20 August 2021
Walker Crips Group plc
("Walker Crips", the "Company" or the "Group")
Final results for the year ended 31 March 2021
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 2021.
Financial Highlights
Resilience and agility through a challenging year where revenue and operating profits have been adversely impacted by the low Bank of England base rates, partially mitigated by higher trading commissions and business performance, including cost-cutting initiatives.
· Total revenues £30.3 million (2020: £31.4 million).
· Operating profit £22,000 (2020: £1,092,000), being £441,000 (2020: £717,000) when adjusted for exceptional items*.
· Loss before tax £114,000 (2020: profit before tax £963,000), being profit before tax £305,000 (2020: £588,000) when adjusted for exceptional items*.
· Adjusted EBITDA £2.61 million (2020: £2.78 million)**.
· Underlying cash generated from operations £1.08 million (2020: £1.85 million)***.
· Cash and cash equivalents £8.86 million (2020: £8.61 million).
· Assets Under Management ("AUM") returned to pre-pandemic levels, with an increase of 22.2% to £3.4 billion from March 2020 (2020: £2.8 billion).
· Proposed final dividend of 0.60 pence per share (2020: nil), bringing the total dividends for the year to 0.75 pence per share (2020: 0.60 pence per share).
* Exceptional items are disclosed in note 10 to the accounts and a full reconciliation to IFRS results is presented in the Finance Director's Review.
** Adjusted EBITDA represents earnings before interest, taxation, depreciation and amortisation on an IFRS basis. The Directors present this result as it is a metric widely used by stakeholders when considering an entity's financial performance. A full reconciliation is provided in the Finance Director's Report.
*** Underlying cash generated from operations shows the cash generated from operations adjusted for lease liability payments under IFRS 16 and non-cyclical working capital movements. The Directors consider that this metric helps readers understand the cash generating performance of the Group. A full reconciliation to IFRS results is presented in the Finance Director's review..
For further information, please contact:
| Walker Crips Group plc Craig Harrison, Media Relations | Tel: +44 (0)20 3100 8000 |
|
Four Communications Mark Knight walkercrips@fourcommunications.com
Singer Capital Markets Will Goode / George Tzimas
|
Tel: +44 (0)20 3697 4200
Tel: +44 (0)20 7496 3000
|
Further information on Walker Crips Group is available on the Company's website: www.walkercrips.co.uk
Chairman's statement
Confident in our continued success
As we publish this report and accounts, we are emerging from what we all hope will be a once in a lifetime global event. Your Group has responded strongly to the COVID-19 pandemic and has made substantial progress in the second half of the year. Whilst I am disappointed that this did not return the Group to profit for the full year, substantial progress has been made and I am able to report that the Group, led by its senior management team, has embarked on a programme of change to improve operating margins that will involve increasing revenue generators, streamlining operating entities and further developing our SaaS services.
Overview of 2020/2021
I was hardly expecting that my first year as Chairman of your Company would see the world taken into such tumultuous actual and economic turmoil. Like most businesses, we approached the pandemic with trepidation and considerable fear of the unknown. However, I am much relieved to report that we have come through the ordeal better than I and the Board had, at least at the outset, feared might be the case.
The onset of the COVID-19 pandemic in the first quarter of the year, and the subsequent renewal of rigorous lockdowns during the final quarter, took all businesses into uncharted waters. However, we reacted rapidly and decisively to the situation. With its robust IT infrastructure, the Group moved to remote working with relative ease on 12 March 2020, eleven days before the national lockdown commenced, providing continuity of service for our clients and safety and protection for our staff. An immediate review of all costs and business units was undertaken with a view to finding efficiencies and savings. Supply contracts were renegotiated and Management implemented an intensive de-papering exercise. The Directors across all entities took a voluntary temporary salary reduction of 20% in the first three months of the financial year. Employee numbers and certain expense categories were reduced in anticipation of hard times ahead, the result of which was a net reduction in operating costs of approximately £525,000 for the year. We placed various staff temporarily on furlough, at full salary, with most subsequently being restored to full employment. Once we had assessed the financial impact of the pandemic on the Group, all Government support received was repaid to HMRC.
Crucially, notwithstanding the lockdown, the Group continued to operate the business fully across its divisions, while of course following all Government advice.
In the context of the most uncertain operating conditions for more than a decade, the Group is reporting a loss before tax of £114,000 for the full year. Notwithstanding the overall loss, the full year achievement is still an improvement on the loss of £451,000 reported in the Interim Results, reflecting the turnaround in the second half of the year as markets improved and the benefits of cost initiatives came through.
The operating profit for the year of £22,000 fell well short of last year's profit of £1,092,000, but, given the substantial impact of the cut in Bank of England base rates (resulting in a year on year reduction of revenue and profits of some £1.4m), as well as the negative impact of the pandemic on certain business units, the consolidated result masks a resilient underlying performance in the core investment management business. Nearly all business units gained momentum in the second half of the year, and this has continued beyond the year-end. Executive management is highly focused on the importance of improving the Group's operating margins in order to alleviate our sensitivity to base rates.
Although our operating divisions all responded robustly to the challenge of the pandemic, in some cases market conditions could not be overridden. This was unfortunately the case with the Walker Crips Structured Investments ("WCSI") division, where the double impact of lower interest rates and a decline in dividends paid by UK companies contributed to the unfavourable environment for pricing this sector has experienced.
We were disappointed that several advisers from the Wealth Management division decided to leave us in September 2020 to set up business independently. The executive team have responded with a drive for recruitment and rejuvenation, which continues apace with the hiring of new advisers and the acquisition of a client book with funds under management. We welcome our new arrivals and look forward to integrating them into the restrengthened team.
The Group believes that continued investment in technology is crucial to providing innovative and effective services to our clients, investment managers and staff. EnOC Technologies Limited's project to commercialise our technology remains a key limb of our growth plan.
Strategy
We remain confident in the three-pronged strategy of growing our core business, seeking opportunities in our alternative business activities and commercialising our technological capabilities.
The pandemic demonstrated the resilience of the core investment management business, though this has been significantly offset by the impact of the cut in base rates. The Wealth Management business has rebounded from adviser and client losses during the year with a new, aggressive recruitment strategy. Our alternative business activities provide diversification and growth opportunities, and the Group's seamless transition to working from home more than justified our focus on technology.
