TIDMWCW
RNS Number : 8219U
Walker Crips Group plc
31 July 2020
The information contained within this announcement is deemed to
constitute inside information as stipulated under the Market Abuse
Regulations (EU) No. 596/2014. Upon the publication of this
announcement, this inside information is now considered to be in
the public domain
31 July 2020
News Release
Walker Crips Group plc
("Walker Crips", the "Company" or the "Group")
Final results for the year ended 31 March 2020
Walker Crips Group plc, the investment management and wealth
management services, pensions administration and regulation
technology Group, announces audited results for the year ended 31
March 2020.
Highlights
The Group reports improved year-on-year income and profits.
-- Annual revenues up 3% to GBP31.4 million (2019: GBP30.5 million).
-- Operating profits up 172.5% to GBP1.09 million (2019: GBP0.40
million) and up 65% to GBP0.717 million (2019: GBP0.434 million)
excluding exceptional items.
-- Profit before tax up 97% to GBP963,000 (2019: GBP489,000) and
up 13% to GBP588,000 (2019: GBP521,000) excluding exceptional
items.
-- IAS 17 consistent EBITDA up 21% to GBP1.93 million (2019: GBP1.59 million)*.
-- Underlying cash generated from operations increased by 18.6%
to GBP1.85 million (2019: GBP1.56 million)*.
-- Cash and cash equivalents increased by GBP1.8 million to GBP8.6 million.
-- Assets Under Management, with the COVID-19 impact on global
markets, particularly affecting the final month of the year,
declined by 15% to GBP2.8 billion (2019: GBP3.3 billion).
-- Non-broking income as a percentage of total income increased to 74.3% (2019: 71.6%).
-- The pandemic headwinds of lower market levels and lower
interest rates are now negatively impacting income and the
underlying mix.
-- No final dividend proposed (2019: 0.33 pence) in view of the pandemic headwinds.
-- Liquid resources remain strong and we look forward with
confidence to continuing to implement strategic priorities
including ongoing focus on cost control.
* Fully explained in the Chairman's statement
For further information, please contact:
Four Broadgate
Roland Cross/Anthony Cornwell Tel: +44 (0)20 3697 4200
Cantor Fitzgerald Europe Tel: +44 (0) 20 7894 7625
Will Goode / Philip Davies
Chairman's statement
Confident in our continued success
An increase in year-on-year profits for the Group has been
overshadowed by the tragic and profound impact of the coronavirus
pandemic just before the year end, forcing the precautionary
suspension of the final dividend. Nevertheless, the Group's
emphasis on technology facilitated a rapid and effective response
to the practical challenges posed by the lockdown.
Overview of 2019/2020
Against a backdrop of largely buoyant market conditions, most of
the Group's businesses performed well until the very last month of
last year, and I am pleased to report an increase in full year
profit before tax of GBP474,000, or 97% on the prior year. However,
the sudden onset of the pandemic and the terrible effects it has
wrought on the economy and capital markets has marred what was a
reasonably good year for the Group. With Management's focus now
firmly on the future, the Group is repositioning itself for the
changes and challenges ahead.
Operating profit for the year of GBP1.092 million (2019:
GBP402,000) and profit before tax for the year of GBP963,000 (2019:
GBP489,000) both benefited from the recovery of a longstanding
disputed insurance claim of GBP209,000 and from the reassessment of
deferred cash consideration due on acquired client relations of
GBP166,000, both of which have been reported as exceptional items.
Adjusting for exceptional items, earnings growth remains strong,
with operating profit increasing by 65% to GBP717,000 (2019:
GBP434,000) and profit before tax increasing by 13% to GBP588,000
(2019: GBP521,000). The reconciliation of these IFRS and
alternative performance measures ('APMs') can be found in CEO's
statement below.
The reported results this year are also impacted by the adoption
of IFRS 16 'Leases' with effect from 1 April 2019 and because the
modified retrospective approach is used they are not comparable to
those reported in the prior year under the previous accounting
standard IAS 17. To provide a meaningful comparison we have
presented an EBITDA based APM, which reports operating profits
before exceptional items adjusted for depreciation, amortisation
and lease charges for both 2019 and 2020 on an IAS 17 consistent
basis.
On this basis the Group's EBITDA for the year increased 21% to
GBP1.93m (2019: GBP1.59m). The reconciliations of EBITDA to
operating profit before exceptional items for 2020 and 2019 are
presented in CEO's statement below. In the year to 31 March 2022
EBITDA figures will be presented on an IFRS 16 consistent
basis.
The encouraging momentum that I reported in the first half of
the year continued in the second half. Although we experienced a
decline in broking commission for the year of GBP572,000, these
revenue losses were more than offset by an increase of GBP1.35
million in management fees, as clients continue to switch from
commission-based to fixed fee tariffs.
Total non-broking income, which benefited from the full-year
impact of the rollout of new tariffs on management fees, the impact
of higher interest rates on managed client deposits, a continued
strong performance in our arbitrage trading book, notwithstanding a
mark to market loss on year-end positions reflecting market
declines in March 2020, improved Walker Crips Structured
Investments ("WCSI") results offset by lower revenues from short
term lending and net investment revenue, comprised 74.3% of Group
revenues versus 71.6% in the previous year. It should be noted,
however, that the full year's benefit of increased interest margins
on managed deposits arising from previous base rate rises will be
more than reversed by the two reductions to base rates in March
this year, taking them to historic lows as part of the Bank of
England's extraordinary response to the pandemic.
Total Assets Under Management and Administration ("AUMA")
averaged GBP5.0 billion during the year, compared with GBP5.1
billion for the previous year, helped by positive market
performance and strong growth from the private client teams, offset
by the loss of a team of associates (with approximately GBP240
million in assets) at the start of the year.
AUMA were impacted by the collapse in equity markets in March
and ended the year down 14% at GBP4.3 billion, but have since
recovered along with markets to GBP4.8 billion by 30 June 2020.
Discretionary and Advisory Assets Under Management were similarly
impacted by the global market decline, ending the year at GBP2.8
billion (31 March 2019: GBP3.3 billion).
Commission paid to self-employed associates increased by 1.0%
during the year, significantly lower than the 3% growth in
revenues, reflecting the changing mix of revenues towards other
non-sharing parts of the business and resulting in an improvement
in the gross margin to GBP21.6 million (31 March 2019: GBP20.8
million). Administrative expenses rose by GBP0.6 million (2.7%)
during the year, significantly lower than the 3% growth in revenues
and resulting in an improvement in operating profit margin
excluding exceptional items to 2.3% (31 March 2019: 1.4%).
Management focus on the cost base is paying off, with the growth in
administrative expenses largely accounted for by an increase in
regulatory fees and levies of GBP0.3 million, effectively doubling
from the previous year. Following the onset of the pandemic,
Management implemented an immediate cost-reduction initiative,
including the acceptance of a temporary pay cut by all Group and
subsidiary Directors. Further actions are being discussed and
readied, subject to developments in market conditions.
At a divisional level, Investment Management saw an 7.5%
increase in fees and other revenues to GBP21.5 million (2019: GBP20
million), offset by the fall in commission income noted above such
that overall revenues of the division increased by 2.4% year on
year to GBP29.6 million (2019: GBP2.9 million). There were notably
strong performances by the London and York-based private client
teams. The impact of the pandemic on markets, and indirectly on
fees, has translated into current fee income falling broadly in
line with industry benchmarks and Management's expectations.
Encouragingly, commissions have, so far, been more resilient than
originally budgeted. Management is not budgeting for a rise in base
rates in the foreseeable future and the recent cuts in base rates
is projected to result in a decline in annual revenues of GBP1.5
million compared to the year ended 31 March 2020.
The York-based Wealth Management division has seen an overall
revenue increase of GBP0.09 million on the previous year. During
the year, two teams within the York division transferred to the
Investment Management division to gain better operational
efficiencies. The Wealth Management team took full ownership of the
previous joint venture with a local firm of Accountants, JWP
Creers, securing over GBP70,000 of recurring annual revenue and
Assets Under Management of approximately GBP11 million on 1 April
2019 for a cash consideration of GBP47,000. JWP Creers Wealth
Management Limited has changed its name to Walker Crips Ventures
Limited and the trade and operations of the company were integrated
into Walker Crips Wealth Management Limited.
The Structured Investments team ("WCSI") delivered improved
revenue in the second half to the year, following sluggish volumes
in the first half. Market conditions towards the end of the year
were favourable, with rising volatility prompting an improvement in
the product terms available to clients. For the year as a whole,
revenues, despite some mark to market losses reported at year end
(majority of which have since been recovered) were up 27.6% to
GBP1.85 million (2019: GBP1.45 million). WCSI added structured
deposits to its product line-up, though market conditions
constrained the issuance in the short-term and this was not
launched in the year. WCSI has continued to build its relationships
with leading credit institutions, adding new issuers during the
year and further diversifying potential credit risk.
The Group's balance sheet remains stable, with reported net
assets of GBP22,644,000, up GBP923,000 from the prior year,
including a GBP601,000 increase due to the adoption of IFRS 16 on 1
April 2019 (see note 35), profit for the year and the payment of
dividends of GBP396,000.
The Group's cash generated by operations during the year was
GBP3.5 million compared to an operating cash out-flow of GBP0.6
million in the prior year. Adjusting for exceptional items, the
anomalies in the timing of working capital payments around
reporting dates and the 2020 lease liability and interest payments
that are now reported as financing activities following the
adoption of IFRS 16 'Leases' (see above), underlying operating cash
generated improved by 18.6% to GBP1.85 million (2019: GBP1.56
million). Reconciliations of the underlying cash generated APMs to
operating cash per the cashflow statement are presented below in
CEO's statement. After cash deployed in investing activities and
dividends paid in the year, cash and cash equivalents increased a
healthy GBP1.820 million to GBP8.609 million at year end.
We have navigated the COVID-19 reality by implementing the
Group's business continuity plan, to protect the Group's
operations, its clients, its shareholders and its staff. The Board
of Directors has invested in technology and infrastructure to
enable the vast majority of staff to work from home to abide by
government guidelines. Operations have been smooth and unaffected
by the disruptions thanks to the Group's state-of-the-art
systems.
Without doubt, the COVID-19 pandemic caused significant
disruption to the financial services industry and the true
financial impact on the UK and Global economy and, in particular,
on the Group is as yet an unknown. However, it is encouraging to
see the regulated financial services sector has so far demonstrated
good governance, control, and risk management and mitigation
procedures to limit the overall impact. It is also encouraging to
see majority of our clients view this short term disruption as an
opportunity.
As part of the post-COVID-19 recovery, the Group plans to
implement future cash generating strategies such as further
expansion of the Group's Software as a Service offering and an
Investment Manager recruitment drive. These strategies are now more
important than ever, and the Board sees revenue-generating
expansion as the best path to recovery and the Group's future
growth beyond these exceptional times.
As the UK emerges from the lockdown, we look forward into
settling to the new normality in an improving post-COVID-19 economy
and environment, with more streamlined business processes, to give
the Group the best chance possible of a quick bounce back.
The continuing negative impact of the pandemic post year end,
both in the form of market declines and reduced interest margins on
managed deposits noted above, has prompted a renewed management
focus on forecasting cash flows. The results of these forecasts
have been integrated into the Group's renewed corporate strategy,
its dividend policy and cost management initiatives. The balance
sheet, cash generation and liquidity enables us to weather these
market impacts and continue to invest in our strategic initiatives,
as further evidenced by the stress testing performed in support of
our viability statement and going concern assessment. However, in
view of the present uncertainty and as explained further below, the
Board considers it prudent to cease the payment of dividends at
this time.
Strategy
I am pleased that the Group has been able to adjust so well to
the rapid changes in working practices occurring as a result of the
pandemic and, in the light of the pandemic, the Group's focus on
technology has been more than justified. However, it is still
incumbent on Management to take the Group's technology services to
the next level, and this is an even greater focus in the Group's
strategy.
EnOC, our technology subsidiary, was incorporated in 2018 to
deliver our "Software as a Service" (SaaS) business. EnOC aims to
close the technology gap by engineering out complexities. During
the year, EnOC Pro Platform (www.enoc.pro) was launched; a cloud
service that helps industry practitioners address the
administration of the new SM&CR regulatory regime. This service
seeks to disrupt the established regulation technology space by
providing a comprehensive and user-friendly solution on a low-cost
subscription basis. The SaaS business is now reported as a separate
business segment, though it is too early to report on the traction
and support the product will receive, as financial services
businesses look to streamline and improve their compliance
solutions.
Walker Crips Investment Management (WCIM) has renewed its
corporate strategy with an emphasis on growing the core investment
management business by organic growth and attracting new advisors,
which is entirely realistic and appropriate for the times. I note
that the strategy also makes the most of the talents of its new
management team (which I discuss below).
In line with the strategy of continued investment in technology,
a new back office system was implemented during the year for Walker
Crips Wealth Management that will streamline business processes and
improve client communication. The pension management team,
following a full review of SIPP fee tariffs, now has a fully
transparent and competitive product supported by robust back office
systems, leaving us ideally placed to expand our client base. The
SSAS client book remains consistent and we expect growth in this
market through our introducers and potential acquisition of smaller
competitors.
Walker Crips Structured Investments recruited senior staff from
major competitors, and built new relationships with
product-providers in preparation for increased activity. These
plans were delayed temporarily by the very extreme market
conditions for structured products, both in terms of price levels
and increased volatility, which impacted on the ability of
providers to create products. However, we expect WCSI to resume a
growth path if calmer market conditions continue to prevail.
Dividend
During the year, the Board approved an interim dividend of 0.60
pence per share (2019: 0.58 pence per share) payable on 20 December
2019 to those shareholders on the register at the close of business
on 6 December 2019.
With the sudden onset of the coronavirus pandemic, this year we
witnessed a once-in-a-century event and its terrifying personal and
economic consequences. While the effect on capital markets has
somewhat lessened of late, the impact of the reduction in base
rates creates increased uncertainties for the Group as it lies
beyond Management's control. Under these conditions, with the
likelihood of the Group reporting losses in the short-term,
Management has decided to take a conservative approach to expenses
and cash flows for the foreseeable future. This is absolutely a
time for shoring up the Group's finances and for resizing costs and
dividend distributions to the expected decline in revenues and
profitability. I am pleased to be able to say that, leading by
example, the Board and subsidiary Directors have all accepted
voluntary reductions in pay on a temporary basis. My deepest
sympathies go out to those staff who have lost relatives, friends
and loved ones. Given the extraordinary impact of the pandemic, the
Board has concluded that it would be inappropriate to recommend a
full-year dividend. The Board will review the Group's dividend
policy when there is greater clarity about the future impact of the
pandemic.
Our people, culture and governance
By setting the right example at the top, the Board has
prioritised good culture and conduct across all who represent the
Group. We continue to encourage professionalism and the right
behaviours in all we do. The end result is a unified emphasis on
achieving the right outcomes for clients. The new Senior Managers
& Certification Regime ("SM&CR") came into force on 9
December 2019. We have embraced and adopted it as part of our
culture of accountability rather than treating it as another
regulatory burden. Indeed, we have already built our own SM&CR
system within our new company, EnOC Technologies Limited, and have
expanded it to include not just the regulatory requirements, but
also our internal policies, governance and controls. Corporate
governance and stewardship as reported against the UK Corporate
Governance regime provides assurance to external parties who rely
on sound management of the business and its risks.
I would like to thank all my fellow Directors, investment
managers and advisers and members of staff for their continued
commitment to the highest levels of client service, support and
diligence during the period. Sanath Dandeniya's promotion to Group
Finance Director has introduced fresh impetus and innovation in our
finance function and operations. The appointments of Nick Hansen*,
as CEO of Walker Crips Investment Management, and Chris Darbyshire,
as Chief Investment Officer have reinvigorated our main operating
subsidiary's senior Management and service offerings. I would like
to take this opportunity to thank Rodney Fitzgerald again for his
outstanding and selfless contribution to the Group, both as Group
Finance Director (1999-2019) and Group CEO (2007-2017), and to wish
him well in his retirement.
This will be my final Annual Report since, as announced at last
year's Annual General Meeting, I will be stepping down as Chairman
at the forthcoming AGM, having served your company in this role for
the past 13 years. I have, however, agreed to the Board's request
to continue as a Non-Executive Director for up to 12 months, and
Martin Wright will take on the role of Chairman. I would like to
pay tribute now to all our loyal employees and Directors for the
support they have given me during some very difficult times such as
the 2008 financial crisis and the current COVID-19 pandemic. Walker
Crips has been in existence for well over 100 years and I am
confident we will see the present crisis through and continue in
our prime goal of offering excellent service to all our
clients.
Outlook
I cannot remember a more difficult time for the Group or,
indeed, the investment Management industry. The improved results
for the year were an important indicator that the Group was heading
in the right direction before the pandemic hit, and I am pleased
that Management has risen to the current challenge, and is already
taking the difficult decisions that will support the Group's
continued progress, its staff and clients.
Liquid resources remain strong despite the impact of the
pandemic and we look forward with confidence to continuing to
implement strategic priorities.
D. M. Gelber
Chairman
31 July 2020
*awaiting approval from the FCA
CEO's statement
Focussing on our customers for 106 years
Our three-pronged strategy continues to give direction to the
Group whilst the world and the financial markets look to recover
from the COVID-19 pandemic.
Reflection
We are pleased with the results for the year ending 31 March
2020, but first, I wish to address the tragic events caused by the
COVID-19 pandemic. Some of us have lost family and friends to the
virus; to those people we send our heartfelt condolences,
recognising that in all the analyses of financial impact, above all
it is the human cost that is hardest to bear. In February, our CIO
was already identifying the epidemic (as it was then) as a
potential game-changer for markets and businesses in general. We
then activated our business continuity plan on 12 March, ahead of
the government's lockdown of 23 March, giving us a head-start in
winding down office-based activities and implementing the working
from home (WFH) regime. The adaptability of our people and the
readiness of our technology enabled our transition to WFH nearly
seamlessly. I am proud of how our members responded to this crisis,
how we kept the Company functioning normally, and how we continued
to engage with our clients and ensuring that they did not suffer
any interruption in quality of service during a potentially chaotic
time. Everyone played their part, demonstrated patience and
tenacity, and got on with the business at hand.
While I am delighted with the way our members responded to the
challenge, we cannot avoid the fact that our financial performance
is a function of events in capital markets. Absent a significant
improvement in market conditions, our revenues will be materially
impacted for the current accounting year ending 31 March 2021.
Management has taken swift action to resize our cost-base, to help
mitigate the impact on earnings of the forecast decline in
revenues.
The Company Directors of the Group and subsidiary boards agreed
to a 20% temporary reduction in salary in light of market
conditions. Management is closely monitoring costs, and will take
proportionate action, while continuing to pursue our strategy to
grow the business.
The year ahead
Firstly, I wish to thank David Gelber for his decade-long
service to Walker Crips as Group Chairman. David has led us with
wise counsel and patient advice. His dedication to the company, and
tirelessly giving of his time and support to the executive board,
is greatly valued. Whilst it was his intention to retire at the
forthcoming AGM, we are grateful that he has agreed to stay on as
Non-Executive Director for up to 12 months. I also wish to thank,
in advance, Martin Wright who will be taking over as Group Chairman
immediately after the AGM. Martin knows the company well, and we
look forward to his guidance and counsel as we navigate the
opportunities and the challenges ahead.
