Limited (EnOC) has reported a loss of £245,000 compared to a
loss of £244,000 in the prior year. While it might be seen as a loss-making
division, EnOC's primary activity is to support the Group and it continues to
provide vital services to, and support across, the Group's operations.
In addition, the segment disclosure in note 4 provides a comparison of
revenues, without cancelling intercompany revenues, to demonstrate this
activity's true value to the Group. Without cancelling intercompany revenues,
EnOC has reported a profit of £51,000 compared to £52,000 in the prior
period.
Central unallocated costs
These costs have increased by 87.2% from £195,000 to £365,000, reflecting
the continued pressure on our cost base brought about through significant
investment towards strengthening our regulatory and compliance framework, and
a strategic review of our business model. General inflationary increases in a
number of areas have also contributed towards the escalation in costs in the
first half of the year compared to last year.
Group strategy
My statement has inevitably been focused on the financial performance of the
Group during the period and the reasons for the reported losses.
The Board is keenly aware of the need to move the focus forwards. The
outsourcing of clearing and client money management and the improvements to
our risk and compliance systems are essential to provide the platform upon
which to develop our business. In tandem with addressing these issues, the
Board has been working to define a strategy to harness the potential within
our business to grow and to broaden the range and quality of services that we
provide to our customers. Inevitably the trading conditions, regulatory
challenges and the outsourcing project have all called heavily on management
time, but significant time has also been invested in formulating plans to
broaden and improve the services we can offer both to existing and new
clients.
Dividends
Given the reported results and our ongoing capital and liquidity requirements,
the Board will not be declaring an interim dividend.
This decision was not taken lightly. The Board will continue to monitor the
Group's progress and will make a decision on whether we can recommend any
final dividend based on performance, capital headroom, market outlook and
short-term and long-term cash flow considerations.
Outlook
Looking ahead, we anticipate that the second half of the financial year is
likely to be as challenging as the first half, but this should pave the way
for the Group to move forward with wider strategic initiatives and a return to
sustainable profitability. Our target is to migrate to Pershing in the final
quarter of current financial year, which is a significant evolutionary step
requiring resource, management time and support from our staff to succeed, and
I am sure our management will see this through successfully.
It is with a heavy heart that I have to report the challenging times that we
have been experiencing. I know that the existing management team, led by the
executive directors, have worked tirelessly to address the issues I have
described. That team has been supported by a number of key new recruits
whose additional expertise and support is a vital element of turning the
business around. On behalf of the Board, I express my thanks for the huge
efforts that have been necessary.
Our long serving company secretary, Rod Goddard, will step down at the end of
the year to take up a very well-deserved retirement. A particular thank you
to him from all of the Board for his support and contribution over many
years. We are very pleased to welcome Amanda Read, a company secretary with
much experience in the Financial Services and Private Wealth sectors, to take
over his role.
Despite the headwinds, we have made very significant progress in addressing
the issues I have described. I remain confident of our ability to navigate
these challenges, ensuring that our Group continues to support our clients in
achieving their long-term financial goals.
I would also like to take the opportunity to express my appreciation to our
clients, shareholders and employees for their continued support, trust and
commitment.
Martin Wright
Chairman
27 December 2024
Walker Crips Group plc
Walker Crips Group plc
Condensed consolidated income statement
For the six months ended 30 September 2024
Unaudited Unaudited Audited
September
September
March
2024
2023
2024
Notes £'000 £'000 £'000
Revenue 4, 7 15,794 15,446 31,574
Commissions and fees paid 8 (2,734) (2,895) (5,769)
Gross profit 13,060 12,551 25,805
Administrative expenses (14,742) (12,378) (25,967)
Exceptional items 9 - - 225
Operating (loss)/profit 4 (1,682) 173 63
Investment revenue 274 185
446
Finance costs (44) (90) (122)
(Loss)/profit before tax (1,452) 268 387
Taxation 363 (67) (19)
(Loss)/profit for the period attributable to equity holders of the Parent (1,089) 201 368
Company
Earnings per share
Basic and diluted 5 (2.56)p 0.47p 0.86p
Walker Crips Group plc
Condensed consolidated statement of comprehensive income
For the six months ended 30 September 2024
Unaudited Unaudited Audited
September
September
March
2024
2023
2024
£'000 £'000 £'000
(Loss)/profit for the period (1,089) 201 368
Total comprehensive (loss)/income for the period attributable to equity (1,089) 201 368
holders of the Parent Company
Walker Crips Group plc
Condensed consolidated statement of financial position