Dividend
Our aim is always to reward shareholders for their continued support, and the Board did not take the decision, in March 2020, to withdraw the final dividend lightly. Given the greater visibility on the impact of the pandemic and the improvement in operating performance as the year went on, an interim dividend of 0.15 pence per share was paid. In that light, having taken into account the Group's plans for more profitable growth and for improved operating margins, capital headroom, market outlook and short-term and long-term cash flow considerations, the Board will recommend for shareholders' approval at the forthcoming AGM for a final dividend of 0.60 pence per share (2020: zero) payable on 01 October 2021 to those shareholders on the register at the close of business on 17 September 2021, with an ex-dividend date of 16 September 2021.
Our Community
We believe that in challenging times, it is important that we continue to support our chosen charities. In addition to financial support, we try to do more by using our technology for good, engaging in technology philanthropy, and using technology as a catalyst to boost the efforts of those charities, working with them to design, deploy and maintain those systems.
Our partner charity, www.twiningenterprise.org.uk, has a mission to combat mental health stigma and to assist people who are struggling with mental health issues around work. Their goal is to ensure that everyone with a mental health issue can find employment and cope with the challenges of working life, to support employers and raise awareness around mental health in general and to reduce stigma and discrimination. This is a mission whose work is crucial, as has been highlighted during this pandemic. We urge you to join us by signing on to support Twining in their mission, staying informed of their latest news and activities, and support them financially by going to www.enoc.pro/community.
Directors, Account Executives and Staff
This is my first Chairman's annual statement. As I noted, I will happily admit that, whilst I take no pleasure from reporting a loss, I am relieved that the impact of the unprecedented situation has not been more severe. I and my colleagues have been impressed by and proud of the manner in which the team as a whole across the Group have responded. Specifically, I would like to thank my fellow Directors, our investment managers and advisers and all members of staff for their efforts, resilience and continued commitment to the highest levels of client service, support and diligence during this exceptional period of global turmoil. One can only hope that this is and has been a once in a lifetime experience.
Outlook
Overall, the story this year has been an underlying resilience shown by the Group, in its management and performance, which bodes well for the future. The headline numbers do not do justice to the positive momentum that is developing in several of the operating divisions and I congratulate our staff and our investment managers for making this possible. I and the Board remain excited about the Group's prospects.
M. J. Wright
Chairman
20 August 2021
CEO's statement
Innovating and adapting during challenging times
Our three-pronged strategy continues to give direction to the Group, whilst the world and the financial markets look to recover from the pandemic.
Reflection
Before I report on the Group's performance, I wish to highlight the continuing tragedy of the pandemic and remember our fellow citizens who lost their lives to it. Many have lost family and friends, and 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. I am proud of how our workforce responded to this crisis, how we kept the Group functioning normally, and how we continued to engage with our clients, ensuring that they did not suffer any interruption in quality of service during a very difficult period. Everyone played their part, demonstrated patience and tenacity, and got on with the business at hand.
Turning now to the Group's performance over the past year, considering where we stood and the uncertainty that we all faced twelve months ago, I am pleased with the outcome for the year ending 31 March 2021. More details of financial performance are provided in the Group Finance Director's Report.
The Investment Management division has had a good year considering the reduction in interest income left us with a significant revenue gap of £1.4 million to recover from new initiatives and other existing areas. We have been adjusting and organising our firm, putting it on a firmer footing, reviewing all areas of our business and improving operating margins and profitability, so that the business is less sensitive in the future to the dual risk of a simultaneous fall in asset values and a decline in interest receivable. We remain focussed on this effort, improving the revenue-growth capability of existing businesses, generating greater profitability from revenue-growth opportunities, while improving control, and the reduction, of our cost-base.
The Wealth Management division has been pursuing a controlled aggressive growth strategy. We are pleased to have a number of highly experienced financial planners recently join us, deepening our product knowledge and expanding our service offering, complementing our existing team so that we can better serve our clients together. We are also looking forward to the opening of our new branch in Southampton in late summer.
Our growth plans for the Structured Investments division were delayed by the extreme market conditions for product pricing referred to in the Chairman's Statement. However, some normality has since returned to pricing conditions and the competitive pressures of the last year have prompted a shake-up in the industry. Having withstood the pressures of the past year, we believe that we are well placed to capitalise on increased activity and resume our growth path.
We are also developing plans to simplify the Group through the consolidation of the number of regulated entities and streamlining the management structure.
Our technology company, EnOC Technologies, was launched in December 2019 with the Senior Managers & Certification Regime ("SM&CR") system. Since then, EnOC has reached out far beyond the boundaries of the Group, collaborating with counterparties in Singapore and Malaysia on technology initiatives. The Group has also embarked on our vision to 'simplify and digitise', using the EnOC Pro Platform to create technologies that will transform processes, create greater efficiencies, reduce the use of paper, provide better services to our clients, and reduce costs.
With the commencement of the Senior Managers & Certification Regime, the responsibility for the assessment and approval of 'certificated individuals' transferred from the FCA to the senior managers of FCA regulated companies. Under this Regime, our senior managers are directly responsible for the assessment of our 'certificated individuals' as being fit and proper to carry out their roles and functions. I am pleased with how management embraced these new responsibilities and the robust and effective approach now embedded in our business. A tremendous amount of work was invested into the appraisal, review and feedback process, and an SM&CR panel was established as the review body for certificated individuals' fitness and propriety under SM&CR, reporting directly into the Board.
The SM&CR appraisal, review and feedback process has been a valuable and continuing process, informing our leadership team regarding our corporate culture, that culture is not just reliant on the 'tone from the top', but that it must also be evidenced with 'music from the sides'.
The world has irreversibly changed, over the past eighteen months, the way we work, communicate, engage, trade, teach and learn. Our ability as individuals and collectively as a people to adapt, learn and change was crucial. As a species, we probably adopted more technology in one year, than we would have done in ten regular years. Our Group must continue to adapt and innovate, and our dependence on technology will only increase. We will continue to prioritise and invest in developing our own technology, continue to create and innovate for ourselves and our clients.
As a Group, we continue to support www.twiningenterprise.org.uk, the mental health charity. In addition to financial support, we also try to use our technology for good, through technology philanthropy. If you wish to find out more, or want to support Twining financially, please visit enoc.pro/community.
I wish to add to the words of our Chairman, my personal thanks to our staff and investment managers for their unwavering commitment to our clients, and to our leadership team for their dedication, advice and candour. And I thank our shareholders for their patience and continued support.