Turning now to the Company's performance over the past year, and
our plans for the future. Investment Management (WCIM) has had a
good year but it was overshadowed by the challenges and threats
posed by COVID-19. Nevertheless, the changes made by the new WCIM
leadership team of Nick Hansen, CEO, and Chris Darbyshire, CIO,
have put WCIM on a much better footing. The combining and enlarging
of the private client department, and the focus on the associate
teams will yield positive results over the next twelve months.
Chris has brought a wealth of expertise across different asset
classes and provided clear investment strategies. I am particularly
impressed with his market insights, especially as the COVID-19
crisis evolved. I know that the business will thrive under his
investment acumen. Nick has bolstered WCIM's commercial focus on
organic revenue growth, a strategy aimed at ensuring WCIM is
financially self-sustaining, and we remain committed to growing our
business through attracting the highest quality investment advisers
and network associates and providing them with systems and services
that helps reduce the admin burden and allows them to focus on
clients.
The Wealth Management (WCWM) division has continued to grow,
even during these challenging times. The consistent and uniform
process implemented by Dominic Martin over two years ago is
starting to bear fruit and the fact that it is scalable, makes me
optimistic for what WCWM will achieve over the next twelve
months.
The Pensions team is also weathering the COVID-19 storm, ably
led by Wendy Eastwood, ensuring that our SSAS and SIPP clients are
well supported and kept in touch with regular updates. Our
collectives team (BPAM) continues to add new clients and new asset
inflows. Geoff Wright and his team run a tight ship, and they are
passionately focussed on good customer outcomes.
Historically, our approach toward diversification has served the
Group well. International Equity Arbitrage generated record
profits, Tier 1 Investor Visa continues its 100% success rate for
its clients since 2013, and Structured Investments is always in
demand by the IFA community. We will seek out good opportunities to
add to this growing list of successful diversification, to add to
the breadth of our revenue streams.
3-pronged strategy for growth
1. Core Investment Management & Advisory Business
-- This is our largest revenue generating division, providing
clients with investment, wealth, pensions, collectives advice and
the creation of structured investments for clients, IFAs and
counterparties;
-- We continue to invest significantly in our core business,
always enhancing our systems and processes to deliver efficiencies,
cost savings and improved services to our Investment Managers via
our in-house developed client management system thereby enabling
them to provide high quality tailored service to clients;
-- The profitability for FY20/21 is expected to be impacted due
to lower market volumes and sustained low, or zero, interest
rates;
-- We continue to grow AUM&A, the major driver of revenue in the form of recurring fees;
-- We have been increasing the creation and deployment of
automated processes, reducing risk and increasing scalability and
efficiency;
-- We continue to be focussed on driving down non-variable costs
and we endeavour to operate on an OpEx (Operational Expenditure)
rather than a CapEx (Capital Expenditure) basis;
-- Our York office has concluded the migration of our backoffice
systems to a cloud platform and we have already started seeing
efficiencies which will translate to improvement in revenues;
-- Our collectives investment management team maintained their
performance levels while facing compression of margin
pressures;
-- We continue to look for good quality investment and wealth
managers, either individually or as teams; and
-- The business is in strong financial standing, and we are able
to weather the economic crisis arising from the COVID-19
pandemic.
2. Alternative Investments
-- This subset of our core investment management division is
where we create innovative and higher margin new business
lines;
-- Our Tier 1 (Investor) Visa investment business continues to
perform well, attracting ultra high net worth individuals from the
Far East to invest in the UK. Our assessment process is vigorous
and thorough and has provided assurance to the UK Home Office with
100% success rate since 2013;
-- Our Short Term Lending associate increased its investment
mandate from GBP44 million to GBP70 million; and
-- Our international equity arbitrage business generates
significant returns on our modest principal trading book.
3. Software as a Service (SaaS)
-- The EnOC Pro Platform is live and its Senior Managers &
Certification Regime (SM&CR) tool is being used by our own
group of companies and also by a number of external companies;
-- A number of SaaS systems are currently being developed and
the next to be deployed will be an HR system, which is a logical
extension of the SM&CR tool;
-- The objective of EnOC is to provide enterprise level systems
to companies of all sizes, from the very large to the very small.
Our pricing model is on a subscription basis without minimum
amounts and without long term lock-in contracts, accessible to even
the smallest of companies and scalable to the largest. EnOC's ethos
is to close the technology gap between those who can afford large
systems, and those who cannot, between those who can build their
own systems, and those who do not have the resources to do so;
removing the barriers to entry;
-- EnOC was born in the cloud and will remain a cloud service,
for all the benefits it brings to the service and to our partners;
and
-- We must and we will Create > Innovate > Rejuvenate > Eliminate > Repeat.
Conclusion
Our core objectives of shareholder value, customer service,
operational effectiveness and efficiency, remain; and only by
emphasising and investing in technology as the delivery mechanism
will our core objectives be achieved. COVID-19 has made it
startlingly clear how much we depend on technology.
We have been fortunate that we have been building our own
technology for nearly 20 years, and that we have been early
adopters of cloud-based technology. We transitioned to an online
workforce overnight with maximum operational resilience and
minimum, or no, risk to clients. The world has changed
significantly over the past several months and we have shown that
we are able to adapt and change along with it.
Dependence on technology will only increase. We will prioritise
and increase our investment into the development of our own
technology, continue to innovate and create regulatory and
operational technologies for ourselves, for our partners and for
the industry via the EnOC Pro Platform www.enoc.pro .
I wish to thank the Non-Executive Directors for keeping the
Executives on the straight and narrow, Sanath Dandeniya for holding
the purse strings and for being my sounding board, and the
Directors for the leadership of their teams.
And finally, I echo the Chairman's words, that we are proud of
our Investment Managers, Advisors and our staff, for their
resilience, for their can-do attitude, but most of all for their
unwavering focus on ensuring that our clients continue to be well
looked after.
Reconciliation of
Reconciliation of profit operating profit to
before tax to profit operating profit
before tax and exceptional
items before exceptional items
2020 2019 2020 2019
GBP000 GBP000 GBP000 GBP000
--------------------------- ------------- -------------- ------------------------- ------------- --------------
Profit before tax 963 489 Operating profit 1,092 402
Exceptional items
Exceptional items (Note10) (375) 32 (Note10) (375) 32
Profit before tax and 588 521 Operating profit before 717 434
exceptional items tax and exceptional
items
--------------------------- ------------- -------------- ------------------------- ------------- --------------
Underlying cash generated IAS17 consistent EBITDA
by the Group
2020 2019 2020 2019
GBP000 GBP000 GBP000 GBP000
--------------------------- ------------- -------------- ------------------------- ------------- --------------
Net cash inflow / 3,483 (631) Operating profit before 717 434
(outflow) from operations tax and exceptional
items
Amortisation /
Working capital (160) 2,163 depreciation (Note32) 1,199 1,151
Lease liability payments RoUA(*) depreciation
under IFRS16 (1,101) - charge (Note 32) 867 -
IAS 17 operating lease
Exceptional items (Note10) (375) 32 charge (Note 35) (855) -
Underlying cash generated
in the period 1,847 1,564 IAS17 consistent EBITDA 1,928 1,585
--------------------------- ------------- -------------- ------------------------- ------------- --------------
* Right of use assets.
Charity
We are pleased to be supporting Twining, the mental health
charity. Twining provides employment support to people with mental
health conditions, which is a great need at the best of times, but
during the COVID-19 pandemic, the demand from people who need
support from Twining has increased exponentially. Twining provides
practical advice and coaching about finding work, and also
supporting people who are in work but are facing challenges. They
understand that people with mental health problems face unique work
barriers, preventing them from getting into, and staying at, work.
Twining believes that with the right support, these barriers can be
overcome and people can enjoy a healthy working life.
The Group, our Investment Managers, Advisors and staff, support
Twining financially, but we are also very pleased to be able to
support them technologically. Twining is doing a very good thing,
helping people in need, and if you are also able to support them,
please visit www.twiningenterprise.org.uk.
S. K. W. Lam
Chief Executive Officer
31 July 2020
Consolidated income statement
year ended 31 March 2020
2020 2019
Note GBP'000 GBP'000
-------------------------------------------------------------------------- ----- --------- ---------
Revenue 5 31,422 30,458
Commission and fees paid 7 (9,771) (9,673)
Share of change in net assets of joint venture 8 (11) 14
-------------------------------------------------------------------------- ----- --------- ---------
Gross profit 21,640 20,799
Administrative expenses 9 (20,923) (20,365)
Exceptional items 10 375 (32)
-------------------------------------------------------------------------- ----- --------- ---------
Operating profit 1,092 402
Investment revenue 11 76 90
Finance costs 12 (205) (3)
-------------------------------------------------------------------------- ----- --------- ---------
Profit before tax 963 489
Taxation 14 (245) (156)
-------------------------------------------------------------------------- ----- --------- ---------
Profit for the year attributable to equity holders of the Parent Company 718 333
-------------------------------------------------------------------------- ----- --------- ---------
Earnings per share
-------------------------------------------------------------------------- ----- --------- ---------
Basic 16 1.69p 0.78p
Diluted 16 1.69p 0.78p
-------------------------------------------------------------------------- ----- --------- ---------
Consolidated statement of comprehensive income
year ended 31 March 2020
2020 2019
GBP'000 GBP'000
---------------------------------------------------------------------------------------------- -------- --------
Profit for the year 718 333
---------------------------------------------------------------------------------------------- -------- --------
Total comprehensive income for the year attributable to equity holders of the Parent Company 718 333
---------------------------------------------------------------------------------------------- -------- --------
Consolidated statement of financial position
as at 31 March 2020
Group Group
2020 2019
Note GBP'000 GBP'000
------------------------------------------------------------- ----- --------- ---------
Non-current assets
Goodwill 17 4,388 4,388
Other intangible assets 18 6,701 7,262
Property, plant and equipment 19 2,330 2,520
Right-of-use assets 20 4,362 -
Investment in joint ventures 8 - 44
Investments - fair value through profit or loss 21 51 51
------------------------------------------------------------- ----- --------- ---------
17,832 14,265
------------------------------------------------------------- ----- --------- ---------
Current assets
Trade and other receivables 22 24,515 35,785
Investments - fair value through profit or loss 21 638 1,005
Cash and cash equivalents 23 8,609 6,916
------------------------------------------------------------- ----- --------- ---------
33,762 43,706
------------------------------------------------------------- ----- --------- ---------
Total assets 51,594 57,971
------------------------------------------------------------- ----- --------- ---------
Current liabilities
Trade and other payables 27 (22,750) (34,095)
Current tax liabilities (424) (178)
Deferred tax liabilities 24 (335) (317)
Bank overdrafts 25 - (127)
Provisions 28 (178) (484)
Lease liabilities 29 (969) -
------------------------------------------------------------- ----- --------- ---------
(24,656) (35,201)
------------------------------------------------------------- ----- --------- ---------
Net current assets 9,106 8,505
------------------------------------------------------------- ----- --------- ---------
Long-term liabilities
Deferred cash consideration 38 (15) (47)
Lease liabilities 29 (3,620) -
Dilapidation provision 28 (659) (542)
Landlord contribution to leasehold improvements - (460)
------------------------------------------------------------- ----- --------- ---------
(4,294) (1,049)
------------------------------------------------------------- ----- --------- ---------
Net assets 22,644 21,721
------------------------------------------------------------- ----- --------- ---------
Equity
Share capital 30 2,888 2,888
Share premium account 30 3,763 3,763
Own shares 31 (312) (312)
Retained earnings 31 11,582 10,659
Other reserves 31 4,723 4,723
------------------------------------------------------------- ----- --------- ---------
Equity attributable to equity holders of the Parent Company 22,644 21,721
------------------------------------------------------------- ----- --------- ---------
The financial statements of Walker Crips Group plc (Company
registration no: 01432059) were approved by the Board of Directors
and authorised for issue on 31 July 2020.
Signed on behalf of the Board of Directors
S. S. Dandeniya FCCA, Director
31 July 2020
Consolidated statement of cash flows
year ended 31 March 2020
2020 2019
Note GBP'000 GBP'000
---------------------------------------------------------- ----- -------- --------
Operating activities
Cash generated / (used) by operations 32 3,483 (631)
Tax received 18 66
---------------------------------------------------------- ----- -------- --------
Net cash generated / (used) by operating activities 3,501 (565)
---------------------------------------------------------- ----- -------- --------
Investing activities
Purchase of property, plant and equipment (321) (382)
Sale of investments held for trading 101 789
Consideration paid on acquisition of client lists (21) (111)
Consideration paid on acquisition of subsidiary (1) -
Deferred consideration paid on acquisition of subsidiary - (600)
Dividends received 11 17 23
Interest received 48 67
---------------------------------------------------------- ----- -------- --------
Net cash used by investing activities (177) (214)
---------------------------------------------------------- ----- -------- --------
Financing activities
Dividends paid (396) (796)
Interest paid 12 (7) (3)
Repayment of lease liabilities* (944) -
Repayment of lease interest* (157) -
---------------------------------------------------------- ----- -------- --------
Net cash used by financing activities (1,504) (799)
---------------------------------------------------------- ----- -------- --------
Net increase / (decrease) in cash and cash equivalents 1,820 (1,578)
Net cash and cash equivalents at beginning of period 6,789 8,367
---------------------------------------------------------- ----- -------- --------
Net cash and cash equivalents at end of period 8,609 6,789
---------------------------------------------------------- ----- -------- --------
Cash and cash equivalents 8,609 6,916
Bank overdrafts - (127)
---------------------------------------------------------- ----- -------- --------
8,609 6,789
---------------------------------------------------------- ----- -------- --------
* Total repayment of lease liabilities under IFRS 16 in the period was GBP1,101,000.
Consolidated statement of changes in equity
year ended 31 March 2020
Share Own
Share premium shares Capital Retained Total
capital account held redemption Other earnings equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------------------- -------- -------- -------- ----------- -------- --------- --------
Equity as at 31 March 2018 2,861 3,674 (312) 111 4,557 11,122 22,013
-------------------------------------------- -------- -------- -------- ----------- -------- --------- --------
Total comprehensive income for the year - - - - - 333 333
-------------------------------------------- -------- -------- -------- ----------- -------- --------- --------
Contributions by and distributions to
owners
Dividends paid - - - - - (796) (796)
Issue of shares on acquisition of
intangibles and
as deferred consideration 27 89 - - 55 - 171
-------------------------------------------- -------- -------- -------- ----------- -------- --------- --------
Total contributions by and distributions to
owners 27 89 - - 55 (796) (625)
-------------------------------------------- -------- -------- -------- ----------- -------- --------- --------
Equity as at 31 March 2019 2,888 3,763 (312) 111 4,612 10,659 21,721
-------------------------------------------- -------- -------- -------- ----------- -------- --------- --------
Comprehensive income for the year - - - - - 718 718
Effect of adoption of IFRS 16 (see note 35) - - - - - 601 601
-------------------------------------------- -------- -------- -------- ----------- -------- --------- --------
Total comprehensive income for the year - - - - - 1,319 1,319
-------------------------------------------- -------- -------- -------- ----------- -------- --------- --------
Contributions by and distributions to
owners
Dividends paid - - - - - (396) (396)
-------------------------------------------- -------- -------- -------- ----------- -------- --------- --------
Total contributions by and distributions to
owners - - - - - (396) (396)
-------------------------------------------- -------- -------- -------- ----------- -------- --------- --------
Equity as at 31 March 2020 2,888 3,763 (312) 111 4,612 11,582 22,644
-------------------------------------------- -------- -------- -------- ----------- -------- --------- --------
Notes to the accounts
year ended 31 March 2020
1. General information
Walker Crips Group plc ("the Company") is the Parent Company of
the Walker Crips group of companies ("the Group"). The Group is a
public limited company incorporated in the United Kingdom under the
Companies Act 2006. The Group is registered in England and Wales.
The address of the registered office is Old Change House, 128 Queen
Victoria Street, London EC4V 4BJ.
The significant accounting policies have been disclosed below.
The accounting policies for the Group and the Company are
consistent unless otherwise stated.
2. Basis of preparation
The financial information set out in these financial statements
does not constitute the Group's statutory accounts for the years
ended 31 March 2020 and 2019. The statutory accounts for 31 March
2020 to which these non-statutory accounts relate have not been
delivered to the registrar of companies.
The auditor's report has been signed and was unqualified.
This preliminary announcement is based on the Group financial
statements which are prepared in accordance with IFRS.
Going concern
The financial statements of the Group have been prepared on a
going concern basis. At 31 March 2020, the Group had net assets of
GBP22.6 million (31 March 2019: GBP21.7 million), net current
assets of GBP9.1 million (31 March 2019: GBP8.5 million) and cash
and cash equivalents of GBP8.6 million (31 March 2019: GBP6.8
million (net of overdraft)). The Group reported an operating profit
of GBP1.09 million for the year ended 31 March 2020 inclusive of
exceptional income of GBP375,000 (31 March 2019: GBP402,000
inclusive of exceptional costs of GBP32,000) and net cash inflows
from operating activities of GBP3.5 million (31 March 2019: net
cash outflows from operating activities of GBP565,000).
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 into
account the following:
-- The capital structure and liquidity of the Group, noting the
capital comprises equity, the balance sheet now reflects lease
liabilities arising on the adoption of IFRS 16 and the level of
liquid resources remains strong.
-- Its base case and stressed cash flow forecasts over the
financial reporting periods ending 31 March 2021 and 31 March
2022.
-- The principal risks facing the Group and its systems of risk management and internal control.
-- Improved operating cashflow during the year to 31 March 2020,
noting the reported figure also benefits from the impact of
adopting IFRS 16 in respect of leased assets for which the
resulting liability repayments and interest cost in the year were
GBP944,000 and GBP157,000 respectively.
-- the uncertainty caused by the COVID-19 outbreak and the
immediate measures, including suspension of certain discretionary
spends, cost cutting and use of the Government job retention
scheme, to mitigate the impact on the business.
Key assumptions that the Directors have made in preparing the
base case cash flow forecasts are that:
-- Revenues prudently reflect the impact of (i) continued low
base rates of 10 basis points on income for managing client
deposits and (ii) lower fee income expectation as a result of the
lower UK equity market levels. The base case assumption is for the
FTSE100 index to remain at 5700 range until December 2020 and
recovering to 7000 range and increasing modestly thereon. Overall
revenue growth expectation for future years set conservatively at
2% to 3.3% from the COVID-19 impacted lower starting point.Base
case costs prudently reflect only the actions Management has taken
to date in response to the impact of COVID-19 on the business for
the remainder of the present reporting year, with any further cost
savings delayed until the year to 31 March 2022.
Key stress scenarios that the Directors have considered
include:
-- A 'bear stress scenario': representing a further 10% fall in
income compared to the base case scenario in reporting period
ending 31 March 2021 and 31 March 2022.
-- A remote 'severe or reverse stress scenario': representing a
20% fall in commission income and 15% fall in fee income compared
to the base case for each forecast period.
-- Both stress scenarios assume no mitigating actions.
Liquidity and regulatory capital resource requirement exceeded
the minimum threshold in both the base and bear scenarios. However,
in the severe stress scenario, although the Group has positive
liquidity throughout the period, negatively impact our capital
prudential capital ratio is such that it falls below the regulatory
requirement in June 2022. The Directors consider this scenario to
be remote in view of the prudence built into the base case planning
and that further mitigations available to the Directors are not
reflected therein. Such mitigating actions within Management
control include reduction in propriety risk positions, delayed
capital expenditure, further reductions in discretionary spend and
additional reduction in employee headcount. Other mitigating
actions which may be possible include seeking shareholder support,
sale of assets and stronger cost reductions.