As at 30 September 2024
Unaudited Unaudited Audited
September September March
2024 2023 2024
Notes £'000 £'000 £'000
Non-current assets
Goodwill 4,388 4,388 4,388
Other intangible assets 3,410 4,225 3,741
Property, plant and equipment 723 884 815
Right-of-use-assets 1,787 2,187 2,075
10,308 11,684 11,019
Current assets
Trade and other receivables 24,434 20,828 31,902
Investments - fair value through profit or loss 12 878 993 538
Cash and cash equivalents 12,794 14,051 13,863
38,106 35,872 46,303
Total assets 48,414 47,556 57,322
Current liabilities
Trade and other payables (24,076) (21,201) (31,961)
Current tax liabilities - (261) (242)
Deferred tax liabilities (176) (446) (260)
Provisions 15 (1,181) (695) (355)
Lease liabilities (732) (492) (718)
Dividends payable (106) (106) -
Deferred cash consideration - (59) (25)
(26,271) (23,260) (33,561)
Net current assets 11,835 12,612 12,742
Long-term liabilities
Deferred cash consideration - (44) (15)
Lease liabilities (1,358) (2,301) (1,736)
Provisions (659) (690) (689)
(2,017) (3,035) (2,440)
Net assets 20,126 21,261 21,321
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 9,064 10,199 10,259
Other reserves 4,723 4,723 4,723
Equity attributable to equity holders of the Parent Company 20,126 21,261 21,321
Walker Crips Group plc
Condensed consolidated statement of cash flows
For the six months ended 30 September 2024
Unaudited Unaudited Audited
September September March
2024 2023 2024
Notes £'000 £'000 £'000
Operating activities
Cash generated from operations 13 (618) 563 970
Tax paid - - (157)
Net cash (used in) / generated from operating activities (618) 563 813
Investing activities
Purchase of property, plant and equipment (58) (32) (114)
(Purchase)/sale of investments held for trading (181) 407 642
Consideration paid on acquisition of intangibles (53) (2) (104)
Dividends received - - 19
Interest received 274 185 427
Net cash (used in) / generated from investing activities (18) 558 870
Financing activities
Dividends paid - - (213)
Interest paid (1) (42) (23)
Repayment of lease liabilities * (389) (118) (623)
Repayment of lease interest * (43) (48) (99)
Net cash used in financing activities (433) (208) (958)
Net (decrease) / increase in cash and cash equivalents (1,069) 913 725
Net cash and cash equivalents at beginning of period 13,863 13,138 13,138
Net cash and cash equivalents at end of period 12,794 14,051 13,863
* Total IFRS 16 lease liability payments of £432,000 (30 September 2023:
£166,000; 31 March 2024: £722,000).
Walker Crips Group plc
Condensed consolidated statement of changes in equity
For the six months ended 30 September 2024
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 2023 2,888 3,763 (312) 111 4,612 10,104 21,166
Total comprehensive income for the six-month period - - - - - 201 201
Contributions by and distributions to owners
Dividends paid - - - - - (106) (106)
Total contributions by and distributions to owners - - - - - (106) (106)
Equity as at 30 September 2023 2,888 3,763 (312) 111 4,612 10,199 21,261
Total comprehensive income for the six-month period - - - - - 167 167
Contributions by and distributions to owners
Dividends paid - - - - - (107) (107)
Total contributions by and distributions to owners - - - - - (107) (107)
Equity as at 31 March 2024 2,888 3,763 (312) 111 4,612 10,259 21,321
Total comprehensive loss for the six-month period - - - - - (1,089) (1,089)
Contributions by and distributions to owners
Dividends paid and payable - - - - - (106) (106)
Total contributions by and distributions to owners - - - - - (106) (106)
Equity as at 30 September 2024 2,888 3,763 (312) 111 4,612 9,064 20,126
Walker Crips Group plc
Notes to the condensed consolidated financial statements
For the six months ended 30 September 2024
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 128 Queen Victoria Street, London EC4V 4BJ.
2. Basis of preparation and significant accounting policies
Basis of preparation
This condensed consolidated interim financial report for the half-year
reporting period ended 30 September 2024 has been prepared in accordance with
the UK-adopted International Accounting Standard 34, 'Interim Financial
Reporting' and the Disclosure Guidance and Transparency Rules sourcebook of
the United Kingdom's Financial Conduct Authority. 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 2024
therefore should be read in conjunction with the Group's audited financial
statements for the year ended 31 March 2024. 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 2024 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. The audit report 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 interim financial statements of the Group are prepared on a going concern
basis. As at 30 September 2024, the Group had net assets of £20.1 million (31
March 2024: £21.3 million), net current assets of £11.8 million (31 March
2024: £12.7 million) and net cash and cash equivalents of £12.8 million (31
March 2024: £13.8 million). The Group reported an operating loss of £ 1.682
million for the period to 30 September 2024 (30 September 2023: profit of
£0.173 million), and net cash used from operating activities of £0.6 million
(30 September 2023: net cash generated £0.56 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 considered:
- The Group's base case financial projections for the five-year period
through to 31 March 2029.