As I conclude, I wish to reiterate our mission; to make investment rewarding for our clients, our shareholders and our staff and giving our customers a fair deal. We support our investment managers and our staff by being a technology-driven financial services company.
S. K. W. Lam
Chief Executive Officer
20 August 2021
Chief Investment Officer's analysis
Managing change at warp speed
With government and regulatory interventions worldwide, economies and, in turn, financial markets, have shown resilience to recover to near-pre-pandemic levels.
Big Government is Here to Stay
Having extended and enlarged former President Trump's stimulus programmes, President Biden is cementing the government's position as the driving force behind the economy, something which was necessitated by the pandemic but is increasingly becoming the norm around the world. Collectively, US stimulus programmes have already exceeded $5 trillion in spending, equivalent to about 23% of GDP. These included a total of $3,200 in direct payments given to most US citizens. Further infrastructure and stimulus programmes on a similar scale are still being debated in Congress. The "NextGenerationEU" recovery fund is not quite on the same scale but, at €750 billion, it would still represent about 7% of this year's GDP. We also know, from the British government's own estimates, that government borrowing this year is likely to reach 10% of GDP, following on from last year's post-second world war record of 14.5%.
This represents a major departure in fiscal policy for much of the western world, and has been made possible by the confluence of several monetary, economic and political trends. For a start, central banks have spent the past decade proving to politicians that they can suppress government borrowing costs by purchasing mindboggling amounts of government bonds. Having been sceptical coming out of the Credit Crunch, politicians of all stripes now feel more assured that they have an open cheque book; the only question is what to use it for.
The Virus Won't Go Away
What will the "return-to-normal" look like, and will it even look normal? Not all the economic data recently has conformed to the expectation of a booming, once-in-a-century rebound unleashed by government spending, accumulated savings and the pent-up desire to consume. Instead, it's been more a case of "two steps forward, one step back".
China's economy was the first to lose some momentum, as the central bank acted early to tighten interest rates and the cost of financing. The Chinese government, meanwhile, reined in borrowing by heavily-indebted local authorities to fund infrastructure projects. The US has been a bigger surprise, with several hiccups in the recent economic data despite March's awe-inspiring stimulus programme. Most disappointing has been the slow pace at which the US economy has created jobs: expectations for 1-2 million new jobs a month were dashed early on in the year and, though recent data has improved, the US is still short of the level needed to replace the 10 million-or-so jobs displaced by the pandemic. It's a similar story in the UK, where consumer spending has underwhelmed, and business activity in both services and manufacturing has tapered off earlier than expected.
So far, then, the reopening has turned out to be a tad disappointing. What is to blame? It seems that the most likely culprit is - still - the virus. Surveys in the UK suggest that many people have yet to become comfortable visiting shops and enjoying indoor services. A hefty proportion of people are still avoiding crowded public places, and households are likely to remain cautious, given the ongoing procession of variants. Old vaccines might provide a decent level of protection against new variants, but "decent" is still not a risk that everyone wants to run.
Markets Had a "Good" Pandemic
You can't argue with the fact that, going into the pandemic, the value of the world's stock markets was at an all-time high of $89 trillion and, at the time of writing, they are valued at $117 trillion. The market's staying power, despite all-time high valuations, is prompting some strategists to reassess their investment rationales. The new thinking goes that the pandemic has forced companies into a once-in-a-century frenzy of capital expenditure as they retool for the post-pandemic world. As a result of this, the post-pandemic world will be more productive, and productivity is the magic ingredient that boosts economic growth, allowing company profits to settle at permanently higher levels. This will break the cycle of muted economic growth caused by ageing populations, heavy debt burdens and a decade of corporate under-investment.
But you don't have to argue that "this time it's different" in order to explain asset prices - a more prosaic explanation is that bond markets have been explicitly supported by $300 billion a month globally in asset purchases by central banks, and that government stimulus money has found its way into equity markets. Data on US household net worth tells us what markets have long since figured out: the pandemic has made the average consumer wealthier. The poorest half of US households saw aggregate household net worth jump by 36% during the first year of the pandemic, equivalent to an increase of about $700 billion spread across 64 million households. That's not far off the $850 billion the US government spent sending stimulus checks to citizens over the same period. Wealthier households did even better, with gains driven by the boom in house prices and the rally in the stock market.
How did we do?
The Investment Management division adjusted rapidly to the new working environment and was able, during the course of the year, to largely overcome the negative impact of the initial decline in market prices. The managers promptly contacted their clients, despite the obstructions that the various lockdowns imposed on communications, maintaining relationships and providing important reassurance at a vital time. As a result, very few clients felt compelled to exit capital markets completely despite the extreme volatility and uncertainty.
Assisted by a regular supply of pandemic-inspired investment ideas in the weekly Patricians meetings, managers were able to reposition portfolios where necessary or hold on to existing investments where there was a sufficient prospect of recovery. It was a testament to the professionalism and competence of our managers that they were able to overcome the twin disadvantages of holding a relatively high proportion of UK-domiciled assets and a bias towards dividend income across their client mandates. As a result, I am delighted to report that our clients have generally seen a substantial recovery in portfolio values from the lows
of last year and, in many cases, portfolio values are now above pre-pandemic levels.
In addition, management instigated a project to track and apportion overheads within the Investment Management division, in fine detail, to individual business units. This has revealed a number of areas for improvement in operating margins and various projects have been identified that will contribute to this goal. For example, the Investment Management division's model portfolio service, operating under the Service First brand, was centralised and upgraded, related commercial terms were improved and its investment process is now managed directly by the Investment Senate. The Service First models will also be used to spearhead the firm's ESG product strategy.
The profitability analysis also highlighted more clearly the elements of the Investment Management cost-base that will require Management action if operating margins are to improve materially. In particular, the recruitment of investment managers in the future will involve more focused due diligence and evaluation with regard to business models, associated regulatory risks, likely overhead usage and the potential for future organic revenue growth. The challenge is all the more acute because, across the industry, recruitment opportunities have grown scarcer with employers increasing the length of notice periods and using more restrictive covenants to prevent departures.
Some base level of regulatory flux is becoming the norm for the financial services industry, and attention within the industry is now firmly focused on the impact of Environment, Social and Governance (ESG) regulations on advisory and investment processes. Prior to the UK's departure from the EU, the EU had proposed changes to the MiFID II suitability rules to ensure that investors' ESG preferences would be taken into consideration. These rules require providers of investment management services to measure clients' ESG preferences and take them into account within the advisory and investment process. Complications and risks arise due to the low levels of ESG related data on investments presently available, and a lack of standardisation in the approaches used to rate ESG considerations.