The Directors have also considered the wider operational
consequences and ramifications of the COVID-19 pandemic. As
explained in the Chief Executive's report our business
infrastructure has proved resilient in protecting the safety of our
employees and maintaining our high levels of client service in the
'working from home' mode of operations. The Government lockdown
restrictions have caused some disruptions, however, the Group's
advanced IT systems, along with greater use of cloud-based
technology, have allowed all operations to run at 100% capacity. We
continue to review our approach in line with latest developments
and government guidance. Our stress testing demonstrates the
Group's financial resilience and operating flexibility.
Following the assessment of the Group's financial position and
its ability to meet its obligations as and when they fall due,
including the financial implications of the pandemic, the Directors
are not aware of any material uncertainties that cast significant
doubt on the Group's ability to continue as a going concern.
Standards and interpretations affecting the reported results or
the financial position
The accounting policies adopted are consistent with those of the
previous financial year with the exception of IFRS 16 "Leases". The
Group has applied the modified retrospective approach and has not
restated comparative amounts for the period prior to initial
adoption. The impact of adopting this new standard is outlined in
note 3.
The Group does not expect any other standards issued by the
IASB, but not yet effective, to have a material impact on the
Group.
3. Significant accounting policies
Basis of consolidation
The Group financial statements consolidate the financial
statements of the Group and companies controlled by the Group (its
subsidiaries) made up to 31 March each year. The Group controls an
entity when it is exposed to, or has rights to, variable returns
from its involvement with the entity and has the ability to affect
those returns through its powers to direct relevant activities of
the entity. Subsidiaries are fully consolidated from the date on
which control is obtained and no longer consolidated from the date
that control ceases; their results are in the consolidated
financial statements up to the date that control ceases.
Entities where the interest is 49% or less are assessed for
potential treatment as a Group company against the control tests
outlined in IFRS 10, being power over the investee, exposure or
rights to variable returns and power over the investee to affect
the amount of investors' returns.
All intercompany balances, income and expenses are eliminated on
consolidation.
Business combinations
The acquisition of subsidiaries is accounted for using the
acquisition method. The cost of the acquisition is measured at the
aggregate of the fair values, at the date of exchange, of assets
given, liabilities incurred or assumed, and equity instruments
issued by the Group in exchange for control of the acquiree. The
acquiree's identifiable assets, liabilities and contingent
liabilities that meet the conditions for recognition under IFRS 3
"Business Combinations" are recognised at their fair value at the
acquisition date.
Interests in joint ventures
A joint venture is a contractual arrangement whereby the Group
and other parties undertake an economic activity that is subject to
joint control; that is when the strategic financial and operating
policy decisions relating to the activities require the unanimous
consent of the parties sharing control.
The Group's share of the assets, liabilities, income and
expenses of jointly controlled entities are accounted for in the
consolidated financial statements under the equity method. In the
current year, there was no longer an asset classified as a joint
venture investment.
Goodwill
Goodwill arising on consolidation represents the excess of the
cost of acquisition over the Group's interest in the fair value of
the identifiable assets and liabilities of a company or jointly
controlled entity at the date of acquisition. Goodwill is initially
recognised as an asset at cost and is subsequently measured at cost
less any accumulated impairment losses. Goodwill is not amortised
but is reviewed for impairment at least annually. Any impairment is
recognised immediately in profit or loss and is not subsequently
reversed in future periods.
For the purpose of impairment testing, goodwill is allocated to
each of the Group's cash-generating units expected to benefit from
the synergies of the combination. Cash-generating units to which
goodwill has been allocated are tested for impairment annually, or
more frequently when there is an indication that the unit may be
impaired. On disposal of a company or jointly controlled entity,
the attributable amount of goodwill is included in the
determination of the profit or loss on disposal.
Intangible assets
(a) Client lists
Client lists are recognised when it is probable that future
economic benefits will flow to the Group and the cost of the asset
can be measured reliably whilst the risk and rewards have also
transferred into the Group's ownership.
Intangible assets classified as client lists are recognised when
acquired as part of a business combination or when separate
payments are made to acquire clients' assets by adding teams of
Investment Managers.
The cost of acquired client lists and businesses generating
revenue from clients and Investment Managers are capitalised. These
costs are amortised on a straight-line basis over their expected
useful lives of three to twenty years. The amortisation period and
amortisation method for intangible assets are reviewed at least
each financial year end. All intangible assets have a finite useful
life.
Amortisation of intangible fixed assets is included within
administrative expenses in the consolidated income statement.
At each statement of financial position date, the Group reviews
the carrying amounts of its intangible assets to determine whether
there is any indication that those assets have suffered an
impairment loss. If any such indication exists, the recoverable
amount of the asset is estimated in order to determine the extent
of the impairment loss (if any). Where the asset does not generate
cash flows that are independent from other assets, the Group
estimates the recoverable amount of the cash-generating unit to
which the asset belongs.
During the year, a review of the Group's intangible assets
resulted in the revision of the Useful Economic Life ("UEL") of an
acquired client list. The Truro client list, which had an estimated
UEL of 16.25 years as at 31 March 2019, was revised to 11.25 years.
As it was a change in accounting estimate, this revision and the
resultant change in annual amortisation for this intangible asset
was applied prospectively, beginning with a new annual amortisation
charge for this asset in the current financial year.
The revised amortisation charge in respect of this intangible
asset was GBP143,000 in the current year and the annual charge
expected for the remaining UEL of the asset. The charge in prior
year was GBP99,000.
(b) Software Licenses
Computer software which is not an integral part of the related
hardware is recognised as an intangible asset when the Group is
expected to benefit from future use of the software and the costs
are reliably measured and amortised using the straight line method
over a useful life of up to five years.
Own shares held
Own shares consist of treasury shares which are recognised at
cost as a deduction from equity shareholders' funds. Subsequent
consideration received for the sale of treasury shares is also
recognised in equity with any difference being taken to retained
earnings. No gain or loss is recognised on sale of treasury
shares.
Shares to be issued
Shares to be issued represent the Group's best estimate of the
Ordinary Shares in the Group which are likely to be issued,
following business combinations or the acquisition of client
relationships which involve deferred payments in the Group's
shares. Where shares are due to be issued within a year, the sum is
included in current liabilities. Shares to be issued are dependent
on the achievement of pre-defined targets and are treated as a
liability until they are allotted and issued. There were no
transactions recognised in relation to this in the current
year.
Revenue recognition
Revenue is measured at a fair value of the consideration or
receivable and represents gross commissions, interest receivable
and fees in the course of ordinary investment business, net of
discounts, VAT and sales related taxes.
Revenues recognised under IFRS 15
Revenue from contracts with customers:
-- gross commissions on stockbroking activities are recognised
on those transactions whose trade date falls within the financial
year, with the execution of the trade being the performance
obligation at that point in time;
-- in Walker Crips Investment Management, fees earned from
managing various types of client portfolios are accrued daily over
the period to which they relate with the performance obligation
fulfilled over the same period;
-- fees in respect of financial services activities of Walker
Crips Wealth Management are accrued evenly over the period to which
they relate with the performance obligation fulfilled over the same
period;
-- fees earned from structured investments are recognised on the
date the underlying security of the structured investment is traded
and settled, with the execution of the trade being the performance
obligation at that point in time; and
-- fees earned from software offering, Software as a Service
"SaaS", are accrued evenly over the period to which they relate
with the performance obligation fulfilled over the same period.
Other incomes:
-- interest is recognised as it accrues in respect of the financial year;
-- dividend income is recognised when:
-- the Group's right to receive payment of dividends is established;
-- when it is probable that economic benefits associated with
the dividend will flow to the Group;
-- the amount of the dividend can be reliably measured; and
-- gains or losses arising on disposal of trading book
instruments and changes in fair value of securities held for
trading purposes are both recognised in profit and loss.
The Group does not have any long-term contract assets in
relation to customers of any fixed and/or considerable lengths of
time which require the recognition of financing costs or incomes in
relation to them.
Operating expenses
Operating expenses and other charges are provided for in full up
to the statement of financial position date on an accruals
basis.
Exceptional items
To assist in understanding its underlying performance, the Group
identifies certain items of pre-tax income and expenditure and
discloses them separately in the Consolidated income statement.
Such items would include:
1. profits or losses on disposal, closure or impairment of assets or businesses;
2. corporate transaction and restructuring costs;
3. changes in the fair value of contingent consideration; and
4. non-recurring items considered individually for
classification as exceptional by virtue of their nature or
size.
The separate disclosure of these items allows a clearer
understanding of the Group's trading performance on a consistent
and comparable basis, together with an understanding of the effect
of non-recurring or large individual transactions upon the overall
profitability of the Group. The exceptional items arising in the
current period are explained in note 10 and all fall under category
4 above. The related tax effect is also quantified and disclosed in
note 14.
Deferred income
Income received from clients in respect of future periods to the
transaction or reporting date are classified as deferred income
within creditors until such time as value has been received by the
client.
Foreign currencies
The individual financial statements of each of the Group's
companies are presented in pounds sterling, which is the functional
currency of the Group and the presentation currency of the
consolidated financial statements.
In preparing the financial statements of the individual
companies, transactions in currencies other than the entity's
functional currency (foreign currencies) are recorded at the rates
of exchange prevailing on the dates of the transactions. At each
statement of financial position date, monetary assets and
liabilities that are denominated in foreign currencies are
re-translated at the rates prevailing on the balance sheet date.
Exchange differences arising on the settlement of monetary items,
and on the re-translation of monetary items, are included in the
consolidated income statement for the period. Where consideration
is received in advance of revenue being recognised, the date of the
transaction reflects the date the consideration is received.
Impairment of non-financial assets
At each balance sheet date, the Group reviews the carrying
amounts of its tangible and intangible assets to determine whether
there is any indication that those assets have suffered an
impairment loss. For the purposes of assessing impairment, assets
are grouped at the lowest levels for which there are separately
identifiable cash flows (cash-generating units). If there is an
indication of possible impairment, the recoverable amount of any
affected asset (or group of related assets) is estimated and
compared with its carrying amount. If the estimated recoverable
amount is lower, the carrying amount is reduced to its estimated
recoverable amount, and an impairment loss is recognised
immediately in profit or loss.
Property, plant and equipment
Fixtures and equipment are stated at historical cost less
accumulated depreciation and provision for any impairment.
Depreciation is charged so as to write-off the cost or valuation of
assets over their estimated useful lives using the straight-line
method on the
following bases:
Computer hardware 33(1) /(3) % per annum on cost
Computer software between 20% and 33(1) /(3) % per annum on
cost
Leasehold improvements over the term of the lease under IFRS 16
Furniture and equipment 33(1) /(3) % per annum on cost
Right-of-use assets held under contractual arrangements are
depreciated over the lengths of their respective contractual terms,
as prescribed under IFRS 16.
The gain or loss on the disposal or retirement of an asset is
determined as the difference between the sales proceeds and the
carrying amount of the asset and is recognised in income. The
residual values and estimated useful life of items within property,
plant and equipment are reviewed at least at each financial year
end. Any shortfalls in carrying value are impaired immediately
through profit or loss.
Taxation
The tax expense represents the sum of the tax currently payable
and deferred tax.
The tax currently payable is based on taxable profit for the
year. Taxable profit differs from net profit as reported in the
income statement because it excludes items of income or expense
that are taxable or deductible in other years and it further
excludes items that are never taxable or deductible. The Group's
liability for current tax is calculated using tax rates that have
been enacted or substantively enacted by the statement of financial
position date.
Deferred tax is the tax expected to be payable or recoverable on
differences between the carrying amounts of assets and liabilities
in the financial statements and the corresponding tax bases used in
the computation of taxable profit. Deferred tax liabilities are
generally recognised for all taxable temporary differences and
deferred tax assets are recognised to the extent that it is
probable that taxable profits will be available against which
deductible temporary differences can be utilised.
The carrying amount of deferred tax assets is reviewed at each
statement of financial position date and reduced to the extent that
it is no longer probable that sufficient taxable profits will be
available to allow all or part of the asset to be recovered.
Deferred tax is calculated at the tax rates that are expected to
apply in the period in which the liability is settled or the asset
is realised based on tax rates that have been enacted or
substantively enacted by the statement of financial position date.
Deferred tax is charged or credited directly to the Income
Statement, except when it relates to items charged or credited to
'Other Comprehensive Income' in which case the deferred tax is also
dealt with in other comprehensive income.
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.
Financial assets and liabilities
Financial assets and liabilities are recognised in the
Consolidated statement of financial position when the Group becomes
a party to the contractual provisions of the instrument.
At initial recognition, the Group measures a financial asset or
financial liability at its fair value plus or minus transaction
costs. Transaction costs of financial assets and financial
liabilities carried at fair value through profit or loss ("FVTPL")
are expensed in the statement of comprehensive income. Immediately
after initial recognition, an expected credit loss allowance
("ECL") is recognised for financial assets measured at amortised
cost, which results in an accounting loss being recognised in
profit or loss when an asset is newly originated.
The Group does not use hedge accounting.
a) Financial assets
Classification and subsequent measurement
The Group classifies its financial assets in the following
measurement categories:
-- Fair value through profit or loss ("FVTPL"); or
-- Amortised cost.
Financial assets are classified as current or non-current
depending on the contractual timing for recovery of the asset.
(i) Debt instruments
Classification and subsequent measurement of debt instruments
depend on:
-- the Group's business model for managing the asset; and
-- the cash flow characteristics of the asset.
Business model: The business model reflects how the Group
manages the assets in order to generate cash flows. That is,
whether the Group's objective is solely to collect the contractual
cash flows from the assets, to collect both the contractual cash
flows and cash flows arising from the sale of assets, or solely or
mainly to collect cash flows arising from the sale of assets.
Factors considered by the Group include past experience on how the
contractual cash flows for these assets were collected, how the
assets' performance is evaluated, and how risks are assessed and
managed.
Cash flow characteristics of the asset: Where the business model
is to hold assets to collect contractual cash flows, the Group
assesses whether the financial instruments' contractual cash flows
represent solely payments of principal and interest ("the SPPI
test"). In making this assessment, the Group considers whether the
contractual cash flows are consistent with a basic lending
instrument.
Based on these factors, the Group classifies its debt
instruments into one of two measurement categories:
Amortised cost: Assets that are held for collection of
contractual cash flows where those cash flows represent solely
payments of principal and interest ("SPPI"), and that are not
designated at FVTPL, are measured at amortised cost. Amortised cost
is the amount at which the financial asset is measured at initial
recognition minus the principal repayments, plus or minus the
cumulative amortisation, using the effective interest rate method,
of any difference between that initial amount and the maturity
amount, adjusted by any ECL recognised. The effective interest rate
is the rate that exactly discounts estimated future cash payments
or receipts through the expected life of the financial asset to the
gross carrying amount. Interest income from these financial assets
is included within investment revenues using the effective interest
rate method.
Fair value through profit or loss ("FVTPL"): Assets that do not
meet the criteria for amortised cost or fair value through other
comprehensive income ("FVTOCI") are measured at fair value through
profit or loss.
Reclassification
The Group reclassifies debt instruments when and only when its
business model for managing those assets changes. The
reclassification takes place from the start of the first reporting
period following the change.
Impairment
The Group assesses on a forward-looking basis the ECL associated
with its debt instruments held at amortised cost. The Group
recognises a loss allowance for such losses at each reporting date.
On initial recognition, the Group recognises a 12-month ECL. At the
reporting date, if there has been a significant increase in credit
risk, the loss allowance is revised to the lifetime expected credit
loss.
The measurement of ECL reflects:
-- an unbiased and probability weighted amount that is
determined by evaluating a range of possible outcomes;
-- the time value of money; and
-- reasonable and supportable information that is available
without undue cost or effort at the reporting date about past
events, current conditions and forecasts of future economic
conditions.
The Group adopts the simplified approach to trade receivables
and contacts assets, which allows entities to recognise lifetime
expected losses on all assets, without the need to identify
significant increases in credit risk (i.e. no distinction is needed
between 12-month and lifetime expected credit losses).
(ii) Equity instruments
Investments are recognised and derecognised on a trade date
basis where a purchase or sale of an investment is under a contract
whose terms require delivery of the instrument within the timeframe
established by the market concerned, and are initially measured at
fair value.
The Group subsequently measures all equity investments at fair
value through profit and loss. Changes in the fair value of
financial assets at FVTPL are recognised in revenue within the
Consolidated Income Statement.
(iii) Cash and cash equivalents
Cash and cash equivalents includes cash in hand, deposits held
at call with financial institutions, other short-term, highly
liquid investments with original maturities of three months or less
that are readily convertible to known amounts of cash and which are
subject to an insignificant risk of changes in value. Bank
overdrafts are shown within current liabilities in the statement of
financial position.
De-recognition
Financial assets are derecognised when the rights to receive
cash flows from the financial assets have expired or have been
transferred and the Group has transferred substantially all the
risks and rewards of ownership.
b) Financial liabilities
Classification and subsequent measurement
Financial liabilities are classified and subsequently measured
at amortised cost.
Financial liabilities are derecognised when they are
extinguished.
Financial liabilities and equity
Financial liabilities and equity instruments are classified
according to the substance of the contractual arrangements entered
into. An equity instrument is any contract that evidences a
residual interest in the assets of the Group after deducting all of
its liabilities.
Trade payables
Trade payables are classified at amortised cost. Due to their
short-term nature, their carrying amount is considered to be the
same as their fair value.
Bank overdrafts
Interest-bearing bank overdrafts are initially measured at fair
value and shown within current liabilities. Finance charges are
accounted for on an accrual basis in profit or loss using the
effective interest rate method and are added to the carrying amount
of the instrument to the extent that they are not settled in the
period in which they arise.
Equity instruments
Equity instruments issued by the Group are recorded at the
proceeds received, net of direct issue costs.
Share Incentive Plan ("SIP")
The Group has an incentive policy to encourage all members of
staff to participate in the ownership and future prosperity of the
Group. All employees can participate in the SIP following three
months of service. Employees may contribute a maximum of 10% of
their gross salary in regular monthly payments (being not less than
GBP10 and not greater than GBP150) to acquire Ordinary Shares in
the Parent Company (Partnership Shares). Partnership Shares are
acquired monthly.
For the period ending 31 March 2020, for every Partnership Share
purchased, the employee receives one matching share. All shares
awarded under this scheme have been purchased in the market by the
Trustees of the SIP.
On 1 April 2020, The Directors as part of the COVID-19 response
to preserve cash and liquidity, suspended the matching option. This
will continue until 31 March 2021.
Provisions
Provisions are recognised when the Group has a present
obligation as a result of a past event, and it is probable that the
Group will be required to settle that obligation. Provisions are
measured at the Directors' best estimate of the expenditure
required to settle the obligation at the statement of financial
position date, and are discounted to present value where the effect
is material.
Long-term liabilities - deferred cash and shares
consideration
Amounts payable to personnel under recruitment contracts in
respect of the client relationships, which transfer to the Group,
are treated as long-term liabilities if the due date for payment of
cash consideration is beyond the period of one year after the
year-end date. The value of shares in all cases is derived by a
formula based on the value of client assets received in conjunction
with the prevailing share price at the date of issue which in turn
determines the number of shares issuable.