- The Group's operating cash inflows and outflows during the period to
30 September 2024, and its projected future cash flows, including the
adjustment of known and/or planned factors to projected revenues and costs as
at the date of the publication of this report.
- The principal risks facing the Group and its systems of risk
management and internal control.
- The outcome of stress scenarios applied to the Group's base case
projections.
The Directors have made key assumptions in formulating the forecast such as
for economic factors such as interest rates and inflation and have assessed
market trends and political events that may also affect trading.
Key stress scenarios that the Directors have considered for illustrative and
comparative purposes include:
- A "bear stress scenario": representing a 10% reduction in management
fees, trading commissions, and interest income with the consequent reduction
in revenue sharing based costs, compared to the base case in the reporting
periods ending 31 March 2025 through to 31 March 2029.
- A "severe stress scenario": representing a 20% fall in management
fees, trading commissions, and interest income with the consequent reduction
in revenue sharing based costs, compared to the base case in the reporting
periods ending 31 March 2025 through to 31 March 2029.
The bear and severe stress scenarios indicate potential breaches of the
Group's minimum regulatory capital ratio threshold in June 2026 and July 2025,
respectively. Our reverse stress testing indicates that all revenues would
have to decline by circa 12% over the next 12 months compared to base case to
reach the Group's minimum regulatory capital ratio threshold. The Directors
note the conservative base case projections and that all stress scenarios are
before considering the impact of corrective management actions or expected
positive impact of Group's Assessment A capital requirement subsequent to the
delivery of work noted in the Chairman's statement. As such, based upon the
analysis, the Directors consider scenarios leading to a regulatory capital
threshold breach to be remote.
Taxation
The tax credit/(charge) in the income statement represents the sum of the tax
currently receivable/(payable) and deferred tax.
The tax currently receivable/(payable) is based on the taxable (loss)/profit
for the period. Taxable (loss)/profit differs from net (loss)/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 asset/(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 (loss)/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
The Group makes certain estimates and assumptions regarding the future.
Estimates and judgements are continually evaluated based on historical
experience and other factors, including expectations of future events that are
believed to be reasonable under the circumstances. In the future, actual
experience may differ from these estimates and assumptions. 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.
There have been no material revisions to the nature and amounts of estimates
of numbers reported in prior periods.
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 with the latest test
carried out as at 30 September 2024. The carrying amount of goodwill at the
statement of financial position date was £4.4 million (31 March 2024: £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. Key assumptions in this regard consist
of the following:
1. The Group continues as a going concern;
2. Life expectancy of clients based on data from 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%.
No intangible asset acquisitions were made in the period to 30 September 2024.
Provisions - estimation and judgement
Provisions are recognised when the Group has a present obligation as a result
of a past event, and it is probable that the Group will be required to settle
that obligation. Provisions are measured at the Directors' best estimate of
the expenditure required to settle the obligation at the statement of
financial position date, and are discounted to present value where the effect
is material.
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
but allowed the lapse of two 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.
Provision for client payments - estimation and judgement
The Group, with the support of external advisors, is currently investigating
an historical client suitability matter from which compensation costs may
arise in the future. The current estimate of the provision is noted in note
15.
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 2024.
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 the 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 Financial SaaS Total
Management
planning
£'000 £'000 £'000 £'000
Six months to 30 September 2024 14,146 1,640 8 15,794
Six months to 30 September 2023 14,369 1,067 10 15,446
Year to 31 March 2024 29,106 2,451 17 31,574
Operating (loss)/profit Unallocated Operating
Costs (loss)/profit
£'000 £'000 £'000 £'000 £'000
Six months to 30 September 2024 (985) (87) (245) (365) (1,682)
Six months to 30 September 2023 911 (299) (244) (195) 173
Year to 31 March 2024 1,632 (629) (490) (450) 63
The following table analyses the above segmental breakdown without cancelling
intercompany transactions to show the value of each segment to the Group
itself.
Revenue Investment Financial SaaS Total
Management
planning
£'000 £'000 £'000 £'000
Six months to 30 September 2024 14,146 1,687 304 16,137
Six months to 30 September 2023 14,016 1,124 306 15,446
Year to 31 March 2024 29,106 2,544 609 32,259
Operating (loss)/profit Unallocated Operating
Costs (loss)/ profit
£'000 £'000 £'000 £'000 £'000
Six months to 30 September 2024 (1,327) (41) 51 (365) (1,682)
Six months to 30 September 2023 559 (243) 52 (195) 173
Year to 31 March 2024 947 (536) 102 (450) 63
5. Earnings per share
The calculation of basic earnings per share for continuing operations is based
on the post-tax loss for the period of £1,089,000 (2023: post-tax profit of
£201,000) and on 42,577,328 (2023: 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
Given the reported results and our ongoing capital and liquidity requirements,
the Board will not be declaring an interim dividend.