Chris Darbyshire
Chief Investment Officer
20 August 2021
Finance Director's review
Resilience and agility through a challenging year
The strength of our underlying business model shone through amidst a challenging year for our revenues.
Financial performance
The reduction of interest rates meant coming into the year we knew our operating revenues would be depleted significantly. In the event, the year on year interest reduction was £1.4 million (2021: £0.9 million vs 2020: £2.3 million), which had a direct £ for £ impact on our reported revenue, operating profit and cash generation. In light of this, the business and financial focus has been revenue generation, cost reduction and cash management. So how did we perform? Taking each in turn:
Total revenue
Total revenue reduced by 3.5% to £30.3 million (2020: £31.4 million), but excluding the interest impact, it rose by 1.0% or £0.3 million. The increase came from strong performances in our trading and arbitrage activities. Commission income from trading increased by 11% to £9 million and the arbitrage desk, including recovery of the mark to market losses reported last year, delivered a 250% increase in gross income to £1 million. Management fee income, being a factor of market values, was 2.2% down from last year, or £0.4 million, but it is encouraging to see levels returning to pre-pandemic heights in the last quarter and continuing in the first quarter of the new financial year. A major disappointment was our structured investments activity, which experienced a difficult year and ended 39% down (£0.7 million) from last year. Revenues from our investor immigration business also reduced by £0.1 million, reflecting the pandemic's curtailment of international travel and migration.
Overall, with increased trading commissions, reduction in interest turn and the market driven downturn in fee revenue, the mix between broking and non-broking income saw a shift towards broking income in the year. It accounted for 29.7% (2020: 25.7%) in the year.
Cost reduction
Administrative expenses, excluding exceptional items, reduced by £652,000 (as noted in the Chairman's statement, £525,000 of this was as a direct result of Management led cost reduction measures), or 3.1%, during the year, notwithstanding a significant year on year increase in regulatory costs of £233,000. The cost reductions principally reflect prompt actions taken to mitigate the impact of the pandemic. These included Directors' voluntary pay reductions, reduced salaries following redundancies, placing discretionary staff recruitment and capital expenditure on hold; an intense de-papering programme to streamline and further digitise client and staff communications and the renegotiation of a number of supplier contracts.
The Group also benefited from lower consumption of staff related expenses such as travel and subsistence during the lockdown with most staff working from home. Although the Group initially took advantage of Government support, as performance improved during the period all amounts received were repaid in full in the year.
Cash management
The Group's treasury team maintained tight focus on and management of cash throughout the year, with cash inflow from operations being £1.8million. Underlying cash generated from operations, principally reflecting the impact of lease liability payments, non-cyclical working capital movements and exceptional items (see reconciliation below), was £1.08 million (2020: £1.85 million) demonstrating the Group remained strongly cash positive after satisfying lease liability obligations. After deducting cash deployed in investing activities and dividends paid, cash and cash equivalents increased to £8.86 million at year-end (2020: £8.61 million).
Financial result and alternative performance measures
The Group's operating profit and loss before tax for the year of £22,000 and £114,000, respectively (2020: operating profit and profit before tax of £1,092,000 and £963,000, respectively) are disappointing, but reflect a recovery in the second half of the year when compared to the operating loss before tax of £451,000 in the first half. The annual results include exceptional charges of £419,000 (2020: exceptional income of £375,000), reflecting the drivers of income and costs explained above. Adjusting for exceptional items (see reconciliation below and further detail in note 10), the Group's operating profit and profit before tax for the year are £441,000 and £305,000, respectively (2020: £717,000 and £588,000, respectively) and reflect the resilience of the Group's core business within the context of a most challenging year.
The Group's adjusted EBITDA (being EBITDA adjusted for exceptional items - see reconciliation below) is £2.61 million (2020: £2.78 million), which again demonstrates a sound performance in view of the significant impact of reduced base rates on the results.
I mentioned earlier that it has been pleasing to see an improvement in management fee income as markets have recovered. Total Assets Under Management and Administration ("AUMA") averaged £4.9 billion during the year, compared with £5.0 billion in the previous year, affected by the collapse in equity markets in March 2020 due to the onset of the global pandemic. Discretionary and Advisory Assets Under Management were similarly impacted by the market decline, though recovered by end of the year to £3.4 billion (2020: £2.8 billion). Total AUMA is up 24% from March 2020 levels to £5.4 billion (2020: £4.3 billion).
Reconciliation of operating profit to operating profit before exceptional items
|
| 2021 £'000 | 2020 £'000 |
| Operating profit | 22 | 1,092 |
| Exceptional items (note 10) | 419 | (375) |
| Operating profit before tax and exceptional items | 441 | 717 |
Reconciliation of (loss)/profit before tax to profit before tax and exceptional items
|
| 2021 £'000 | 2020 £'000 |
| (Loss)/profit before tax | (114) | 963 |
| Exceptional items (note 10) | 419 | (375) |
| Profit before tax and exceptional items | 305 | 588 |
Adjusted EBITDA
|
| 2021 £'000 | 2020 £'000 |
| Operating profit | 22 | 1,092 |
| Exceptional items (note 10) | 419 | (375) |
| Amortisation / depreciation (note 31) | 1,212 | 1,199 |
| Right-of-use assets depreciation charge (note 31) | 961 | 867 |
| Adjusted EBITDA | 2,614 | 2,783 |
Underlying cash generated by the Group
|
| 2021 £'000 | 2020 £'000 |
| Net cash inflow from operations | 1,806 | 3,483 |
| Working capital | (8) | (160) |
| Lease liability payments under IFRS 16 | (1,133) | (1,101) |
| Exceptional items (note 10) | 419 | (375) |
| Underlying cash generated in the period | 1,084 | 1,847 |
Divisional performance
The Investment Management division delivered an operating profit of £1.3 million for the year, compared to £2.0 million in the previous year. As noted in the context of the Group's results, this reflects the significant reduction in interest receivable on managed deposits, lower income from the structured products business where the double impact of lower interest rates and a decline in dividends paid by UK companies contributed to the worst environment for pricing the sector has seen, and lower management fee income, mitigated by strong performances in trading commissions and the arbitrage desk activities.