Share-based payments
The Group issues equity-settled share-based payments to certain
self-employed personnel. Equity-settled share-based payments are
measured at fair value (excluding the effect of non-market-based
vesting conditions) at the date of grant. The fair value determined
at the grant date of the equity-settled share-based payments is
expensed on a straight-line basis over the vesting period, based on
the Group's estimate of shares that will eventually vest and
adjusted for the effects of non-market-based vesting
conditions.
The Group also issues shares as part of deferred consideration
for client relationships acquired under arrangements agreed with
Investment Managers when they join the Group. Equity-settled
share-based payments are awarded if Assets Under Management or
revenue targets for incoming clients have been achieved. The fair
value is estimated at the date of transfer of the assets and are
amortised on a straight-line basis over their estimated useful
lives.
As at the reporting date there were no share-based payments in
issue.
Pension costs
The Group contributes to defined contribution personal pension
schemes for selected employees. The contribution rate is based on
annual salary and the amount is charged to the income statement on
an accrual basis.
Dividends paid
Equity dividends are recognised when they become legally
payable. There is no requirement to pay dividends unless approved
by the shareholders by way of written resolution where there is
sufficient cash to meet current liabilities, and without detriment
of any financial covenants, if applicable.
IFRS 16 "Leases"
As outlined in note 2 above. The Group has adopted IFRS 16
"Leases" for the first time this period. This new standard was
adopted on 1 April 2019. Under the transition method chosen,
comparative information is not restated, and therefore, the revised
requirements are not reflected in the prior year financial
statements. Rather, these changes have been processed at the date
of initial application (1 April 2019) and recognised in the opening
equity balances.
Details of the impact of adoption are given below.
IFRS 16 provides a single lessee accounting model by removing
the IAS 17 classification of leases as either operating or finance
leases. The standard introduces a single, on-balance sheet
accounting model, which requires:
-- recognition of a right-of-use asset and corresponding lease
liability with respect to all lease arrangements in which the Group
is the lessee, except for short-term leases and leases of low value
assets;
-- recognition of a depreciation charge on the right-of-use
asset on a straight-line basis over the shorter of the expected
life of the asset and the lease term; and
-- recognition of an interest charge arising from the unwinding
of the discounted lease liability over the lease term.
All leases are accounted for by recognising a right-of-use asset
and a lease liability except for:
-- Leases of low value assets; and
-- Leases with a duration of 12 months or less.
Lease liabilities are measured at the present value of the
contractual payments due to the lessor over the lease term, with
the discount rate determined by reference to the rate inherent in
the lease unless this is not readily determinable, in which case
the Group's incremental borrowing rate on commencement of the lease
is used. Variable lease payments are only included in the
measurement of the lease liability if they depend on an index or
rate. In such cases, the initial measurement of the lease liability
assumes the variable element will remain unchanged throughout the
lease term. Other variable lease payments are expensed in the
period to which they relate.
On initial recognition, the carrying value of the lease
liability also includes:
-- amounts expected to be payable under any residual value guarantee;
-- the exercise price of any purchase option granted in favour
of the Group if it is reasonable certain to assess that option;
and
-- any penalties payable for terminating the lease, if the term
of the lease has been estimated on the basis of termination option
being exercised.
Right of use assets are initially measured at the amount of the
lease liability, reduced for any lease incentives received, and
increased for:
-- lease payments made at or before commencement of the lease;
-- initial direct costs incurred; and
-- the amount of any provision recognised where the Group is
contractually required to dismantle, remove or restore the leased
asset (typically leasehold dilapidations - see note 28).
Subsequent to initial measurement, lease liabilities increase as
a result of interest charged at a constant rate on the balance
outstanding and are reduced for lease payments made. Right-of-use
assets are amortised on a straight-line basis over the remaining
term of the lease or over the remaining economic life of the asset
if, rarely, this is judged to be shorter than the lease term.
Reassessment of lease term by way of extension, exercising of
break clause or termination will result in an adjustment to the
carrying value of the lease liability to reflect the payments to
make over the revised term.
The Group's leasing activities
The Group leases various offices, software and equipment that
were recognised as right-of use assets on the application of IFRS
16. The Group's lease contracts are typically made for fixed
periods of 2 to 10 years and extension and termination options are
included in a number of property and software leases across the
Group. These terms are used to maximise operational flexibility in
terms of managing contracts.
The extensions to leases are exercisable only by the Group and
not by the respective lessor. Lease terms are negotiated on an
individual basis and contain a wide range of different but
comparable terms and conditions. The lease agreements do not impose
any covenants, but leased assets may not be used as security for
borrowing purposes.
Prior to the implementation of IFRS 16, payments made under
operating leases (net of any incentives received from the lessor)
were charged to profit or loss on a straight-line basis over the
period of the lease. From 1 April 2019, leases are recognised as a
right-of-use asset and a corresponding liability at the date at
which the leased asset is available for use by the Group. Each
lease payment is allocated between the liability and finance cost.
The finance cost is charged to profit or loss over the lease period
so as to produce a constant periodic rate of interest on the
remaining balance of the liability for each period. The
right-of-use assets are depreciated over the shorter of the asset's
useful life and the lease term on a straight-line basis.
Assets and liabilities arising from a lease are initially
measured on a present value basis. Lease liabilities include the
net present value of the following lease payments:
-- fixed payments (including in-substance fixed payments), less any lease incentives receivable;
-- variable lease payment that are based on an index or a rate;
-- amounts expected to be payable by the lessee under residual value guarantees;
-- the exercise price of a purchase option if the lessee is
reasonably certain to exercise that option; and
-- payments of penalties for terminating the lease, if the lease
term reflects the lessee exercising that option.
The Group, as permitted under IFRS 16 has used the incremental
borrowing rate, being the rate that the Group estimates that it
would have to pay to borrow funds necessary to obtain an asset of
similar value in a similar economic environment with similar terms
and conditions.
Right-of-use assets are measured at cost comprising the
following:
-- the amount of the initial measurement of lease liability;
-- any lease payments made at or before the commencement date
less any lease incentives received;
-- any initial direct costs; and
-- restoration costs.
Payments associated with short-term leases and leases of
low-value assets are recognised on a straight-line basis as an
expense in profit or loss. Short-term leases are leases with a
lease term of 12 months or less. Low-value assets comprise IT
equipment and small items of office furniture.
The Group does not have any leasing activities acting as a
lessor.
Transition method and practical expedients utilised
The Group has adopted IFRS 16 retrospectively from 1 April 2019,
but has not restated comparatives for prior year ending 31 March
2019, as permitted under the specific transitional provisions in
the standard. The reclassifications and the adjustments arising
from the new leasing rules are therefore recognised in the opening
statement of financial position on 1 April 2019.
The Group elected to apply the practical expedient to not
reassess whether a contract is, or contains, a lease at the date of
initial application. Contracts entered into before the transition
date that were not identified as leases under IAS 17 and IFRIC 4
were not reassessed. The definition of a lease under IFRS 16 was
applied only to contracts entered into or changed on or after 1
April 2019.
IFRS 16 provides for certain optional practical expedients,
including those related to the initial adoption of the standard.
The Group applied the following practical expedients when applying
IFRS 16 to leases previously classified as operating leases under
IAS 17:
-- apply a single discount rate to a portfolio of leases with
reasonably similar characteristics;
-- exclude initial direct costs from the measurement of
right-of-use assets at the date of initial application for leases
where the right-of-use asset was determined as if IFRS 16 had been
applied since the commencement date;
-- reliance on previous assessments on whether leases are
onerous as opposed to preparing an impairment review under IAS 36
as at the date of initial application;
-- applied the exemption not to recognise right-of-use assets
and liabilities for leases with less than 12 months of lease term
remaining as of the date of initial application; and
-- the use of hindsight in determining the lease term where the
contract contains options to extend or terminate the lease.
Adjustments recognised on adoption of IFRS 16
As a lessee, the Group previously classified leases as operating
or finance leases based on its assessment of whether the lease
transferred substantially all of the risks and rewards of
ownership. Under IFRS 16, the Group recognises right-of-use assets
and lease liabilities for most leases. However, the Group has
elected not to recognise right-of-use assets and lease liabilities
for some leases of low value assets based on the value of the
underlying asset when new or for short-term leases with a lease
term of 12 months or less.
On adoption of IFRS 16, the Group recognised right-of-use assets
and lease liabilities in relation to leases of property, software
and hire of equipment, which had previously been classified as
operating leases. The lease liabilities were measured at the
present value of the remaining lease payments, discounted using the
Group's incremental borrowing rate as at 1 April 2019. The Group's
incremental borrowing rate is the rate at which a similar borrowing
could be obtained from an independent creditor under comparable
terms and conditions. The incremental borrowing rates used by
the
Group to measure lease liabilities at 1 April 2019 are listed in
the table below:
Incremental Borrowing Rate
------------------- ---------------------------
Leased property 3.23%
------------------- ---------------------------
Hire of equipment 2.87%
------------------- ---------------------------
Software licenses 2.87%
------------------- ---------------------------
In the context of transition to IFRS 16, right-of-use assets of
GBP5,062,000 and lease liabilities of GBP5,366,000 were recognised
as at 1 April 2019. Of these lease liabilities, GBP1,026,000 was
due within one year and were captured within current liabilities in
the statement of financial position. In addition, the Group has
decided not to apply the new IFRS 16 guidance to leases whose lease
term will end within 12 months of the date of initial application.
In such cases, the leases are accounted for as short-term leases
and the lease payments associated with them are recognised as an
expense from short term leases.
The following table reconciles the minimum lease commitments
disclosed in the Group's 31 March 2019 annual financial statements
to the amount of lease liabilities recognised on 1 April 2019:
As at 1 April 2019
GBP'000
---------------------------------------------------------------------------------------------- -------------------
Operating lease commitments disclosed as at 31 March 2019 7,214
Less: Service & Maintenance element included within lease commitments (997)
----------------------------------------------------------------------------------------------- -------------------
Adjusted operating lease commitments 6,217
----------------------------------------------------------------------------------------------- -------------------
Discounted using the lessee's incremental borrowing rate of at the date of initial application 5,233
Add: finance lease liabilities recognised as at 1 April 2019 142
Less: short-term leases recognised on a straight-line basis as expense (9)
----------------------------------------------------------------------------------------------- -------------------
Lease liability recognised as at 1 April 2019 5,366
----------------------------------------------------------------------------------------------- -------------------
Of which were due:
Current lease liabilities 1,026
Non-current lease liabilities 4,340
----------------------------------------------------------------------------------------------- -------------------
5,366
---------------------------------------------------------------------------------------------- -------------------
Details of the right-of-use assets and lease liabilities can be
found in notes 20 and 29, respectively.
Judgements and estimates
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, which are listed within
the above disclosure, 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.
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.
4. Key sources of estimation uncertainty and judgements
COVID-19 - estimation and judgement
The COVID-19 pandemic is an unprecedented global event;
therefore, it is somewhat difficult to predict certain outcomes,
including future revenues and cash flows. The unpredictable nature
of this pandemic carries a higher degree of uncertainty, but in
preparing these financial statements, the Directors have used all
available information and past experience in making estimates and
judgements.
Impairment of goodwill - estimation and judgement
Determining whether goodwill is impaired requires an estimation
of the fair value less costs to sell and the value-in-use of the
cash-generating units to which goodwill has been allocated. The
fair value less costs to sell involves estimation of values based
on the application of earnings multiples and comparison to similar
transactions. The value-in-use calculation requires the entity to
estimate the future cash flows expected to arise from the
cash-generating unit and apply a discount rate in order to
calculate present value. The assumptions used and inputs involve
judgements and create estimation uncertainty. These assumptions
have been stress-tested as described in note 17. The carrying
amount of goodwill at the balance sheet date was GBP4.4 million
(2019: GBP4.4 million) as shown in note 17.
Other intangible assets - judgement
Acquired client lists are capitalised based on current fair
values. No acquisitions were made in the period to 31 March 2020.
When the Group purchases client relationships from other corporate
entities, a judgement is made as to whether the transaction should
be accounted for as a business combination, or a separate purchase
of intangible assets. In making this judgement, the Group assesses
the acquiree against the definition of a business combination in
IFRS 3. Payments to newly recruited Investment Managers are
capitalised when they are judged to be made for the acquisition of
client relationship intangibles. The useful lives are estimated by
assessing the historic rates of client retention, the ages and
succession plans of the Investment Managers who manage the clients
and the contractual incentives of the Investment Managers. The
Directors conduct a review of indicators of impairment and also
consider a life of up to twenty years to be both appropriate and in
line with peers.
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, which are listed within
the above disclosure, 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.
-- 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.
Short-Term Lending Administration - judgement
The Group provides administrative services to Special Purpose
Vehicles who in turn make loans to specialist lenders in the
residential housing construction industry. Having considered the
requirements of IFRS 10, the Directors have also obtained
independent advice to support our conclusion that no additional
consolidation is required as a result of these arrangements and the
structure in which the Group provides this service.
During the period, all contracts relating to Short-Term Lending
Administration were novated to a new entity, Walker Crips Property
Investment Limited (WCPIL), where the Group holds 33% investment.
Future revenue from this division will be accounted via equity
accounting method.
Provision for dilapidations - estimation and judgement
The Group has made provisions for dilapidations under six leases
for its offices. The Group did not enter into any new property
leases in the period. During the year, GBP117,000 of additional
provisions were recognised, including GBP41,000 of interest, giving
a new provision at year-end of GBP659,000.
5. Revenue
An analysis of the Group's revenue is as follows:
2020 2019
-------------------------------------------------- -------- -------- -------- -------- ---------- --------
Non- Non-
Broking broking Broking broking
income income Total income income Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------------------------- -------- -------- -------- -------- ---------- --------
Stockbroking commission 8,095 - 8,095 8,667 - 8,667
Fees and other revenue(1) - 21,468 21,468 - 20,022(3) 20,022
-------------------------------------------------- -------- -------- -------- -------- ---------- --------
Investment Management 8,095 21,468 29,563 8,667 20,022 28,889
Wealth Management, Financial Planning & Pensions - 1,859 1,859 - 1,769(3) 1,769
-------------------------------------------------- -------- -------- -------- -------- ---------- --------
Revenue 8,095 23,327 31,422 8,667 21,791 30,458
-------------------------------------------------- -------- -------- -------- -------- ---------- --------
Investment revenue (see note 11) - 76 76 - 90(2) 902
-------------------------------------------------- -------- -------- -------- -------- ---------- --------
Total Income 8,095 23,403 31,498 8,667 21,881 30,548
-------------------------------------------------- -------- -------- -------- -------- ---------- --------
% of total income 25.7 74.3 100.0 28.4 71.6 100.0
-------------------------------------------------- -------- -------- -------- -------- ---------- --------
1 Includes Investment Management, Structured Investments, Alternative Investments and SaaS.
2 Prior year adjusted to exclude finance costs of GBP3,000. See note 12 for finance costs.
3 During the period to March 2020, two teams transferred from
Wealth Management to Investment management and as a result, to make
the comparison more meaningful, revenue of GBP832,000 was
transferred from Wealth Management to Investment Management.
Timing of revenue recognition
The following table presents operating income analysed by the
timing of revenue recognition of the operating segment providing
the service:
Consolidated
year ended
Investment Wealth 31 March
Management Management SaaS 2020
2020 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------------------------ ----------- ----------- -------- -------------
Revenue from contracts with customers
Products and services transferred at a point in time 10,269 410 - 10,679
Products and services transferred over time 16,706 1,449 1 18,156
Other revenue
Products and services transferred at a point in time 280 - - 280
Products and services transferred over time 2,307 - - 2,307
------------------------------------------------------ ----------- ----------- -------- -------------
29,562 1,859 1 31,422
------------------------------------------------------ ----------- ----------- -------- -------------
Consolidated
year ended
Investment Wealth 31 March
Management Management SaaS 2019
2019 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------------------------ -------------------- ----------- -------- -------------
Revenue from contracts with customers
Products and services transferred at a point in time 10,360 459 - 10,819
Products and services transferred over time(1) 16,309 1,250 - 17,559
Other revenue
Products and services transferred at a point in time 234 60 - 294
Products and services transferred over time 1,786 - - 1,786
------------------------------------------------------ -------------------- ----------- -------- -------------
28,689 1,769 - 30,458
------------------------------------------------------ -------------------- ----------- -------- -------------
1 During the period to March 2020, two business segments were
transferred from Wealth Management to Investment management and as
a result, to make the comparison more meaningful, revenue from
contracts with customers of GBP832,000 was transferred from Wealth
Management to Investment Management.
Contract Contract Contract Contract
assets assets liabilities liabilities
2020 2019 2020 2019
GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------------------------------------- --------- --------- ------------ ------------
Brought forward 4,623 4,005 (4) (3)
Amounts included in contract liabilities that was recognised
as revenue during the period - - 4 3
Settlement of contract assets brought forward (4,623) (4,005) - -
Cash received in advance of performance and not recognised
as revenue during the period - - (3) (4)
Amounts included in contract assets that was recognised
as revenue during the period 4,907 4,623 - -
-------------------------------------------------------------- --------- --------- ------------ ------------
At 31 March 4,907 4,623 (3) (4)
-------------------------------------------------------------- --------- --------- ------------ ------------
6. Segmental analysis
For segmental reporting purposes, the Group currently has three
operating segments; Investment Management, being portfolio-based
transaction execution and investment advice; Wealth Management,
being financial planning and pension advice; and Software as a
Service (SaaS) comprising provision of regulatory and admin
software to regulated companies. Unallocated corporate expenses,
assets and liabilities are not considered to be allocateable
accurately, or fairly, under any known basis of allocation and are
therefore disclosed separately.
Walker Crips Investment Management's activities focus
predominantly on investment management of various types of
portfolios and asset classes.
Walker Crips Wealth Management provides advisory and
administrative services to clients in relation to their financial
planning, life insurance, inheritance tax and pension
arrangements.
EnOC Technologies Limited (Saas) provides the regulatory and
admin software, software as a service, to regulated companies
including all WCG's regulated entities. Fees payable by subsidiary
companies to EnOC Technologies Limited has been eliminated on
consolidation. These companies are the basis on which the Group
reports its primary segment information.
Revenues between Group entities, and in turn reportable
segments, are excluded from the below analysis as part of the
consolidation journals to cancel intercompany transactions and
balances.