7. Total income
Six months Six months
ended 30 ended 30 Year ended
September September 31 March
2024 2023 2024
£'000 £'000 £'000
Revenue from contracts with customers 13,404 12,461 25,603
Other revenue 2,390 2,985 5,971
15,794 15,446 31,574
Investment revenue 274 185 446
16,068 15,631 32,020
8. Commissions and fees paid
Commissions and fees paid comprise:
Six months Six months
ended 30 ended 30 Year ended
September September 31 March
2024 2023 2024
£'000 £'000 £'000
To self-employed certified persons 2,734 2,895 5,769
2,734 2,895 5,769
9. Exceptional items
Certain items of income and expenditure may be disclosed separately as
exceptional due to their nature and materiality in order to provide a clearer
understanding of the Group's performance. During the period to 30 September
2024, there were no exceptional items to report. Exceptional items impacting
the comparative information are as follows:
Exceptional items included within operating profit Six months Six months Year ended
ended 30
ended 30 September 2023
31 March
September 2024
2024
£'000 £'000 £'000
Liability arising from the underpayment of SDRT - - (225)
- - (225)
The Group, in the financial year 2023, identified an obligation in respect of
stamp duty reserve tax which arose over several previous years. An initial
provision of £878,000 was made in 2023, and subsequently upon management
investigation was revised to £355,000 in the financial year 2024 and has been
settled in full in the current year (see note 15).
10. Tax
Tax is credited/(charged) at 25% for the six months ended 30 September 2024
(2023: 25%), representing the best estimate of the average annual effective
tax rate expected to apply for the full year, applied to the pre-tax
(loss)/income of the six-month period.
11. Current investments - fair value through profit or loss
As at As at As at
30 September
30 September
31 March
2024 2023 2024
£'000 £'000 £'000
Trading investments
Investments - fair value through profit or loss 878 993 538
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.
12. 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 Total
£'000 £'000
At 30 September 2024
Financial assets held at fair value through profit and loss 878 878
878 878
At 30 September 2023
Financial assets held at fair value through profit and loss 993 993
993 993
At 31 March 2024
Financial assets held at fair value through profit and loss 538 538
538 538
Further IFRS 13 disclosures have not been presented here as the balance
represents 1.814% (2023: 2.088%) of total assets.
13. Cash generated from operations
Unaudited Unaudited Audited
September September March
2024 2023 2024
£'000 £'000 £'000
Operating (loss)/profit for the period (1,682) 173 63
Adjustments for:
Amortisation of intangibles 386 424 1,011
Net change in fair value of financial instruments at fair value through profit (159) (124) 96
or loss
Depreciation of property, plant and equipment 150 140 288
Depreciation of right-of-use assets 314 322 636
Decrease in debtors * 7,506 15,473 4,398
Decrease in creditors * (7,133) (15,845) (5,522)
Net cash (used)/generated from operations (618) 563 970
* £373,000 cash inflow from working capital movement (30 September 2023:
£372,000 outflow; 31 March 2024: £1,124,000 outflow).
14. Contingent liability
In 2021, a former associate brought a claim against Walker Crips Investment
Management Limited "WCIM") in an Employment Tribunal. A hearing of a
preliminary issue took place in 2022 and the Tribunal found in favour of
WCIM. The former associate appealed certain aspects of that decision, and in
2023, whilst many of the appeal grounds were not upheld, certain points were
referred back to the Employment Tribunal to reconsider. The specific
contested points were subsequently upheld and the case will in due course move
to trial stage. WCIM considers the claims to be unjustified and intends to
continue to defend them robustly.
In addition to above, 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 any cases where a financial obligation is
deemed to be probable and thus provision is made, the Directors presently
consider a negative outcome to be remote. As a result, no further disclosure
has been made in these financial statements. Provisions made remain subject to
estimation uncertainty, which may result in material variations in such
estimates as matters are finalised.
15. Provisions
Provisions within one year are made up as follows:
Client Stamp Duty ( ) Total
payments liability
£'000 £'000 ( ) £'000
At 1 April 2023 - 878 878
Utilisation of provision - (183) ( ) (183)
At 30 September 2023 - 695 695
Utilisation of provision - (96) ( ) (96)
Release of provision - (244) ( ) (244)
At 1 April 2024 - 355 ( ) 355
Utilisation of provision - (324) (324)
Release of provision - (31) (31)
Additions 1,181 - 1,181
At 30 September 2024 1,181 - ( ) 1,181
Client payments
The provision relates to the current estimate of client redress arising from a
legacy suitability issue along 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 investigation is currently ongoing
to quantify the impact however the timing of these settlements are unknown but
it is expected that they will be resolved within 12 months.
16. Subsequent events
There are no material events arising after 30 September 2024, 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 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
27 December 2024
Walker Crips Group plc
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