Looking forward, management is not planning for any reversal in base rate reductions and therefore remains focused on initiatives to improve the division's operating margins. Also the prospects for the structured investments business have improved as competitors exit this sector together with recent improvement in pricing conditions. Moreover, the structured investments team was strengthened before the onset of the pandemic and is positioned to exploit future opportunities.
The Wealth Management division's progress was hindered by market conditions and departures of underperforming teams, resulting in the division reporting an operating loss of £127,000 (2020: operating profit £42,000) on revenues of £1.6 million (2020: £1.9 million). However, its rejuvenation continues apace with the hiring of new advisers and the acquisition of a client book with funds under management and we anticipate continued growth and improved results in the coming year.
EnOC Technologies Limited ("EnOC") reported an operating loss of £127,000 (2020: £29,000) as it continues to invest in its capabilities and future prospects. Its technology underpins the Group's delivery platforms whilst it also focuses on external market opportunities.
Capital resources, liquidity and regulatory capital
The Group's capital structure, comprising solely of equity capital, provides a stable platform to support growth. At year end, net assets are £22.3 million (2020: £22.6 million), reflecting a small net reduction due to the reported loss after tax and dividends paid. Liquidity remains strong with cash and cash equivalents increasing over the year to £8.9 million and testimony to the Group's overall resilience and the early measures taken to address the pandemic. Regulatory capital at year end, including audited reserves for the year, is £11.738 million (2020: 11.943 million), comfortably in excess of the Group's capital requirements as shown in the tables below. The finance team has also planned for the introduction of the new prudential regulatory regime.
Regulatory own funds and own funds requirement
Own funds
|
| 2021 £'000 | 2020 £'000 |
| Share capital and share premium | 6,651 | 6,651 |
| Retained earnings | 11,260 | 11,582 |
| Other reserves | 4,723 | 4,723 |
| Less: |
|
|
| Own shares held | (312) | (312) |
| Regulatory Adjustments | (10,584) | (10,701) |
| Total own funds | 11,738 | 11,943 |
Own funds requirement
|
| 2021 £'000 | 2020 £'000 |
| Credit risk requirement | 1,639 | 1,490 |
| Market risk requirement | 598 | 387 |
| Operational risk requirement | 3,145 | 3,144 |
| Total own funds requirement | 5,382 | 5,021 |
|
|
|
|
| Regulatory capital surplus | 6,356 | 6,922 |
| Cover on own funds as a % | 218.1% | 237.9% |
Dividends
The pandemic has not been without its challenges and the Group has made an overall loss for the year. However, in view of the second half performance, strong capital and liquidity position, balanced reward to our people and confident financial outlook, it is right to reward our shareholders for their support. I fully support the Board's recommendation to pay a final dividend of 0.60 pence per share on 1 October 2021 for those members on the shareholders' register on 17 September 2021. Including the interim dividend of 0.15 pence per share (2020: 0.60 pence per share), the total dividend for the year is 0.75 pence per share (2020: 0.60 pence per share).
Sanath Dandeniya
Finance Director
20 August 2021
Consolidated income statement
year ended 31 March 2021
|
|
| 2021 | 2020 |
|
| Note | £'000 | £'000 |
| Revenue | 5 | 30,348 | 31,422 |
| Commissions and fees paid | 7 | (9,702) | (9,771) |
| Share of associate/joint venture after tax profit/(loss) | 8 | 66 | (11) |
| Gross profit |
| 20,712 | 21,640 |
|
|
|
|
|
| Administrative expenses | 9 | (20,271) | (20,923) |
| Exceptional items | 10 | (419) | 375 |
| Operating profit |
| 22 | 1,092 |
|
|
|
|
|
| Investment revenue | 11 | 10 | 76 |
| Finance costs | 12 | (146) | (205) |
| (Loss)/profit before tax |
| (114) | 963 |
| Taxation | 14 | (144) | (245) |
| (Loss)/profit for the year attributable to equity holders of the Parent Company |
| (258) | 718 |
|
|
|
|
|
| (Loss)/earnings per share |
|
|
|
| Basic and diluted | 16 | (0.61)p | 1.69p |
Consolidated statement of comprehensive income
year ended 31 March 2021
|
| 2021 | 2020 |
|
| £'000 | £'000 |
| (Loss)/profit for the year | (258) | 718 |
| Total comprehensive (loss)/income for the year attributable to equity holders of the Parent Company | (258) | 718 |
Consolidated statement of financial position
as at 31 March 2021
|
|
| Group | Group |
|
|
| 2021 | 2020 |
|
| Note | £'000 | £'000 |
| Non-current assets |
|
|
|
| Goodwill | 17 | 4,388 | 4,388 |
| Other intangible assets | 18 | 6,566 | 6,701 |
| Property, plant and equipment | 19 | 1,477 | 2,330 |
| Right-of-use asset | 20 | 3,612 | 4,362 |
| Investment in associate/joint venture | 8 | 2 | - |
| Investments - fair value through profit or loss | 21 | 37 | 51 |
|
|
| 16,082 | 17,832 |
| Current assets |
|
|
|
| Trade and other receivables | 22 | 49,098 | 24,515 |
| Investments - fair value through profit or loss | 21 | 920 | 638 |
| Cash and cash equivalents | 23 | 8,855 | 8,609 |
|
|
| 58,873 | 33,762 |
| Total assets |
| 74,955 | 51,594 |
|
|
|
|
|
| Current liabilities |
|
|
|
| Trade and other payables | 26 | (47,395) | (22,750) |
| Current tax liabilities |
| (123) | (424) |
| Deferred tax liabilities | 24 | (400) | (335) |
| Provisions | 27 | (205) | (178) |
| Lease liabilities | 28 | (946) | (969) |
|
|
| (49,069) | (24,656) |
| Net current assets |
| 9,804 | 9,106 |
|
|
|
|
|
| Long-term liabilities |
|
|
|
| Deferred cash consideration | 36 | (33) | (15) |
| Lease liabilities | 28 | (2,856) | (3,620) |
| Dilapidation provision | 27 | (675) | (659) |
|
|
| (3,564) | (4,294) |
| Net assets |
| 22,322 | 22,644 |
|
|
|
|
|
| Equity |
|
|
|
| Share capital | 29 | 2,888 | 2,888 |
| Share premium account | 29 | 3,763 | 3,763 |
| Own shares | 30 | (312) | (312) |
| Retained earnings | 30 | 11,260 | 11,582 |
| Other reserves | 30 | 4,723 | 4,723 |
| Equity attributable to equity holders of the Parent Company |
| 22,322 | 22,644 |
The financial statements of Walker Crips Group plc (Company registration no: 01432059) were approved by the Board of Directors and authorised for issue on 20 August 2021.