Consolidated
year ended
Investment Wealth 31 March
Management Management SaaS 2020
2020 GBP'000 GBP'000 GBP'000 GBP'000
--------------------------------------- ----------- ----------- -------- -------------
Revenue
Revenue from contracts with customers 26,975 1,859 1 28,835
Other revenue 2,587 - - 2,587
--------------------------------------- ----------- ----------- -------- -------------
Total revenue 29,562 1,859 1 31,422
--------------------------------------- ----------- ----------- -------- -------------
Results
Segment result 2,034 42 (29) 2,047
Unallocated corporate expenses (955)
--------------------------------------- ----------- ----------- -------- -------------
1,092
Investment revenue 76
Finance costs (205)
--------------------------------------- ----------- ----------- -------- -------------
Profit before tax 963
Tax (245)
--------------------------------------- ----------- ----------- -------- -------------
Profit after tax 718
--------------------------------------- ----------- ----------- -------- -------------
Consolidated
year ended
Investment Wealth 31 March
Management Management SaaS 2020
2020 GBP'000 GBP'000 GBP'000 GBP'000
----------------------------------- ----------- ----------- -------- -------------
Other information
Capital additions 444 14 109 567
Depreciation 520 70 13 603
Statement of financial positions
Assets
Segment assets 42,473 964 159 43,596
Unallocated corporate expenses 7,998
----------------------------------- ----------- ----------- -------- -------------
Consolidated total assets 51,594
----------------------------------- ----------- ----------- -------- -------------
Liabilities
Segment liabilities 23,805 502 216 24,523
Unallocated corporate liabilities 4,427
----------------------------------- ----------- ----------- -------- -------------
Consolidated total liabilities 28,950
----------------------------------- ----------- ----------- -------- -------------
Consolidated
year ended
Investment Wealth 31 March
Management Management SaaS 2019
2019 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------------ ----------- ----------- -------- -------------
Revenue
Revenue from contracts with customers(1) 26,669 1,709 - 28,378
Other revenue 2,020 60 - 2,080
------------------------------------------ ----------- ----------- -------- -------------
Total revenue 28,689 1,769 - 30,458
------------------------------------------ ----------- ----------- -------- -------------
Results
Segment result 1,223 138 - 1,361
Unallocated corporate expenses (959)
------------------------------------------ ----------- ----------- -------- -------------
402
Investment revenue 90
Finance costs (3)
------------------------------------------ ----------- ----------- -------- -------------
Profit before tax 489
Tax (156)
------------------------------------------ ----------- ----------- -------- -------------
Profit after tax 333
------------------------------------------ ----------- ----------- -------- -------------
Consolidated
year ended
Investment Wealth 31 March
Management Management SaaS 2019
2019 GBP'000 GBP'000 GBP'000 GBP'000
----------------------------------- ----------- ----------- -------- -------------
Other information
Capital additions 318 93 - 411
Depreciation 522 71 - 593
Statement of financial positions
Assets
Segment assets 50,823 2,601 - 53,424
Unallocated corporate expenses 4,547
----------------------------------- ----------- ----------- -------- -------------
Consolidated total assets 58,975
----------------------------------- ----------- ----------- -------- -------------
Liabilities
Segment liabilities 35,072 774 - 35,846
Unallocated corporate liabilities 404
----------------------------------- ----------- ----------- -------- -------------
Consolidated total liabilities 36,250
----------------------------------- ----------- ----------- -------- -------------
1 During the period to March 2020, two business segments was
transferred from Wealth Management to Investment management and as
a result, to make the comparison more meaningful, revenue from
contracts with customers of GBP832,000, Segment result of
GBP210,000 and Segment assets of GBP125,000 was transferred from
Wealth Management to Investment Management.
7. Commissions and fees paid
Commissions and fees paid comprises:
2020 2019
GBP'000 GBP'000
------------------------------- -------- --------
To authorised external agents 65 25
To approved persons 9,706 9,648
-------------------------------- -------- --------
9,771 9,673
------------------------------- -------- --------
8. Investment in joint venture and associate
Associate
The Group has a 33% (2019: nil) interest in an associate, Walker
Crips Property Income Limited ("WCPIL"), a separate structured
vehicle incorporated and operating in the United Kingdom.
The contractual arrangement provides the Group with only the
rights to the net assets with the rights to the assets and
obligation for liabilities resting primarily with WCPIL.
This investment has not been recognised for as associate in the
consolidated Financial Statement of the Group for the period ending
31 March 2020, since the related results were not material for the
Group.
Joint venture
In the prior year, the Group had a 50% interest in a joint
venture, JWPCreers Wealth Management Limited, a regulated financial
services company. The primary activity of JWPCreers Wealth
Management Limited was to provide financial advice to the clients
of JWPCreers LLP (a firm of accountants), who held the other 50%
interest in the joint venture. The contractual arrangement provided
the Group with equal rights to the net assets of the joint
arrangement, with the rights to the assets and obligation regarding
the liabilities resting primarily with JWPCreers Wealth Management
Limited. Under IFRS 11, this joint arrangement was classified as a
joint venture and was included in the consolidated financial
statements using the equity method.
On 1 April 2019, Walker Crips Wealth Management Limited, a 100%
owned subsidiary of the Group, increased its shareholding in
JWPCreers Wealth Management Limited from 50% to 100%. In the
previous financial year to 31 March 2019, this entity was a joint
venture. On 2 April 2019, the entity changed its name to Walker
Crips Ventures Limited.
As part of the purchase agreement, prior to the increase in
shareholding, and on 1 April 2019, a dividend payment of GBP22,000
was paid to "A" shareholders of the joint venture, being the joint
venture partner only. This saw the net assets of the joint venture
decrease by GBP22,000 on 1 April 2019, just prior to the
acquisition by WCWM on the same day. The Group's share of the
decrease in net assets of half this amount is reflected in the
consolidated income statement as an GBP11,000 share of change in
net assets of the joint venture. Given the above there are no
financial figures at 31 March 2020 since WCV is a subsidiary of the
Group. Thus n/a is shown below.
Summarised financial information in relation to the joint
venture is presented below:
2020 2019
As at 31 March GBP'000 GBP'000
----------------------------------------------------------------- --------- --------
Current assets n/a 100
Non-current assets n/a -
Current liabilities n/a (12)
Non-current liabilities n/a -
Included in the above amounts are:
Cash and cash equivalents n/a 90
Current financial liabilities (excluding trade payables) n/a (6)
Non-current financial liabilities (excluding trade payables) n/a -
Net assets (100%) n/a 88
----------------------------------------------------------------- --------- --------
Group share of net assets (50%) n/a 44
Period ending 31 March
Revenue n/a 84
Profit before tax n/a 28
Profit after tax n/a 23
Tax expense n/a 5
Total consolidated income n/a
Total consolidated income (100%) n/a 28
Group share of total consolidated income (50%) n/a 14
Dividends received by Group from Joint Venture n/a -
Included in the above amounts are: n/a -
Depreciation and amortisation n/a -
Interest income n/a -
Interest expense n/a -
Income tax expense (income) n/a -
----------------------------------------------------------------- --------- --------
9. Profit for the year
Profit for the year on continuing operations has been arrived at
after charging:
2020 2019
Note GBP'000 GBP'000
----------------------------------------------- ----- -------- --------
Depreciation of property, plant and equipment 19 590 593
Depreciation of right-of-use assets 20 867 -
Amortisation of intangibles 18 609 558
Staff costs 13 13,268 12,680
Recharge of staff costs (581) (521)
Settlement costs 1,049 1,012
Communications 1,474 1,264
Computer expenses 642 738
Other expenses 2,785 2,452
Auditor's remuneration 220 315
Lease payment - 1,274
----------------------------------------------- ----- -------- --------
20,923 20,365
----------------------------------------------- ----- -------- --------
A more detailed analysis of auditor's remuneration is provided
below:
2020 2019
-------------------------------------------------------------------------------- -------- ----- -------- -----
GBP'000 % GBP'000 %
-------------------------------------------------------------------------------- -------- ----- -------- -----
Audit services
Fees payable to the Company's auditor for the audit of its annual accounts 60 27 51 16
The audit of the Company's subsidiaries pursuant to legislation - current year 145 66 125 40
The audit of the Company's subsidiaries pursuant to legislation - prior year - - 125 40
Non-audit services
FCA client assets reporting 12 6 12 3
Interim review 3 1 2 1
-------------------------------------------------------------------------------- -------- ----- -------- -----
220 100 315 100
-------------------------------------------------------------------------------- -------- ----- -------- -----
10. Exceptional items
As a result of their materiality the Directors decided to
disclose certain amounts separately in order to present results
which are not distorted by significant items of income and
expenditure.
2020 2019
GBP'000 GBP'000
--------------------------------------------------------------- -------- --------
Changes in the value of deferred consideration (166) (102)
Transaction cost in relation to a launch of a public issuance - 134
Insurance recovery of historical claim against the Group (209) -
--------------------------------------------------------------- -------- --------
(375) 32
--------------------------------------------------------------- -------- --------
In the period to 31 March 2020, the Group received GBP209,000 in
respect of a disputed insurance recovery. This related to a
historic claim expensed in prior periods that was resolved in the
current period, following arbitration proceedings. In addition,
cash consideration payable for acquired client relationships was
re-assessed based on actual values and accordingly, an exceptional
credit has been recorded in the year representing the reversal of
an over-estimation of GBP166,000.
During the period to 31 March 2019, cash consideration payable
on acquisition of client relationships were re-assessed based on
the actual values and accordingly, an exceptional credit, being
exceptional in nature and size, was recorded representing the
reversal of an over-estimation of GBP102,000 of such
consideration.
Also, during the period to 31 March 2019, a further GBP134,000
provision was made to cover the costs of delayed launch of a listed
bond in connection with the Group's short-term lending facility
business. The bond has not been launched to date, therefore
Directors believe it is prudent to retain the provision until all
matters relating to the launch has been resolved.
11. Investment revenues
Investment revenue comprises:
2020 2019
GBP'000 GBP'000
--------------------------------------------------- -------- --------
Interest on bank deposits/fixed income securities 59 67
Dividends from equity investment 17 23
---------------------------------------------------- -------- --------
76 90
--------------------------------------------------- -------- --------
12. Finance costs
Finance costs comprises:
2020 2019
GBP'000 GBP'000
------------------------------------- -------- --------
Interest on lease liabilities (157) -
Interest on dilapidation provisions (41) -
Interest on overdue liabilities (7) (3)
-------------------------------------- -------- --------
Net investment revenue (205) (3)
-------------------------------------- -------- --------
13. Staff costs
Particulars of employee costs (including Directors) are as shown
below:
2020 2019
GBP'000 GBP'000
------------------------ -------- --------
Wages and salaries 10,909 10,390
Social security costs 1,182 1,126
Share incentive plan 239 209
Other employment costs 938 955
------------------------- -------- --------
13,268 12,680
------------------------ -------- --------
Staff costs do not include commissions payable mainly to
self-employed account executives, as these costs are included in
total commissions payable to approved persons disclosed in note 7.
At the end of the year there were 44 self-employed account
executives who were approved persons of the Group (2019: 49).
The average number of staff employed during the year was:
2020 2019
Number Number
---------------------------------- ------- -------
Executive Directors 2 3
Certification and approved Staff 60 58
Other staff 156 157
----------------------------------- ------- -------
218 218
---------------------------------- ------- -------
The table incorporates the new staff classification under Senior
Managers and Certification Regime (SM&CR).
14. Taxation
The tax charge is based on the profit for the year of continuing
operations and comprises:
2020 2019
GBP'000 GBP'000
-------------------------------------------------------------------------- -------- --------
UK corporation tax at 19% (2019: 19%) 328 189
Prior year adjustments (16) (6)
Origination and reversal of timing differences during the current period (67) (35)
Adjustment to the estimated recoverable amount of deferred tax - 8
--------------------------------------------------------------------------- -------- --------
245 156
-------------------------------------------------------------------------- -------- --------
Corporation tax is calculated at 19% (2019: 19%) of the
estimated assessable profit for the year.
The charge for the year can be reconciled to the profit per the
income statement as follows:
2020 2019
GBP'000 GBP'000
----------------------------------------------------------------------------------------------- -------- --------
Profit before tax 963 489
------------------------------------------------------------------------------------------------ -------- --------
Tax on profit on ordinary activities at the standard rate UK corporation tax rate of 19% (2019:
19%) 183 93
Effects of:
Tax rate changes for deferred tax (15) 3
Expenses not deductible for tax purposes 7 3
Prior year adjustment (1) 3
Fixed asset differences 74 58
Non-taxable income - (4)
Other (3) -
----------------------------------------------------------------------------------------------- -------- --------
245 156
----------------------------------------------------------------------------------------------- -------- --------
Current tax has been provided at the rate of 19%. A further
reduction in the rate of corporation tax to 17% was due to come
into effect from April 2020, however this planned reduction was
cancelled in March 2020 and on 17 March 2020 the 19% rate was again
substantively enacted. Deferred tax has been provided at 19% (2019:
17%).
The exceptional credit of GBP375,000 (2019: cost of GBP32,000),
disclosed separately on the consolidated income statement, is tax
chargeable to the value of GBP71,250 (2019: tax deductible
GBP6,000) of corporation tax. Classifying these credits/costs as
exceptional has no effect on the tax liability.
15. Dividends
When determining the level of proposed dividend in any year a
number of factors are taken into account including levels of
profitability, future cash commitments, investment needs,
shareholder expectations and prudent buffers for maintaining an
adequate regulatory capital surplus. Amounts recognised as
distributions to equity holders in the period:
2020 2019
GBP'000 GBP'000
------------------------------------------------------------------------------------------- -------- --------
Final dividend for the year ended 31 March 2019 of 0.33p (2018: 1.29p) per share 142 549
-------------------------------------------------------------------------------------------- -------- --------
Interim dividend for the year ended 31 March 2020 of 0.60p (2019: 0.58p) per share 254 247
-------------------------------------------------------------------------------------------- -------- --------
396 796
------------------------------------------------------------------------------------------- -------- --------
Proposed final dividend for the year ended 31 March 2020 of 0.00p (2019: 0.33p) per share - 142
-------------------------------------------------------------------------------------------- -------- --------
Subject to approval by shareholders at the Annual General
Meeting held in September, the Directors do not propose to pay a
final dividend this year.
16. Earnings per share
The calculation of basic earnings per share for continuing
operations is based on the post-tax profit for the financial year
of GBP718,000 (2019: GBP333,000) and on 42,577,328 (2019:
42,509,997) Ordinary Shares of 6 2/3 pence, being the weighted
average number of Ordinary Shares in issue during the year.
No dilution to earnings per share in the current year or in the
prior year.
The calculation of the basic and diluted earnings per share is
based on the following data:
2020 2019
GBP'000 GBP'000
---------------------------------------------------------------------------------------------- -------- --------
Earnings for the purpose of basic earnings per share being net profit attributable to equity
holders of the Parent 718 333
----------------------------------------------------------------------------------------------- -------- --------
Earnings for the purposes of diluted earnings per share 718 333
----------------------------------------------------------------------------------------------- -------- --------
Number of shares
2020 2019
Number Number
----------------------------------------------------------------------------------------- ----------- -----------
Weighted average number of Ordinary Shares for the purposes of basic earnings per share 42,577,328 42,509,997
------------------------------------------------------------------------------------------ ----------- -----------
Weighted average number of Ordinary Shares for the purposes of diluted earnings per share 42,577,328 42,509,997
------------------------------------------------------------------------------------------ ----------- -----------
This produced basic earnings per share of 1.69 pence (2019: 0.78
pence) and diluted earnings per share of 1.69 pence (2019: 0.78
pence).
17. Goodwill
GBP'000
-------------------------- --------
Cost
At 1 April 2018 7,056
---------------------------- --------
At 1 April 2019 7,056
---------------------------- --------
At 31 March 2020 7,056
---------------------------- --------
Accumulated impairment
At 1 April 2018 2,668
---------------------------- --------
At 1 April 2019 2,668
Impaired during the year -
-------------------------- --------
At 31 March 2020 2,668
Carrying amount
-------------------------- --------
At 31 March 2020 4,388
---------------------------- --------
At 31 March 2019 4,388
---------------------------- --------
Goodwill acquired in a business combination is allocated, at
acquisition, to the cash-generating units (CGUs) that are expected
to benefit from that business combination or intangible asset. The
carrying amount of goodwill has been allocated as follows:
2020 2019
GBP'000 GBP'000
----------------------------------------------------- -------- --------
London York Fund Managers Limited CGU (London York) 2,901 2,901
Barker Poland Asset Management LLP CGU (BPAM) 1,487 1,487
------------------------------------------------------ -------- --------
4,388 4,388
----------------------------------------------------- -------- --------
The recoverable amounts of the CGUs have been determined based
upon value-in-use calculations for the London York CGU and fair
value less costs of disposal for the BPAM CGU.
The London York computation was based on discounted five-year
cash flow projections and terminal values. The key assumptions for
these calculations are a pre-tax discount rate of 12%, terminal
growth rates of 1.75% and the expected changes to revenues and
costs during the five year projection period based on discussions
with senior Management, past experience, future expectations in
light of anticipated market and economic conditions, comparisons
with our peers and widely available economic and market forecasts.
The pre-tax discount rate is determined by Management based on
current market assessments of the time value of money and risks
specific to the London York CGU. The base value-in-use cash flows
were stress tested for an increase in discount rates to 16% and a
20% fall in net inflows resulting in no impairment.
The discount rate would need to increase to 27.6% for the London
York CGU value in use to equal the respective carrying values.
Revenues would need to fall by GBP456,000 per annum in present
value terms for the London York CGU value in use to equal the
respective carrying values.
The BPAM CGU recoverable amount was assessed, in accordance with
IAS 36, by adopting the higher method of the fair value less cost
of disposal to determine the recoverable amount (as opposed to the
lower value in use). The recoverable amount at the year-end
calculated for the BPAM CGU, determined by the fair value less cost
of disposal, exceeded that produced by the value-in-use
calculation. The fair value less cost of disposal amounted to
GBP4.7 million (2019: GBP4.9 million) with headroom, after selling
costs, of GBP0.9 million after applying price earnings multiples
based on the average of the Group's and its peers' published
results. Accordingly, this measurement is classified as fair value
hierarchy Level 3 being directly based on observable market data. A
20% decrease in BPAM's profit after tax would result in potential
impairment of GBP136,000. Profit before tax would have to drop by
GBP60,000 per annum before an impairment is required.
The impairment assessment of both CGU's gives due consideration
to the implications of COVID-19 and has been assessed in line with
Group's going concern assessment, therefore after careful
consideration, Management has concluded that there is no impairment
to goodwill.
18. Other intangible assets
Unit trust
management Software
contracts licences Client lists Total
GBP'000 GBP'000 GBP'000 GBP'000
--------------------------------------------------------------- ----------- --------- -------------- ---------
Cost
At 1 April 2018 240 44 10,531 10,815
Disposal of fully depreciated intangible assets (240) - - (240)
Additions in the year - - (7) (7)
--------------------------------------------------------------- ----------- --------- -------------- ---------
At 1 April 2019 - 44 10,524 10,568
Disposal of fully depreciated intangible assets - - - -
Additions in the year - - 48 48
--------------------------------------------------------------- ----------- --------- -------------- ---------
At 31 March 2020 - 44 10,572 10,616
--------------------------------------------------------------- ----------- --------- -------------- ---------
Amortisation
At 1 April 2018 240 7 2,741 2,988
Eliminated on disposal of fully depreciated intangible assets (240) - - (240)
Charge for the year - 9 549 558
--------------------------------------------------------------- ----------- --------- -------------- ---------
At 1 April 2019 - 16 3,290 3,306
Charge for the year - 9 600 609
--------------------------------------------------------------- ----------- --------- -------------- ---------
At 31 March 2020 - 25 3,890 3,915
--------------------------------------------------------------- ----------- --------- -------------- ---------
Carrying amount
--------------------------------------------------------------- ----------- --------- -------------- ---------
At 31 March 2020 - 19 6,682 6,701
--------------------------------------------------------------- ----------- --------- -------------- ---------
At 31 March 2019 - 28 7,234 7,262
--------------------------------------------------------------- ----------- --------- -------------- ---------
The intangible assets are amortised over their estimated useful
lives. 'Unit trust management contracts' are amortised over ten
years but are no longer in use. 'Client lists' are amortised over
three to twenty years and 'Software Licenses' are amortised over
five years. There are no indications that the value attributable to
client lists should be impaired.
19. Property, plant and equipment
Leasehold
improvements,
furniture and Computer Computer
equipment software hardware Total
Owned fixed assets GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------------------------------------------- -------------- --------- --------- --------
Cost
At 1 April 2018 2,765 2,355 1,312 6,432
Disposal of fully depreciated assets (182) - - (182)
Additions 151 213 47 411
---------------------------------------------------------------------- -------------- --------- --------- --------
At 1 April 2019 2,734 2,568 1,359 6,661
Re-classification of initial software build costs to software lease
liabilities - (58) - (58)
Additions 99 283 76 458
---------------------------------------------------------------------- -------------- --------- --------- --------
At 31 March 2020 2,833 2,793 1,435 7,061
---------------------------------------------------------------------- -------------- --------- --------- --------
Accumulated depreciation
At 1 April 2018 762 1,882 1,082 3,726
Eliminated on disposal of fully depreciated assets (178) - - (178)
Charge for the year 296 160 137 593
---------------------------------------------------------------------- -------------- --------- --------- --------
At 1 April 2019 880 2,042 1,219 4,141
Charge for the year 183 265 148 596
---------------------------------------------------------------------- -------------- --------- --------- --------
Re-classification of depreciation charge on IFRS 16 re-classified
assets - (6) - (6)
---------------------------------------------------------------------- -------------- --------- --------- --------
At 31 March 2020 1,063 2,301 1,367 4,731
---------------------------------------------------------------------- -------------- --------- --------- --------
Carrying amount
---------------------------------------------------------------------- -------------- --------- --------- --------
At 31 March 2020 1,770 492 68 2,330
---------------------------------------------------------------------- -------------- --------- --------- --------
At 31 March 2019 1,854 526 140 2,520
---------------------------------------------------------------------- -------------- --------- --------- --------
20. Right-of-use assets
Computer Computer
Offices software hardware Total
Right-of-use assets held under leasing arrangements under IFRS 16 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------------------------------------- -------- --------- --------- --------
Cost
Recognised on adoption of IFRS 16 on 1 April 2019 4,601 366 95 5,062
Lease reassessment - 25 - 25
Additions - 142 - 142
-------------------------------------------------------------------- -------- --------- --------- --------
At 31 March 2020 4,601 533 95 5,229
-------------------------------------------------------------------- -------- --------- --------- --------
Accumulated depreciation
1 April 2019 - - - -
Charge for the year 660 187 20 867
-------------------------------------------------------------------- -------- --------- --------- --------
At 31 March 2020 660 187 20 867
-------------------------------------------------------------------- -------- --------- --------- --------
Carrying amount
------------------------------------------------------------------- -------- --------- --------- --------
At 31 March 2020 3,941 346 75 4,362
-------------------------------------------------------------------- -------- --------- --------- --------
At 31 March 2019 - - - -
-------------------------------------------------------------------- -------- --------- --------- --------
21. Investments
Non-current asset investments
Investments at
fair value through
profit or loss Total
GBP'000 GBP'000
------------------ ------------------- --------
At 31 March 2019 51 51
------------------- ------------------- --------
At 31 March 2020 51 51
------------------- ------------------- --------
The Group's investments include GBP11,000 of life policies and
GBP40,000 unregulated collective investment scheme ("UCIS")
investments held in relation to a number of customer
complaints.
Current asset investments
As at As at
31 March 31 March
2020 2019
GBP'000 GBP'000
------------------------------------------------- --------- ---------
Trading investments
Investments - fair value through profit or loss 638 1,005
-------------------------------------------------- --------- ---------
Financial assets at fair value through profit or loss represent
investments in equity securities and collectives that present the
Group with opportunity for return through dividend income, interest
and trading gains. The fair values of these securities are based on
quoted market prices.
The following provides an analysis of financial instruments that
are measured subsequent to initial recognition at fair value,
grouped into Levels 1 to 3 based on the degree to which the fair
value is observable:
Level 1 fair value measurements are those derived from quoted
prices (unadjusted) in active markets for identical assets or
liabilities. The Group's financial assets held at fair value
through profit and loss under current assets fall within this
category;
Level 2 fair value measurements are those derived from inputs
other than quoted prices included within Level 1 that are
observable for the asset or liability, either directly (i.e. as
prices) or indirectly (i.e. derived from prices). The Group does
not hold financial instruments in this category; and
Level 3 fair value measurements are those derived from valuation
techniques that include inputs for the asset or liability that are
not based on observable market data (unobservable inputs). The
Group's financial assets held at fair value through profit and loss
under non-current assets fall within this category.
Level 1 Level 2 Level 3 Total
GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------------------------------- -------- -------- -------- --------
At 31 March 2020
Financial assets held at fair value through profit and loss 638 - 51 689
------------------------------------------------------------- -------- -------- -------- --------
At 31 March 2019
Financial assets held at fair value through profit and loss 1,005 - 51 1,056
------------------------------------------------------------- -------- -------- -------- --------
Further IFRS 13 disclosures have not been presented here as the
balance represents 1.336% (2019: 1.822%) of total assets. There
were no transfers of investments between any of the Levels of
hierarchy during the year.
22. Trade and other receivables
2020 2019
GBP'000 GBP'000
---------------------------------------------------------------------------- -------- --------
Amounts falling due within one year:
Due from clients, brokers and recognised stock exchanges at amortised cost 16,184 27,030
Other debtors at amortised cost 2,380 3,063
Prepayments and accrued income 5,951 5,692
----------------------------------------------------------------------------- -------- --------
24,515 35,785
---------------------------------------------------------------------------- -------- --------
23. Cash and cash equivalents at amortised cost
2020 2019
GBP'000 GBP'000
------------------------------------------------------------------------- -------- --------
Short-term cash deposits held at bank, repayable on demand with penalty - 3,250
Cash deposits held at bank, repayable on demand without penalty 8,609 3,666
-------------------------------------------------------------------------- -------- --------
8,609 6,916
------------------------------------------------------------------------- -------- --------
Cash and cash equivalents do not include deposits of client
monies placed by the Group with banks and building societies in
segregated client bank accounts (free money and settlement
accounts). All such deposits are designated by the banks and
building societies as clients' funds and are not available to
satisfy any liabilities of the Group.
The amount of such net deposits which are not included in the
consolidated statement of financial position at 31 March 2020 was
GBP305,300,000 (2019: GBP300,600,000).
The credit quality of banks holding the Group's cash at 31 March
2020 is analysed below with reference to credit ratings awarded by
Fitch.
2020 2019
GBP'000 GBP'000
------------------------- -------- --------
A+ 5,221 2,659
A 1,829 1,122
AA- - 3,135
A- 1,558 -
Unrated or held in cash 1 -
------------------------- -------- --------
8,609 6,916
------------------------- -------- --------
24. Deferred tax liability
Short-term
temporary
Capital differences
allowances and other Total
GBP'000 GBP'000 GBP'000
------------------------------------------------ ----------- ------------ --------
At 1 April 2018 23 (364) (341)
Use of loss brought forward - 37 37
Debit to the income statement (10) (3) (13)
------------------------------------------------- ----------- ------------ --------
At 1 April 2019 13 (330) (317)
------------------------------------------------- ----------- ------------ --------
Use of loss brought forward - 78 78
(Debit)/credit to the income statement (78) 67 (11)
Debit to the statement of comprehensive income - (85) (85)
------------------------------------------------- ----------- ------------ --------
At 31 March 2020 (65) (270) (335)
------------------------------------------------- ----------- ------------ --------
A further reduction in the rate of corporation tax to 17% was
due to come into effect from April 2020, however this planned
reduction was cancelled in March 2020 and on 17 March 2020 the 19%
rate was again substantively enacted. Deferred tax has been
provided at 19% (2019: 17%).
25. Bank overdrafts at amortised cost
2020 2019
GBP'000 GBP'000
----------------- --------- --------
Bank overdrafts - (127)
------------------ -------- --------
26. Financial instruments and risk profile
Financial risk management
Procedures and controls are in place to identify, assess and
ultimately control the financial risks faced by the Group arising
from its use of financial instruments. Steps are taken to mitigate
identified risks with established and effective procedures and
controls, efficient systems and the adequate training of staff.
The Group's risk appetite, along with the procedures and
controls mentioned above, are laid out in the Group's Internal
Capital Adequacy Assessment Process document prepared in accordance
with the requirements of the Financial Conduct Authority (FCA).
The overall risk appetite for the Group is considered by
Management to be low, despite operating in a marketplace where
financial risk is inherent in investment management and financial
services.
The Group considers its financial risks arising from its use of
financial instruments to fall into three main categories:
(i) credit risk;
(ii) liquidity risk; and
(iii) market risk.
Financial risk management is a central part of the Group's
strategic management which recognises that an effective risk
management programme can increase a business's chances of success
and reduce the possibility of failure. Continual assessment,
monitoring and updating of procedures and benchmarks are all
essential parts of the Group's risk management strategy.
(i) Credit risk management practices
The Group's credit risk is the risk of loss through default by a
counterparty and, accordingly, the Group's definition of default is
primarily attributable to its trade receivables or pledged
collateral which is the risk that a client, market counterparty or
recognised stock exchange will be unable to pay amounts to settle a
trade in full when due. Other credit risks, such as free delivery
of securities or cash, are not deemed to be significant.
Significant changes in the economy or a particular sector could
result in losses that are different from those that the Group has
provided for at the year-end date.
All financial assets at the year-end were assessed for credit
impairment and no material amounts have arisen having evaluated the
age of overdue debtors, the quality of recourse to third parties
and the availability of mitigation through the disposal of liquid
collateral in the form of marketable securities. The Group's
write-off policy is driven by the historic dearth of instances
where material irrecoverable losses have been incurred. Where the
avenues of recourse and mitigation outlined above have not been
successful, the outstanding balance, or residual balance if sale
proceeds do not fully cover an exposure, will be written off.
The Board is responsible for oversight of the Group's credit
risk. The Group accepts a limited exposure to credit risk but aims
to mitigate and minimise the risk through various methods. There is
no material concentrated credit risk as the exposures are spread
across a substantial number of clients and counterparties.
Trade receivables (includes settlement balances)
Settlement risk arises in any situation where a payment of cash
or transfer of a security is made in the expectation of a
corresponding delivery of a security or receipt of cash. Settlement
balances arise with clients, market counterparties and recognised
stock exchanges.
In the vast majority of cases, control of the stock purchased
will remain with the Group until client monetary balances are fully
settled.
Where there is an absence of securities collateral, clients are
usually required to hold sufficient funds in their managed deposit
account prior to the trade being conducted. Holding significant
amounts of client money helps the Group to manage credit risks
arising with clients. Many of our clients also hold significant
amounts of stock and other securities in our nominee subsidiary
company, providing additional security should a specific
transaction fail to be settled and the proceeds of such securities
disposed of can be used to settle all outstanding obligations.
In addition, the client side of settlement balances are normally
fully guaranteed by our commission-sharing certification persons
who conduct transactions and manage the relationships with our
mutual clients.
Exposures to market counterparties also arise in the settlement
of trades or when collateral is placed with them to cover open
trading positions. Market counterparties are usually other
FCA-regulated firms and are considered creditworthy, some reliance
being placed on the fact that other regulated firms would be
required to meet the stringent capital adequacy requirements of the
FCA.
Maximum exposure to credit risk:
2020 2019
GBP'000 GBP'000
------------------- -------- --------
Cash 8,609 6,916
Trade receivables 16,184 27,030
-------------------- -------- --------
Other debtors 2,380 3,063
Accrued income 56 23
27,229 37,032
------------------- -------- --------
An ageing analysis of the Group's financial assets is presented
in the following table:
0 - 1 2 - 3 Over 3 Carrying
Current month months months value
At 31 March 2020 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------- -------- -------- -------- -------- ---------
Trade receivable 14,559 1,547 60 18 16,184
Cash and cash equivalent 8,609 - - - 8,609
Other debtors 2,265 134 - 37 2,436
-------------------------- -------- -------- -------- -------- ---------
25,443 1,681 60 55 27,229
-------------------------- -------- -------- -------- -------- ---------
Expected credit loss
The Group applies the IFRS 9 simplified approach to measuring
expected credit losses using a lifetime expected credit loss
provision for trade receivables and contract assets. To measure
expected credit losses on a collective basis, trade receivables and
contract assets are grouped based on similar credit risk and aging.
The contract assets have similar risk characteristics to the trade
receivables for similar types of contracts.
In relation to the impairment of financial assets, IFRS 9
requires an expected credit loss model as opposed to an incurred
credit loss model under IAS 39. The expected credit loss model
requires the Group to account for expected credit losses and
changes in those expected credit losses at each reporting date to
reflect changes in credit risk since initial recognition of the
financial assets. In other words, it is no longer necessary for a
credit event to have occurred before credit losses are
recognised.
The Group undertake a daily assessment of credit risk which
includes monitoring of client and counterparty exposure and credit
limits. New clients are individually assessed for their credit
worthiness using external ratings where available and all
institutional relationships are monitored at regular intervals.
As at 31 March 2020, the Directors of the Company reviewed and
assessed the Group's existing assets for impairment using the IFRS
9 simplified approach to measuring expected credit losses using a
lifetime expected credit loss provision for trade receivables and
contract assets and no additional impairments have been recognised.
No material defaults are anticipated.
Concentration of credit risk
In addition, daily risk management procedures to actively
monitor disproportionately large trades by a customer or market
counterparty are in place. The financial standing, pattern of
trading, type and size of security or instrument traded are amongst
the factors taken into consideration.
(ii) Liquidity risk
Liquidity risk is the risk that the Group is unable to meet its
payment obligations associated with its financial liabilities when
they fall due.
Historically, sufficient underlying cash has been prevalent in
the business for many years as the Group is normally
cash-generative. The risk of unexpected large cash outflows could
arise where large amounts are being settled daily of which only a
fraction forms the commission earned by the Group. This could be
due to clients settling late or bad deliveries to the market or
CREST, also resulting in a payment delay from the market side.
The Group's policy with regard to liquidity risk is to carefully
monitor balance sheet structure and borrowing limits,
including:
-- monitoring of cash positions on a daily basis;
-- exercising strict control over the timely settlement of trade debtors; and
-- exercising strict control over the timely settlement of market debtors and creditors.
The Group holds its cash and cash equivalents spread across a
number of highly rated financial institutions. All cash and cash
equivalents are short-term highly liquid investments that are
readily convertible to known amounts of cash without penalty.
All the regulated Group subsidiaries are subject to the
provisions of FCA Liquidity standards if they are within the scope
of the rules in the FCA Handbook chapter IFPRU 7.
The table below analyses the Group's cash outflow based on the
remaining period to the contractual maturity date.
Less than
1 year Total
2020 GBP'000 GBP'000
-------------------------- ---------- --------
Trade and other payables 22,750 22,750
---------------------------- ---------- --------
22,750 22,750
-------------------------- ---------- --------
2019
-------------------------- ---------- --------
Bank overdrafts 127 127
Trade and other payables 34,095 34,095
---------------------------- ---------- --------
34,222 34,222
-------------------------- ---------- --------
Future contracted undiscounted cash flows for deferred cash
consideration amounts to GBP15,000, and is shown in long-term
liabilities.
(iii) Market risk
Market risk is the risk that changes in market prices such as
foreign exchange rates or equity prices, on financial assets and
liabilities will affect the Group's results. They relate to price
risk on fair value through profit or loss trading investments and
are subject to ongoing monitoring.
Fair value of financial instruments
The fair values of the Group's financial assets and liabilities
are not materially different from their carrying values as they
have been revalued at 31 March 2020 using closing market
prices.
A 10% fall in global equity markets would, in isolation, result
in a pre-tax decrease to net assets of GBP63,800 (2019:
GBP100,500). A 10% rise would have an equal and opposite
effect.
The impact of foreign exchange and interest rate risk is not
material and is therefore not presented.
27. Trade and other payables
2020 2019
GBP'000 GBP'000
----------------------------------------------------------------- -------- --------
Amounts owed to clients, brokers and recognised stock exchanges 15,167 25,781
Other creditors 3,548 4,021
Contract liability 3 4
Accrued expenses 4,032 4,289
------------------------------------------------------------------ -------- --------
22,750 34,095
----------------------------------------------------------------- -------- --------
Trade creditors and accruals comprise amounts outstanding for
investment-related transactions, to customers or counterparties,
and ongoing costs. The average credit period taken for purchases in
relation to costs is ten days (2019: thirteen days). The Directors
consider that the carrying amount of trade payables approximates to
their fair value.
28. Provisions
Provisions included in other current liabilities and long-term
liabilities are made up as follows:
2020
Claims / 2020
complaints Dilapidations Total
GBP'000 GBP'000 GBP'000
----------------------------------------- ----------- -------------- --------
At start of year 484 542 1,026
Additions 1 117 118
Utilisation of provision (258) - (258)
Unused amounts reversed during the year (49) - (49)
----------------------------------------- ----------- -------------- --------
178 659 837
----------------------------------------- ----------- -------------- --------
Claims/complaints
These provisions relate to outstanding claims and complaints
from third parties which, in the opinion of the Board, need
providing for after taking into account the risks and uncertainties
surrounding each claim or complaint. The timing of these
settlements is unknown but it is expected that they will be
resolved within twelve months.
Dilapidations
The Group, based on revised estimates, has made an additional
provision of GBP117,000 for dilapidations in connection with
acquired leasehold premises (2019: nil). These costs are expected
to arise at the end of each respective lease. Provisions for
dilapidations payable on leases after more than one year amounted
to GBP659,000.
The Group has six leased properties, all of which have
contractual dilapidation requirements. The dilapidation provisions
in relation to these leases range from net present values as at the
year-end of GBP10,000 to GBP528,000 per lease.
29. Lease liabilities
Computer Computer
Offices software hardware Total
Lease liabilities GBP'000 GBP'000 GBP'000 GBP'000
--------------------------------------------------- -------- --------- --------- --------
Cost
Recognised on adoption of IFRS 16 on 1 April 2019 4,916 362 88 5,366
Additions - 142 - 142
Adjustments* - 25 - 25
Interest 147 8 2 157
Lease payments (854) (231) (16) (1,101)
--------------------------------------------------- -------- --------- --------- --------
At 31 March 2020 4,209 306 74 4,589
--------------------------------------------------- -------- --------- --------- --------
* Adjustments relates to new services added to existing leases recognised on 1 April 2019.
2020 2019
Lease liabilities profile (statement of financial position) GBP'000 GBP'000
------------------------------------------------------------ -------- --------
Amounts due within one year 969 -
Amounts due after more than one year 3,620 -
------------------------------------------------------------ -------- --------
4,589 -
------------------------------------------------------------ -------- --------
2020 2019
Undiscounted lease maturity analysis GBP'000 GBP'000
------------------------------------- -------- --------
Within one year 1,099 -
Between one and two years 942 -
Between two and five years 2,643 -
Over five years 1,496 -
------------------------------------- -------- --------
Total undiscounted lease liabilities 6,180 -
------------------------------------- -------- --------
30. Called-up share capital
2020 2019
GBP'000 GBP'000
---------------------------------------- -------- --------
Called-up, allotted and fully paid
43,327,328 (2019: 43,327,328) Ordinary
Shares of 6 2/3 p each 2,888 2,888
----------------------------------------- -------- --------
The Group's Articles were amended in 2010 since when there has
been no authorised share capital. Shareholders have no restrictions
on their holdings except for certain Investment Managers who were
awarded shares in the Group soon after joining as part of the
consideration for their client relationships. These holdings cannot
be sold for a period of four to six years from commencement
date.