Signed on behalf of the Board of Directors
S Dandeniya FCCA
Director
20 August 2021
Consolidated statement of cash flows
year ended 31 March 2021
|
|
| 2021 | 2020 |
|
| Note | £'000 | £'000 |
| Operating activities |
|
|
|
| Cash generated from operations | 31 | 1,806 | 3,483 |
| Tax (paid)/received |
| (379) | 18 |
| Net cash generated from operating activities |
| 1,427 | 3,501 |
| Investing activities |
|
|
|
| Purchase of property, plant and equipment |
| (24) | (321) |
| Sale of investments held for trading |
| 78 | 101 |
| Consideration paid on acquisition of client lists |
| (100) | (21) |
| Consideration paid on acquisition of subsidiary |
| - | (1) |
| Dividends received | 11 | 8 | 17 |
| Dividends received from associate investment | 8 | 64 | - |
| Interest received |
| 2 | 48 |
| Net cash generated from/(used in) investing activities |
| 28 | (177) |
| Financing activities |
|
|
|
| Dividends paid |
| (64) | (396) |
| Interest paid |
| (12) | (7) |
| Repayment of lease liabilities* |
| (999) | (944) |
| Repayment of lease interest* |
| (134) | (157) |
| Net cash used in financing activities |
| (1,209) | (1,504) |
| Net increase in cash and cash equivalents |
| 246 | 1,820 |
| Net cash and cash equivalents at beginning of period |
| 8,609 | 6,789 |
| Net cash and cash equivalents at end of period |
| 8,855 | 8,609 |
* Total repayment of lease liabilities under IFRS 16 in the period was £1,133,000 (2020: 1,101,000)
Consolidated statement of changes in equity
year ended 31 March 2021
|
|
| Share | Own |
|
|
|
|
|
| Share | premium | shares | Capital |
| Retained | Total |
|
| capital | account | held | redemption | Other | earnings | equity |
|
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 |
| 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 | - | - | - | - | - | 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 |
| Comprehensive loss for the year | - | - | - | - | - | (258) | (258) |
| Total comprehensive loss for the year | - | - | - | - | - | (258) | (258) |
| Contributions by and distributions to owners |
|
|
|
|
|
|
|
| Dividends paid | - | - | - | - | - | (64) | (64) |
| Total contributions by and distributions to owners | - | - | - | - | - | (64) | (64) |
| Equity as at 31 March 2021 | 2,888 | 3,763 | (312) | 111 | 4,612 | 11,260 | 22,322 |
Notes to the accounts
year ended 31 March 2021
1. General information
Walker Crips Group plc ('the Company') is the Parent Company of the Walker Crips group of companies ('the Company'). The Company is a public limited company incorporated in the United Kingdom under the Companies Act 2006 and listed on the London Stock Exchange. The Group is registered in England and Wales. The address of the registered office is Old Change House, 128 Queen Victoria Street, London EC4V 4BJ.
The significant accounting policies have been disclosed below. The accounting policies for the Group and the Company are consistent unless otherwise stated.
2. Basis of preparation
The consolidated financial statements have been prepared in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006.
The principal accounting policies adopted in the preparation of the consolidated financial statements are set out in note 3. The policies have been consistently applied to all the years presented, unless otherwise stated.
The consolidated financial statements are presented in GBP sterling (£). Amounts shown are rounded to the nearest thousand, unless stated otherwise.
The consolidated financial statements have been prepared on the historical cost basis, except for certain financial instruments that are measured at fair value, and are presented in Pounds Sterling, which is the currency of the primary economic environment in which the Group operates. The principal accounting policies adopted are set out below and have been applied consistently to all periods presented in the consolidated financial statements.
The preparation of financial statements requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group's accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements, are disclosed in note 4.
Going concern
The financial statements of the Group have been prepared on a going concern basis. At 31 March 2021, the Group had net assets of £22.3 million (2020: £22.6 million), net current assets of £9.8 million (2020: £9.1 million) and cash and cash equivalents of £8.9 million (2020: £8.6 million). The Group reported an operating profit of £22,000 for the year ended 31 March 2021 (2020: £1,092,000), inclusive of exceptional expense of £419,000 (2020: exceptional income of £375,000), and net cash inflows from operating activities of £1.8 million (2020: £3.5 million).
The Directors consider the going concern basis to be appropriate following their assessment of the Group's financial position and its ability to meet its obligations as and when they fall due. In making the going concern assessment the Directors have taken into account the following:
· The Group's three year base case projections based on current strategy, trading performance, expected future profitability, liquidity, capital solvency and dividend policy.
· Outcome of stress scenarios applied to the Group's base case projections prior to deployment of management actions.
· The principal risks facing the Group and its systems of risk management and internal control.
· The Group's ability to generate positive operating cash flow during the year to 31 March 2021, a period of significant uncertainty, and the projections over the next three years.
Key assumptions that the Directors have made in preparing the base case cash flow forecasts are that:
· Revenues reflect the impact of (i) continued low base rates of 10 basis points on income for managing client deposits and (ii) no further significant impact from the pandemic other than what is already known. The base case assumption is for the FTSE 100 index to remain at the lower 7000 range for a large part of the next 12 months. The total revenue is expected to increase by 5% next year with fee income, helped by the recovering financial markets, and a conservative new fee expectation from the joiners to our Wealth team. Years two and three growth expectation set conservatively at 2%.
· Base case costs prudently reflect only the actions Management has taken to date.
· Expected benefits from the planned consolidation of a number of regulated entities and streamlining the management structure not included in the forecast at this stage.
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 the reporting periods ending 31 March 2022 and 31 March 2023.
· 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 requirements exceed the minimum thresholds in both the base and bear scenarios. However, in the severe stress scenario, although the Group has positive liquidity throughout the period, the negative impact on our prudential capital ratio is such that it is projected to fall below the regulatory requirement in September 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 proprietary risk positions, delayed capital expenditure, further reductions in discretionary spend and additional reduction in employee headcount. Other mitigating actions which may be possible include seeking shareholder support, sale of assets and stronger cost reductions.
Following the assessment of the Group's financial position and its ability to meet its obligations as and when they fall due, including the financial implications of the pandemic, the Directors are not aware of any material uncertainties that cast significant doubt on the Group's ability to continue as a going concern.