In the prior year, 409,598 new Ordinary Shares were issued and
allotted to various personnel associated with the Group in order to
meet contractual commitments made by the Group as part of the
ongoing expansion of its client base. All shares issued to
personnel under recruitment contracts are restricted from sale for
periods between four to six years.
The following movements in share capital occurred during the
year:
Number of Share Share
Shares capital premium Total
GBP'000 GBP'000 GBP'000
---------------------------- ------------ --------- -------- --------
At 1 April 2018 42,917,730 2,861 3,674 6,535
Shares issued to personnel 409,598 27 89 116
---------------------------- ------------ --------- -------- --------
At 1 April 2019 43,327,328 2,888 3,763 6,651
---------------------------- ------------ --------- -------- --------
At 31 March 2020 43,327,328 2,888 3,763 6,651
---------------------------- ------------ --------- -------- --------
The Group's capital is defined for accounting purposes as total
equity. As at 31 March 2020, this totalled GBP22,644,000 (2019:
GBP21,721,000). The increase during the year was attributable the
impact of adopting IFRS 16 on 1 April 2019, profit for the year
less dividends paid.
The Group's objectives when managing capital are to:
-- safeguard the Group's ability to continue as a going concern
so that it can continue to provide returns for shareholders and
benefits for other stakeholders;
-- maintain a strong capital base in a cost-efficient manner to
be able to support the development of the business when
required;
-- optimise the distribution of capital across the Group's
subsidiaries, reflecting the requirements of each company;
-- strive to make capital freely transferable across the Group where possible; and
-- comply with regulatory requirements at all times.
Walker Crips Group plc is classified for capital purposes as an
investment management group and performs an Internal Capital
Adequacy Assessment Process ("ICAAP"), which is presented to the
FCA on request. Regulatory capital resources for ICAAP purposes are
calculated in accordance with published rules. These require
certain adjustments to and certain deductions from accounting
capital, the latter largely in respect of intangible assets. The
ICAAP compares regulatory capital resources against regulatory
capital requirements derived using the FCA's Pillar 1 and Pillar 2
methodology.
The Group has adopted the standardised approach to calculating
its Pillar 1 credit risk component and the basic indicator approach
to calculating its operational risk component. Capital management
policy and practices are applied at both Group and entity
level.
In addition to a variety of stress tests performed as part of
the ICAAP process, and daily reporting in respect of treasury
activity, capital levels are monitored and forecast to ensure that
dividends and investment requirements are appropriately managed and
appropriate buffers are kept against adverse business
conditions.
Regulatory capital
No breaches were reported to the FCA during the financial years
ended 31 March 2019 and 2020.
The Group holds 750,000 of its own shares, purchased for total
cash consideration of GBP312,000. In line with the principles of
IAS 32 these treasury shares have been deducted from equity. No
gain or loss has been recognised in the income statement in
relation to these shares.
31. Reserves
Apart from share capital and share premium, the Group holds
reserves at 31 March 2020 under the following categories:
Own shares held (GBP312,000) (2019: (GBP312,000))
* the negative balance of the Group's own shares, which
have been bought back and held in treasury.
Retained earnings GBP11,582,000 (2019: GBP10,659,000)
* the net cumulative earnings of the Group, which have
not paid out as dividends, retained to be reinvested
in our core, or developing, companies.
Other reserves GBP4,723,000 (2019: GBP4,723,000)
* the cumulative premium on the issue of shares as
deferred consideration for corporate acquisitions.
32. Cash generated/(used) by operations
2020 2019
GBP'000 GBP'000
--------------------------------------------------------------------------------------------- --------- --------
Operating profit for the year 1,092 402
Adjustments for:
Amortisation of intangibles 609 558
Changes in the fair value of deferred consideration (166) (102)
Loss on sale of tangible fixed asset - 4
Net change in fair value of financial instruments at fair value through profit or loss* 367 91
Share of change in net assets of joint venture 11 (14)
Depreciation of property, plant and equipment 590 593
Depreciation of right-of-use assets 867 -
Decrease in debtors** 11,044 1,642
Decrease in creditors** (10,884) (3,805)
---------------------------------------------------------------------------------------------- --------- --------
Change in working capital as a result of net effects of acquiring a subsidiary and disposal
of a joint venture
De recognition of joint venture asset now fully acquired (44) -
Trade and other payables (12) -
Trade and other receivables 9 -
--------------------------------------------------------------------------------------------- --------- --------
Net cash inflow / (outflow) 3,483 (631)
---------------------------------------------------------------------------------------------- --------- --------
* Mark to market loss on year end positions reflecting market declines in March 2020.
** GBP160,000 cash inflow from working capital movement (prior
year, an out flow of GBP2,163,000).
33. Financial commitments
Capital commitments
At the end of the year, there were capital commitments of GBP
nil (2019: GBP nil) contracted but not provided for and GBP nil
(2019: GBP nil) capital commitments authorised but not contracted
for.
Lease commitments
Prior to 1 April 2019, all Group leases were classified as
operating leases. The future aggregate minimum lease payments under
non-cancellable operating leases prior to the implementation of
IFRS 16 were:
2019
GBP'000
-------------------------- --------
Within one year 1,445
Within two to five years 3,742
More than five years 2,027
---------------------------- --------
34. Related parties
Directors and their close family members have dealt on standard
commercial terms with the Group. The commission and fees earned by
the Group included in revenue through such dealings is as
follows:
2020 2019
GBP'000 GBP'000
---------------------------------------------------------------------------- -------- --------
Commission and fees received from Directors and their close family members 14 10
---------------------------------------------------------------------------- -------- --------
Other related parties include Charles Russell Speechlys, of
which M. J. Wright, Non-Executive Director, is a Partner. Charles
Russell Speechlys provides certain legal services to the Group on
normal commercial terms and the amount paid and expensed during the
year (including the fees paid to the firm for Mr. Wright's services
as Director) was GBP84,000 (2019: GBP181,000), including
administrative expenses or other receivables if the costs are
reimbursable.
Commission of GBP4,746 (2019: GBP3,354) was earned by the Group
from Phillip Securities (HK) Limited (a Phillip Brokerage Pte
Limited company, where H. M. Lim is a shareholder) having dealt on
standard commercial terms. Additionally, some custody services are
provided by Phillip Securities Pte Ltd (in Singapore, where H. M.
Lim is a Director), again all on standard commercial terms, both
these items being included in revenue. Transactions between the
Group and its subsidiaries, which are related parties, have been
eliminated on consolidation and are accordingly not disclosed.
Remuneration of the Directors who are the key Management personnel
of the Group are disclosed in the table opposite.
2020 2019
GBP'000 GBP'000
--------------------------------------- -------- --------
Key management personnel compensation
Short-term employee benefits 446 590
Post-employment benefits 34 45
Termination benefits - 86
Share-based payment 7 9
---------------------------------------- -------- --------
487 730
--------------------------------------- -------- --------
35. Effect of changes in accounting policies
Impact on Financial Statements on adoption
Right-of use assets were initially measured at the amount equal
to the lease liability, adjusted by the amount of any prepaid or
accrued lease payments relating to that lease recognised in the
balance sheet as at 31 March 2019. There were no onerous lease
contracts that would have required an adjustment to the
right-of-use assets at the date of initial application.
The following illustrates the impact on the income statement on
the adoption of IFRS 16:
31 March
31 March 2020
2020 Finance Other under
as reported Rents costs Depreciation adjustments IAS 17
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------------------- ------------ -------- -------- ------------- ------------ ---------
Revenue 31,422 - - - - 31,422
Commission and fees paid (9,771) - - - - (9,771)
Share of after tax profit from joint
venture (11) - - - - (11)
-------------------------------------------- ------------ -------- -------- ------------- ------------ ---------
Gross profit 21,640 - - - - 21,640
Administrative expenses (20,923) (855) - 861* 19** (20,898)
Exceptional items 375 - - - - 375
-------------------------------------------- ------------ -------- -------- ------------- ------------ ---------
Operating profit 1,092 (855) - 861 19 1,117
Investment revenue 76 - - - - 76
Finance costs (205) - 157 - - (48)
-------------------------------------------- ------------ -------- -------- ------------- ------------ ---------
Profit before tax 963 (855) 157 861 19 1,145
Taxation (245) - - - - (245)
Profit for the period attributable to
equity holders of the Parent Company 718 (855) 157 861 19 900
-------------------------------------------- ------------ -------- -------- ------------- ------------ ---------
* This depreciation is the net effect of the depreciation
charges relating to the new right-of-use assets and the existing
depreciation treatment of items adjusted for as a result of the
application of IFRS 16.
** This adjustment relates to the revised treatment of
irrecoverable VAT on certain rental invoices as a result of the
application of IFRS 16.
The recognised right-of-use assets split between asset classes
and on 1 April 2019 and 31 March 2020 can be seen in note 20.
The change in accounting policy affected the following items in
the statement of financial position on 1 April 2019:
-- Right-of-use assets - increase by GBP5,062,000;
-- Prepayments - decrease by GBP239,000 regarding rental prepayments;
-- Accrued expenses - decrease by GBP621,000 regarding the rent-free period;
-- Current liabilities - decrease by GBP63,000 regarding the landlord contribution;
-- Non-current Lease liabilities - decrease by GBP460,000 regarding the landlord contribution;
-- Current liabilities - increase by GBP1,026,000 regarding lease liabilities within one year;
-- Non-current Lease liabilities - increase by GBP4,340,000
regarding lease liabilities after one year.
The net impact on retained earnings on 1 April 2019 was an
increase of GBP601,000.
The table below presents the impact of adopting IFRS 16 on the
statement of financial position as at 1 April 2019:
As at 1 April 2019
GBP'000
------------------------------------------------------------------ -------------------
Right-of-Use Assets on 1 April 2019 (based on lease liabilities) 5,366
Adjustments:
Derecognition of Landlord Contribution (523)
Reclassification of prepaid expenses 219
------------------------------------------------------------------- -------------------
Total right-of-use Assets on 1 April 2019 after all adjustments 5,062
------------------------------------------------------------------- -------------------
As at 1 April 2019
GBP'000
------------------------------------------------------------------- -------------------
Irrecoverable VAT reversal of prepayments (20)
Reduction in accrued expenses (derecognition of rent-free period) 621
-------------------------------------------------------------------- -------------------
Net increase in retained earnings 601
-------------------------------------------------------------------- -------------------
Included in profit or loss for the period are GBP867,000 of
depreciation of right-of-use assets and GBP157,000 of finance
expenses on lease liabilities. The Group did not classify any
leases as low value leases.
The lease liabilities outstanding as at 31 March 2020 are
disclosed in note 29.
36. Contingent liability
Occasionally the Group receives complaints that are considered
without merit, but the final outcome sometimes falls outside the
Group's control. Where such claims are not covered by the Group's
indemnity insurance, for example due to an excess or coverage
dispute, a contingent liability arises. However, where in the view
of the Directors a negative outcome is considered to be remote no
disclosure has been made in these financial statements.
37. Subsequent events
There are no material events arising after 31 March 2020, which
have an impact on these financial statements.
COVID-19 is a significant in-year event, the impact of which is
likely to be felt for an unquantifiable number of months or even
years. The Investment and Wealth Management market in which the
Group operates is a resilient market with a good track record of
early recovery. However, the Group has considered the immediate
consequences and ramifications of the pandemic and, accordingly,
has already taken some early steps to protect the Group, our client
service and our employees.
Business Continuity Plans are in place across the Group's
operating segments, with measures to manage and continue client
service, operational efficiency and staff welfare whilst
significant portion of our staff continue to work remotely from
home. We continue to review this approach on a daily basis in line
with Government guidance.
38. Long-term liabilities - deferred cash consideration
2020 2019
GBP'000 GBP'000
----------------------------------------------------------------------------- -------- --------
Amounts due to personnel under recruitment contracts/acquisition agreements 15 47
----------------------------------------------------------------------------- -------- --------
These amounts are based on fixed contractual terms and the fair
value of the liability approximates carrying value, due to the
consistency of the prevailing market rate of interest when compared
to the inception of liability.
Company balance sheet
As at 31 March 2020
2020 2019
Note GBP'000 GBP'000
------------------------------------------------------------- ----- -------- --------
Non-current assets
Other intangible assets 43 3,556 3,879
Property, plant and equipment 42 1,420 1,556
Investments measured at cost less impairment 44 17,425 17,425
------------------------------------------------------------- ----- -------- --------
22,401 22,860
------------------------------------------------------------- ----- -------- --------
Current assets
Trade and other receivables 45 737 770
Deferred tax asset 46 179 224
Cash and cash equivalents 141 269
------------------------------------------------------------- ----- -------- --------
1,057 1,263
------------------------------------------------------------- ----- -------- --------
Total assets 23,458 24,123
------------------------------------------------------------- ----- -------- --------
Current liabilities
Trade and other payables 47 (2,363) (2,314)
------------------------------------------------------------- ----- -------- --------
(2,363) (2,314)
------------------------------------------------------------- ----- -------- --------
Net current liabilities (1,306) (1,051)
------------------------------------------------------------- ----- -------- --------
Long-term liabilities
Deferred cash consideration 50 (15) (47)
Dilapidation provision 50 (554) (450)
Landlord contribution to leasehold improvements 50 (398) (460)
------------------------------------------------------------- ----- -------- --------
(967) (957)
------------------------------------------------------------- ----- -------- --------
Net assets 20,128 20,852
------------------------------------------------------------- ----- -------- --------
Equity
Share capital 49 2,888 2,888
Share premium account 49 3,763 3,763
Own shares 49 (312) (312)
Retained earnings 49 9,066 9,790
Other reserves 49 4,723 4,723
------------------------------------------------------------- ----- -------- --------
Equity attributable to equity holders of the Parent Company 20,128 20,852
------------------------------------------------------------- ----- -------- --------
As permitted by section 408 of the Companies Act 2006 the Parent
Company has elected not to present its own profit and loss account
for the year. Walker Crips Group plc reported a loss for the
financial year of GBP328,000 (2019: profit of GBP1,690,000).
The financial statements of Walker Crips Group plc (Company
registration no: 01432059) were approved by the Board of Directors
and authorised for issue on 31 July 2020.
Signed on behalf of the Board of Directors:
S. S. Dandeniya FCCA
Director
31 July 2020
Company statement of changes in equity
year ended 31 March 2020
Called up Share Own
share premium shares Retained Total
capital account held Other earnings equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------------------------- ---------- -------- -------- -------- --------- --------
Equity as at 31 March 2018 2,861 3,674 (312) 4,668 8,896 19,787
---------------------------------------------------- ---------- -------- -------- -------- --------- --------
Total comprehensive income for the period - - - - 1,690 1,690
---------------------------------------------------- ---------- -------- -------- -------- --------- --------
Contributions by and distributions to owners
Dividends paid - - - - (796) (796)
Issue of shares on acquisition of intangibles and
as deferred consideration 27 89 - 55 - 171
Total contributions by and distributions to owners 27 89 - 55 (796) (625)
---------------------------------------------------- ---------- -------- -------- -------- --------- --------
Equity as at 31 March 2019 2,888 3,763 (312) 4,723 9,790 20,852
---------------------------------------------------- ---------- -------- -------- -------- --------- --------
Total comprehensive income for the period - - - - (328) (328)
---------------------------------------------------- ---------- -------- -------- -------- --------- --------
Contributions by and distributions to owners
Dividends paid - - - - (396) (396)
---------------------------------------------------- ---------- -------- -------- -------- --------- --------
Total contributions by and distributions to owners - - - - (396) (396)
---------------------------------------------------- ---------- -------- -------- -------- --------- --------
Equity as at 31 March 2020 2,888 3,763 (312) 4,723 9,066 20,128
---------------------------------------------------- ---------- -------- -------- -------- --------- --------
Notes to the Company accounts
year ended 31 March 2020
39. Significant accounting policies
The separate financial statements of Walker Crips Group plc, the
Parent Company, are presented as required by the Companies Act
2006.
The financial statements have been prepared under the historical
cost convention except for the modification to a fair value basis
for certain financial instruments as specified in the accounting
policies below, and in accordance with Financial Reporting Standard
(FRS 102), the Financial Reporting Standard applicable in the UK
and the Republic of Ireland, and the Companies Act 2006.
The preparation of financial statements in compliance with FRS
102 requires the use of certain critical accounting estimates. It
also requires Management to exercise judgement in applying the
Parent Company's accounting policies (see note 40).
The financial statements are presented in the currency of the
primary activities of the Parent Company (its functional currency).
For the purpose of the financial statements, the results and
financial position are presented in pounds sterling (GBP). The
principal accounting policies have been summarised below. They have
all been applied consistently throughout the year and the preceding
year.
The Parent Company has chosen to adopt the disclosure exemption
in relation to the preparation of a cash flow statement under FRS
102.
Property, plant and equipment
Fixtures and equipment are stated at historical cost less
accumulated depreciation and provision for any impairment.
Depreciation is charged so as to write-off the cost or valuation of
assets over their estimated useful lives using the straight-line
method on the following bases:
Computer hardware 33(1) /(3) % per annum on cost
Computer software between 20% and 33(1) /(3) % per annum on
cost
Leasehold improvements over the term of the lease
Furniture and equipment 33(1) /(3) % per annum on cost
The gain or loss on the disposal or retirement of an asset is
determined as the difference between the sales proceeds and the
carrying amount of the asset and is recognised in income. The
residual values and estimated useful life of items within property,
plant and equipment are reviewed at least at each financial year
end. Any shortfalls in carrying value are impaired immediately
through profit or loss.
Intangible assets
Client lists
Client lists are recognised when it is probable that future
economic benefits will flow to the Parent Company and the cost of
the asset can be measured reliably whilst the risk and rewards have
also transferred into the Parent Company's ownership.
Intangible assets classified as client lists are recognised when
acquired as part of a business combination or when separate
payments are made to acquire clients' assets by adding teams of
Investment Managers.
The cost of acquired client lists and businesses generating
revenue from clients and Investment Managers are capitalised. These
costs are amortised on a straight-line basis over their expected
useful lives of three to twenty years. The amortisation period and
amortisation method for intangible assets are reviewed at least
each financial year end. All intangible assets have a finite useful
life.
During the year, a review of the Company's intangible assets
resulted in the revision of the UEL of an acquired client list. The
Truro client list, which had an estimated UEL of 16.25 years as at
31 March 2019, was revised to 11.25 years. As it was a change in
accounting estimate, this revision and the resultant change in
annual amortisation for this intangible asset was applied
prospectively, beginning with a new annual amortisation charge for
this asset in the current financial year.
The revised amortisation charge in respect of this intangible
asset was GBP143,000 in the current year and the annual charge
expected for the remaining UEL of the asset. The charge in prior
year was GBP99,000.
Impairment of non-financial assets
At each reporting date, the Parent Company reviews the carrying
amounts of its tangible and intangible assets to determine whether
there is any indication that those assets have suffered an
impairment loss. For the purposes of assessing impairment, assets
are grouped at the lowest levels for which there are separately
identifiable cash flows (cash-generating units). If there is an
indication of possible impairment, the recoverable amount of any
affected asset (or group of related assets) is estimated and
compared with its carrying amount. If the estimated recoverable
amount is lower, the carrying amount is reduced to its estimated
recoverable amount, and an impairment loss is recognised
immediately in profit or loss.
Taxation
The tax expense represents the sum of the tax currently payable
and any deferred tax.
Current tax, including UK corporation tax and foreign tax, is
provided at amounts expected to be paid or recovered using the tax
rates and laws that have been enacted or substantively enacted by
the balance sheet date. Current tax charges arising on the
realisation of revaluation gains recognised in the statement of
comprehensive income are also recorded in this statement.
Deferred tax is recognised in respect of all timing differences
that have originated but not reversed at the balance sheet date
where transactions or events that result in an obligation to pay
more tax in the future or a right to pay less tax in the future
have occurred at the balance sheet date.
A deferred tax asset is regarded as recoverable and therefore
recognised only when, on the basis of all available evidence, it
can be regarded as more likely than not that there will be suitable
taxable profits from which the future reversal of the underlying
timing differences can be deducted. Deferred tax assets and
liabilities are not discounted.
Own shares held
Own shares consist of treasury shares which are recognised at
cost as a deduction from equity shareholders' funds. Subsequent
consideration received for the sale of treasury shares is also
recognised in equity with any difference being taken to retained
earnings. No gain or loss is recognised on sale of treasury
shares.
Financial instruments
Financial assets and financial liabilities are recognised in the
balance sheet when the Parent Company becomes a party to the
contractual provisions of the instrument. Section 11 of FRS 102 has
been applied in classifying financial instruments depending on the
nature of the instrument held.
Revenue
Income consists of interest received or accrued over time and
dividend income recorded when received.
Investments in subsidiaries
Investments in subsidiaries are stated at cost less, where
appropriate, provisions for impairment. The fair valuation of the
Parent Company's basic financial instrument investments is based
upon the underlying market price and volatility which may be
subject to fluctuation from year to year (see note 44 for further
information).
Debtors
Other debtors are classified as basic financial instruments and
measured at initial recognition at transaction price. Debtors are
subsequently measured at amortised cost using the effective
interest rate method. A provision is established when there is
objective evidence that the Group will not be able to collect all
amounts due.
Cash and cash equivalents
Cash and cash equivalents comprise cash in hand and demand
deposits, together with other short-term highly liquid investments,
which are readily convertible to a known amount of cash and are
subject to an insignificant risk of changes in value.
Financial liabilities and equity
Financial liabilities and equity instruments are classified
according to the substance of the contractual arrangements entered
into. An equity instrument is any contract that evidences a
residual interest in the assets of the Parent Company after
deducting all of its liabilities. Equity instruments issued by the
Parent Company are recorded at the proceeds received, net of direct
issue costs.
Share-based payments
The Parent Company makes share based payments to certain
self-employed account executives of a subsidiary within the Group,
the share-based payment is accounted for as an intangible in the
respective subsidiary.
As at the reporting date there were no share-based payments in
issue.
Shares to be issued
Shares to be issued represent the Parent Company's best estimate
of the Ordinary Shares in the Parent Company which are likely to be
issued following business combinations or the acquisition of client
relationships which involve deferred payments in the Parent
Company's shares. Where shares are due to be issued within a year,
the sum is included in current liabilities. Shares to be issued are
dependent on the achievement of predefined targets and are treated
as a liability until they are allotted and issued. The Parent
Company had recognised as a liability the sum which has been issued
and allotted to personnel associated with the Parent Company in
order to meet contractual commitments given as part of the recent
expansion of its client base. There were no transactions recognised
in relation to this in the current year.
Leases
Rentals under operating leases are charged on a straight-line
basis over the lease term even if the payments are not made on such
a basis. Benefits received as an incentive to enter into an
operating lease are also spread on a straight-line basis over the
lease term.
Going concern
After conducting enquiries, the Directors believe that the
Parent Company has adequate resources to continue in existence for
the foreseeable future. Accordingly, they continue to adopt the
going concern basis in preparing the financial statements. The
Parent Company's business activities, together with the factors
likely to affect its future development, performance and position,
has been rigorously assessed (see note 2).
40. Key sources of estimation uncertainty and judgements
The preparation of financial statements in conformity with
generally accepted accounting practice requires Management to make
estimates and judgements that affect the reported amounts of assets
and liabilities as well as the disclosure of contingent assets and
liabilities at the balance sheet date and the reported amounts of
revenues and expenses during the reporting period.
Intangible assets
Acquired client lists are capitalised based on current fair
values. By assessing the historic rates of client retention, the
ages and succession plans of the Investment Managers who manage the
clients and the contractual incentives of the Investment Managers,
the Directors consider a life of up to twenty years to be both
appropriate and in line with our peers. There were no acquisitions
made in the period to 31 March 2020. Additions in the period
relates to existing client lists and are disclosed in note 43.
The determination of what constitutes 'observable' requires
significant judgement by the Directors when using peer comparisons
to rationalise our assessments. The Directors consider observable
data to be that market data which is readily available, regularly
distributed or updated, reliable and verifiable, not proprietary,
provided by multiple, independent sources that are actively
involved in the relevant market.
41. Profit/loss for the year
Loss for the financial year of GBP328,000 (2019: profit of
GBP1,690,000) is after an amount of GBP60,000 (2019: GBP51,000)
related to the auditor's remuneration for audit services to the
Parent Company.
Particulars of employee costs (including Directors) are as shown
below:
Employee costs during the year amounted to:
2020 2019
GBP'000 GBP'000
--------------------------------------------- -------- --------
Employee costs during the year amounted to:
Wages and salaries 170 176
Social security costs 14 15
Other costs 4 7
---------------------------------------------- -------- --------
188 198
--------------------------------------------- -------- --------
In the current year, employee costs are those of the
Non-Executive Directors, a proportion of Executive Directors and
the cost of the Group's profit share scheme. The remaining
Executive Director Employee costs are borne by Walker Crips
Investment Management Limited.
The monthly average number of staff employed during the year
was:
2020 2019
Number Number
------------------------- ------- -------
Executive Directors 2 3
Non-Executive Directors 4 4
-------------------------- ------- -------
6 7
------------------------- ------- -------
42. Property, plant and equipment
Leasehold
improvements,
furniture and Computer
equipment software Total
GBP'000 GBP'000 GBP'000
--------------------- -------------- --------- --------
Cost
At 1 April 2019 2,125 858 2,983
Additions 67 - 67
--------------------- -------------- --------- --------
At 31 March 2020 2,192 858 3,050
--------------------- -------------- --------- --------
Amortisation
At 1 April 2019 569 858 1,427
Charge for the year 203 - 203
--------------------- -------------- --------- --------
At 31 March 2020 772 858 1,630
--------------------- -------------- --------- --------
Net book value
--------------------- -------------- --------- --------
At 31 March 2020 1,420 - 1,420
--------------------- -------------- --------- --------
At 31 March 2019 1,556 - 1,556
--------------------- -------------- --------- --------
43. Other intangible assets
Client lists Total
GBP'000 GBP'000
--------------------- ------------- --------
Cost
At 1 April 2019 5,055 5,055
Additions 21 21
---------------------- ------------- --------
At 31 March 2020 5,076 5,076
---------------------- ------------- --------
Amortisation
At 1 April 2019 1,176 1,176
Charge for the year 344 344
---------------------- ------------- --------
At 31 March 2020 1,520 1,520
---------------------- ------------- --------
Net book value
--------------------- ------------- --------
At 31 March 2020 3,556 3,556
---------------------- ------------- --------
At 31 March 2019 3,879 3,879
---------------------- ------------- --------
44. Fixed asset investments
2020 2019
GBP'000 GBP'000
------------------------- -------- --------
Subsidiary undertakings 17,425 17,425
-------------------------- -------- --------
A complete list of subsidiary undertakings can be found in note
55.
45. Trade and other receivables
2020 2019
GBP'000 GBP'000
------------------------------------ -------- --------
Amounts owed by Group undertakings 436 492
Prepayments and accrued income 8 28
Other debtors 293 250
------------------------------------- -------- --------
737 770
------------------------------------ -------- --------
A presentational change was made in this note to exclude the
deferred tax asset from this grouping and to present it in its own
line on the face of the statement of financial position. The
deferred tax asset is presented separately in note 46.
46. Deferred taxation
2020 2019
GBP'000 GBP'000
-------------------------------- -------- --------
At 1 April 224 140
Use of losses brought forward - -
Use of Group Relief (86) -
Credit to the income statement 41 84
--------------------------------- -------- --------
As at 31 March 179 224
--------------------------------- -------- --------
A further reduction in the rate of corporation tax to 17% was
due to come into effect from April 2020, however this planned
reduction was cancelled in March 2020 and on 17 March 2020 the 19%
rate was again substantively enacted. Deferred tax has been
provided at 19% (2019: 17%).
47. Trade and other payables
2020 2019
GBP'000 GBP'000
---------------------------------------- -------- --------
Accruals and deferred income 99 117
Amounts due to subsidiary undertakings 2,195 1,950
Other creditors 69 247
----------------------------------------- -------- --------
2,363 2,314
---------------------------------------- -------- --------
48. Risk management policies
Procedures and controls are in place to identify, assess and
ultimately control the financial risks faced by the Parent Company
arising from its use of financial instruments. Steps are taken to
mitigate identified risks with established and effective procedures
and controls, efficient systems and the adequate training of
staff.
The Parent Company's risk appetite, along with the procedures
and controls mentioned above, are laid out in the Group's Internal
Capital Adequacy Assessment Process document prepared in accordance
with the requirements of the Financial Conduct Authority
("FCA").
The overall risk appetite for the Parent Company and for the
Group as a whole is considered by Management to be low, despite
operating in a market-place where financial risk is inherent in the
core businesses of Investment Management and financial
services.
The Group considers its financial risks arising from its use of
financial instruments to fall into three main categories:
(i) credit risk;
(ii) liquidity risk; and
(iii) market risk.
Further information on the disclosures and policies carried out
by the Parent Company and the Group are made in note 26 of the
consolidated financial statements.
(i) Credit risk
Maximum exposure to credit risk:
2020 2019
GBP'000 GBP'000
---------------- -------- --------
Cash 141 269
Other debtors 293 250
----------------- -------- --------
As at 31 March 434 519
----------------- -------- --------
The credit quality of banks holding the Group's cash at 31 March
2020 is analysed below with reference to credit ratings awarded by
Fitch.
2020 2019
GBP'000 GBP'000
---------------- -------- --------
A+ 11 224
A - 45
AA- 130 -
---------------- -------- --------
As at 31 March 141 269
----------------- -------- --------
Analysis of other debtors due from financial institutions:
2020 2019
GBP'000 GBP'000
------------------------------------ ------------ -------- --------
Neither past due, nor impaired 293 250
Amounts past due, but not impaired < 30 Days - -
> 30 Days - -
> 3 Months - -
------------------------------------ ------------ -------- --------
As at 31 March 293 250
---------------------------------------------------- -------- --------
(ii) Liquidity risk
The tables below analyse the Parent Company's future
undiscounted cash outflows based on the remaining period to the
contractual maturity date:
2020 2019
GBP'000 GBP'000
---------------------------------------- -------- --------
Creditors due within one year 2,363 2,314
Creditors due after more than one year 569 497
----------------------------------------- -------- --------
As at 31 March 2,932 2,811
----------------------------------------- -------- --------
2020 2019
GBP'000 GBP'000
---------------------------- -------- --------
Within one year 2,363 2,314
Within two to five years 15 47
After more than five years 554 450
----------------------------- -------- --------
As at 31 March 2,932 2,811
----------------------------- -------- --------
(iii) Market risk
Market risk is the risk that changes in market prices such as
foreign exchange rates or equity prices will affect the Group's
income.
These relate to price risk breached on available-for-sale and
trading investments and closely monitored using limits to prevent
significant losses.
Fair value of financial instruments
No financial instruments at fair value were held by the Parent
Company in the current or prior financial year.
49. Called-up share capital
2020 2019
GBP'000 GBP'000
--------------------------------------------------------------- -------- --------
Called-up, allotted and fully paid
43,327,328 (2019: 43,327,328) Ordinary Shares of 6 2/3 p each 2,888 2,888
---------------------------------------------------------------- -------- --------
No new shares were issued in the year to 31 March 2020. In the
prior year, 409,598 new Ordinary Shares were issued and allotted to
various personnel associated with the Parent Company in order to
meet contractual commitments made by the Parent Company as part of
the ongoing expansion of its client base.
The Parent Company holds 750,000 of its own shares, purchased
for a total cash consideration of GBP312,000. In line with the
principles of FRS 102, section 11, these treasury shares have been
deducted from equity. No gain or loss has been recognised in the
profit and loss account in relation to these shares.
The following movements in share capital occurred during the
year:
Share Share
Number capital premium Total
of shares GBP'000 GBP'000 GBP'000
--------------------------------------------------------------------------- ----------- -------- -------- --------
At 1 April 2018 42,917,730 2,861 3,674 6,535
Issue of shares on acquisition of intangibles and as deferred
consideration 409,598 27 89 116
At 1 April 2019 43,327,328 2,888 3,763 6,651
--------------------------------------------------------------------------- ----------- -------- -------- --------
At 31 March 2020 43,327,328 2,888 3,763 6,651
--------------------------------------------------------------------------- ----------- -------- -------- --------
Walker Crips is classified for capital purposes as an Investment
Management group and performs an Internal Capital Adequacy
Assessment Process (ICAAP), which is presented to the FCA on
request. Regulatory capital resources for ICAAP purposes are
calculated in accordance with published rules. These require
certain adjustments to and certain deductions from accounting
capital, the latter largely in respect of intangible assets. The
ICAAP compares regulatory capital resources against regulatory
capital requirements derived using the FCA's Pillar 1 and Pillar 2
methodology. The Group has adopted the standardised approach to
calculating its Pillar 1 credit risk component and the basic
indicator approach to calculating its operational risk component.
Capital management policy and practices are applied at both Group
and entity level.
In addition to a variety of stress tests performed as part of
the ICAAP process, and daily reporting in respect of treasury
activity, capital levels are monitored and forecast to ensure that
dividends and investment requirements are appropriately managed and
appropriate buffers are kept against adverse business
conditions.
Apart from share capital and share premium, the Parent Company
holds reserves at 31 March 2020 under the following categories:
Own shares held (GBP312,000) (2019: (GBP312,000))
* the negative balance of the Parent Company's own
shares, which have been bought back and held in
treasury.
Retained earnings GBP9,066,000 (2019: GBP9,790,000)
* the net cumulative earnings of the Parent Company,
which have not paid out as dividends, retained to be
reinvested in our core, or new, business.
Other reserves GBP4,723,000 (2019: GBP4,723,000)
* the cumulative premium on the issue of shares as
deferred consideration for corporate acquisitions.
50. Creditors: amounts falling due after more than one year
2020 2019
GBP'000 GBP'000
------------------------------------------------- -------- --------
Dilapidation provision 554 450
Landlord contribution to leasehold improvements 398 460
Deferred cash consideration 15 47
-------------------------------------------------- -------- --------
967 957
------------------------------------------------- -------- --------
51. Financial commitments
Capital commitments
At the end of the year, there were capital commitments of GBP
nil (2019: GBP nil) contracted but not provided for and GBP nil
(2019: GBP nil) capital commitments authorised but not contracted
for.
Lease commitments
The annual commitments under non-cancellable operating leases
fall due as follows:
2020 2019
GBP'000 GBP'000
-------------------------- -------- --------
Within one year 765 763
Within two to five years 2,616 2,775
More than five years 1,390 1,976
--------------------------- -------- --------
52. Related party transactions
Key Management are those persons having authority and
responsibility for planning, controlling and directing the
activities of the Parent Company and Group. In the opinion of the
Board, the Parent Company and Group's key Management are the
Directors of Walker Crips Group plc.
Total compensation to key Management personnel is GBP487,000
(2019: GBP730,000).
53. Contingent liability
Occasionally the Company receives complaints that are considered
without merit, but the final outcome sometimes falls outside the
Company's control. Where such claims are not covered by the Group's
indemnity insurance, for example due to an excess or coverage
dispute, a contingent liability arises. However, where in the view
of the Directors a negative outcome is considered to be remote no
disclosure has been made in these financial statements.
54. Subsequent events
There are no material events arising after 31 March 2020, which
have an impact on these financial statements.
COVID-19 is a significant in-year event, the impact of which is
likely to be felt for an unquantifiable number of months or even
years. The Investment and Wealth Management market in which the
Group operates is a resilient market with a good track record of
early recovery. However, the Group has considered the immediate
consequences and ramifications of the pandemic and, accordingly,
has already taken some early steps to protect the Group, our client
service and our employees.
Business Continuity Plans are in place across the Group's
operating segments, with measures to manage and continue client
service, operational efficiency and staff welfare whilst
significant portion of our staff continue to work remotely from
home. We continue to review this approach on a daily basis in line
with Government guidance.
55. Subsidiaries and jointly-owned entities
Class and percentage of
Principal place of business Principal activity shares held
Group
Trading subsidiaries
Walker Crips Investment United Kingdom Investment management Ordinary Shares 100%
Management Limited(1)
London York Fund Managers United Kingdom Management services Ordinary Shares 100%
Limited(3)
Walker Crips Wealth United Kingdom Financial services advice Ordinary Shares 100%
Management Limited(3)
Ebor Trustees Limited(3) United Kingdom Pensions management Ordinary Shares 100%
EnOC Technologies United Kingdom Financial regulation and Ordinary Shares 100%
Limited(1) other software
Barker Poland Asset United Kingdom Investment management Membership 100%
Management LLP(1)
Non-trading subsidiaries
Walker Crips Financial United Kingdom Financial services Ordinary Shares 100%
Services Limited(1)
G & E Investment Services United Kingdom Holding company Ordinary Shares 100%
Limited(3)
Ebor Pensions Management United Kingdom Dormant company Ordinary Shares 100%
Limited(3)
Investorlink Limited(1) United Kingdom Agency stockbroking Ordinary Shares 100%
Walker Cambria Limited(1) United Kingdom Dormant company Ordinary Shares 100%
Walker Crips Trustees United Kingdom Dormant company Ordinary Shares 100%
Limited(1)
W.B. Nominees Limited(2) United Kingdom Nominee company Ordinary Shares 100%
WCWB (PEP) Nominees United Kingdom Nominee company Ordinary Shares 100%
Limited(2)
WCWB (ISA) Nominees United Kingdom Nominee company Ordinary Shares 100%
Limited(2)
WCWB Nominees Limited(2) United Kingdom Nominee company Ordinary Shares 100%
Walker Crips Consultants United Kingdom Dormant company Ordinary Shares 100%
Limited(1)
Walker Crips Ventures United Kingdom Financial services advice Ordinary Shares 100%
Limited(3)
Jointly-owned entities
Walker Crips Property United Kingdom Holding company Ordinary Shares 33.3%
Income Limited(1)
---------------------------- ---------------------------- ---------------------------- ----------------------------
The registered office for companies and associated undertakings
is:
1 Old Change House, 128 Queen Victoria Street, London, England, EC4V 4BJ.
2 St James House, 27-43 Eastern Road, Romford, Essex, England, RM1 3NH.
3 Apollo House, Eboracum Way, York, England, YO31 7RE.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR UASSRRUUBOAR
(END) Dow Jones Newswires
July 31, 2020 10:47 ET (14:47 GMT)
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