Standards and interpretations affecting the reported results or the financial position
The accounting standards adopted are consistent with those of the previous financial year. Amendments to existing IFRS standards did not have a material impact on the Group's Consolidated Income Statement or the Statement of Financial Positions.
The Group does not expect standards yet to be adopted by the newly-formed and independent UK endorsement body ("UKEB") to have a material impact in future years.
3. Significant accounting policies
Basis of consolidation
The Group financial statements consolidate the financial statements of the Group and companies controlled by the Group (its subsidiaries) made up to 31 March each year. The Group controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its powers to direct relevant activities of the entity. Subsidiaries are fully consolidated from the date on which control is obtained and no longer consolidated from the date that control ceases; their results are in the consolidated financial statements up to the date that control ceases.
Entities where the interest is 49% or less are assessed for potential treatment as a Group company against the control tests outlined in IFRS 10, being power over the investee, exposure or rights to variable returns and power over the investee to affect the amount of investors' returns.
All intercompany balances, income and expenses are eliminated on consolidation.
Business combinations
The acquisition of subsidiaries is accounted for using the acquisition method. The cost of the acquisition is measured at the aggregate of the fair values, at the date of exchange, of assets given, liabilities incurred or assumed, and equity instruments issued by the Group in exchange for control of the acquiree. The acquiree's identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under IFRS 3 Business Combinations are recognised at their fair value at the acquisition date.
Acquisition-related costs are expensed as incurred.
If the business combination is achieved in stages, the acquisition date carrying value of the acquirer's previously held equity interest in the acquiree is re-measured to fair value at the acquisition date; any gains or losses arising from such re-measurement are recognised in profit or loss.
Contingent consideration is classified either as equity or as a financial liability. Amounts classified as a financial liability are subsequently remeasured to fair value, with changes in fair value recognised in profit or loss.
Interests in associate/joint venture
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. Following the acquisition of the remaining interest in the former joint venture, JWPCreers Wealth Management Limited, which is now a 100% owned subsidiary, no assets or liabilities are classified as a joint venture investment in these Financial Statements.
An associate is an entity in which the Group has significant influence, but not control or joint control. The Group uses the equity method of accounting by which the equity investment is initially recorded at cost and subsequently adjusted to reflect the investor's share of the net assets of the associate.
The Group has a 33% associate investment in Walker Crips Property Income Limited ("WCPIL") (see note 8).
Intangible assets
(a) Goodwill
Goodwill arises on the acquisition of subsidiaries and represents the excess of the consideration transferred, the amount of any non-controlling interest in the acquire and the acquisition-date fair value of any previous equity interest in the acquire over the fair value of the identifiable net assets acquired. If the total of consideration transferred, non-controlling interest recognised and previously held interest measured at fair value is less than the fair value of the net assets of the subsidiary acquired, in the case of a bargain purchase, the difference is recognised directly in the income statement.
Goodwill is initially recognised as an asset at cost and is subsequently measured at cost less any accumulated impairment losses. Goodwill is not amortised but is reviewed for impairment at least annually. Any impairment is recognised immediately in profit or loss and is not subsequently reversed in future periods.
For the purpose of impairment testing, goodwill acquired in a business combination is allocated to each of the CGUs, or groups of CGUs, that is expected to benefit from the synergies of the combination. Each unit or group of units to which the goodwill is allocated represents the lowest level within the entity at which the goodwill is monitored for internal management purposes. Goodwill is monitored at the operating segment level.
Goodwill impairment reviews are undertaken annually or more frequently if events or changes in circumstances indicate a potential impairment. The carrying value of the CGU containing the goodwill is compared to the recoverable amount, which is the higher of value-in-use and the fair value less costs of disposal. Any impairment is recognised immediately as an expense and is not subsequently reversed.
(b) Client lists
Client lists are recognised when it is probable that future economic benefits will flow to the Group and the cost of the asset can be measured reliably whilst the risk and rewards have also transferred into the Group's ownership.
Intangible assets classified as client lists are recognised when acquired as part of a business combination 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 at inception. The amortisation period and amortisation method for intangible assets are reviewed at least each financial year end. All intangible assets have a finite useful life.
Amortisation of intangible fixed assets is included within administrative expenses in the consolidated income statement.
At each statement of financial position date, the Group reviews the carrying amounts of its intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where the asset does not generate cash flows that are independent from other assets, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs.
(c) Software 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.
Impairment of non-financial assets
Intangible assets that have an indefinite useful life or intangible assets not ready to use are not subject to amortisation and are tested annually for impairment. Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset's fair value less costs of disposal and value-in-use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are largely independent cash inflows (cash-generating units). Prior impairments of non-financial assets (other than goodwill) are reviewed for possible reversal at each reporting date.
Own shares held
Own shares consist of treasury shares which are recognised at cost as a deduction from equity shareholders' funds. Subsequent consideration received for the sale of treasury shares is also recognised in equity with any difference being taken to retained earnings. No gain or loss is recognised on sale of treasury shares.
Revenues recognised under IFRS 15
Revenue from contracts with customers:
· Gross commissions on stockbroking activities are recognised on those transactions whose trade date falls within the financial year, with the execution of the trade being the performance obligation at that point in time.
· In Walker Crips Investment Management, fees earned from managing various types of client portfolios are accrued daily over the period to which they relate with the performance obligation fulfilled over the same period.
· Fees in respect of financial services activities of Walker Crips Wealth Management are accrued evenly over the period to which they relate with the performance obligation fulfilled over the same period.
· Fees earned from structured investments are recognised on the date the underlying security of the structured investment is traded and settled, with the execution of the trade being the performance obligation at that point in time.
· Fees earned from software offering, Software as a Service ("SaaS"), are accrued evenly over the period to which they relate with the performance obligation fulfilled over the same period.
Other incomes:
· Interest is recognised as it accrues in respect of the financial year.
· Dividend income is recognised when:
· the Group's right to receive payment of dividends is established;
· when it is probable that economic benefits associated with the dividend will flow to the Group; and
· the amount of the dividend can be reliably measured.
· Gains or losses arising on disposal of trading book instruments and changes in fair value of securities held for trading purposes are both recognised in profit and loss.
The Group does not have any long-term contract assets in relation to customers of any fixed and/or considerable lengths of time which require the recognition of financing costs or incomes in relation to them.
Operating expenses
Operating expenses and other charges are provided for in full up to the statement of financial position date on an accruals basis.
Exceptional items
To assist in understanding its underlying performance, the Group identifies certain items of pre-tax income and expenditure and discloses them separately in the Consolidated income statement.
Such items include:
1. profits or losses on disposal, 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 falls under categories 2, 3 and 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.
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 331/3% per annum on cost
Leasehold improvements over the term of the lease
Furniture and equipment 331/3% per annum on cost
Right-of-use assets held under contractual arrangements are depreciated over the lengths of their respective contractual terms, as prescribed under IFRS 16.
The gain or loss on the disposal or retirement of an asset is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in income. The residual values and estimated useful life of items within property, plant and equipment are reviewed at least at each financial year end. Any shortfalls in carrying value are impaired immediately through profit or loss.
Taxation
The tax expense for the period comprises current and deferred tax.
Tax is recognised in the income statement, except to the extent that it relates to items recognised directly in equity. In this case the tax is also recognised directly in other comprehensive income or directly in equity, respectively.
The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end of the reporting period in the countries where the Company's subsidiaries and associates operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.
Deferred income tax is recognised, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, the deferred tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that, at the time of the transaction, affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted, or substantially enacted, by the end of the reporting period and are expected to apply when the related deferred income tax asset is realised, or the deferred income tax liability is settled.
Deferred income tax assets are recognised only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised.
Deferred income tax liabilities are provided on taxable temporary differences arising from investments in subsidiaries, associates and joint arrangements, except for deferred income tax liability where the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future. Generally, the Group is unable to control the reversal of the temporary difference for associates. Only where there is an agreement in place that gives the Group the ability to control the reversal of the temporary difference not recognised.
Deferred income tax assets are recognised on deductible temporary differences arising from investments in subsidiaries, associates and joint arrangements only to the extent that it is probable the temporary difference will reverse in the future and there is sufficient taxable profit available against which the temporary difference can be utilised.
Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities, and when the deferred income tax assets and liabilities relate to income taxes levied by the same taxation authority on either the taxable entity or different taxable entities where there is an intention to settle the balances on a net basis.
Financial assets and liabilities
Financial assets and liabilities are recognised in the Consolidated Statement of Financial Position when the Group becomes a party to the contractual provisions of the instrument.
At initial recognition, the Group measures a financial asset or financial liability at its fair value plus or minus transaction costs. Transaction costs of financial assets and financial liabilities carried at fair value through profit or loss ("FVTPL") are expensed in the income statement. Immediately after initial recognition, an expected credit loss allowance ("ECL") is recognised for financial assets measured at amortised cost, which results in an accounting loss being recognised in profit or loss when an asset is newly originated.
The Group does not use hedge accounting.
a) Financial assets
Classification and subsequent measurement
The Group classifies its financial assets in the following measurement categories:
· Fair value through profit or loss ("FVTPL");
· Fair value through other comprehensive income ("FVTOCI"); or
· Amortised cost.
Financial assets are classified as current or non-current depending on the contractual timing for recovery of the asset. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of its financial assets at initial recognition.
(i) Debt instruments
Classification and subsequent measurement of debt instruments depend on:
· the Group's business model for managing the asset; and
· the cash flow characteristics of the asset.
Business model: The business model reflects how the Group manages the assets in order to generate cash flows. That is, whether the Group's objective is solely to collect the contractual cash flows from the assets, to collect both the contractual cash flows and cash flows arising from the sale of assets, or solely or mainly to collect cash flows arising from the sale of assets. Factors considered by the Group include past experience on how the contractual cash flows for these assets were collected, how the assets' performance is evaluated, and how risks are assessed and managed.
Cash flow characteristics of the asset: Where the business model is to hold assets to collect contractual cash flows, the Group assesses whether the financial instruments' contractual cash flows represent solely payments of principal and interest ("the SPPI test"). In making this assessment, the Group considers whether the contractual cash flows are consistent with a basic lending instrument.
Based on these factors, the Group classifies its debt instruments into one of two measurement categories:
Amortised cost: Assets that are held for collection of contractual cash flows where those cash flows represent solely payments of principal and interest ("SPPI"), and that are not designated at FVTPL, are measured at amortised cost. Amortised cost is the amount at which the financial asset is measured at initial recognition minus the principal repayments, plus or minus the cumulative amortisation, using the effective interest rate method, of any difference between that initial amount and the maturity amount, adjusted by any ECL recognised. The effective interest rate is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial asset to the gross carrying amount. Interest income from these financial assets is included within investment revenues using the effective interest rate method.
Fair value through profit or loss ("FVTPL"): Assets that do not meet the criteria for amortised cost or fair value through other comprehensive income ("FVTOCI") are measured at fair value through profit or loss.
Reclassification
The Group reclassifies debt instruments when and only when its business model for managing those assets changes. The reclassification takes place from the start of the first reporting period following the change.
Impairment
The Group assesses on a forward-looking basis the ECL associated with its debt instruments held at amortised cost. The Group recognises a loss allowance for such losses at each reporting date. On initial recognition, the Group recognises a 12-month ECL. At the reporting date, if there has been a significant increase in credit risk, the loss allowance is revised to the lifetime expected credit loss.
The measurement of ECL reflects:
· an unbiased and probability weighted amount that is determined by evaluating a range of possible outcomes;
· the time value of money; and
· reasonable and supportable information that is available without undue cost or effort at the reporting date about past events, current conditions and forecasts of future economic conditions.
The Group adopts the simplified approach to trade receivables and 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 include cash in hand, deposits held at call with financial institutions, other short-term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. Bank overdrafts are shown within current liabilities in the statement of financial position.
De-recognition
Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have been transferred and the Group has transferred substantially all the risks and rewards of ownership.
b) Financial liabilities
Classification and subsequent measurement
Financial liabilities are classified and subsequently measured at amortised cost.
Financial liabilities are derecognised when they are extinguished.
Financial liabilities and equity
Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities.
Trade payables
Trade payables are classified at amortised cost. Due to their short-term nature, their carrying amount is considered to be the same as their fair value.
Bank overdrafts
Interest-bearing bank overdrafts are initially measured at fair value and shown within current liabilities. Finance charges are accounted for on an accrual basis in profit or loss using the effective interest rate method and are added to the carrying amount of the instrument to the extent that they are not settled in the period in which they arise.
Equity instruments
Ordinary shares are classified as equity.
Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds.
Where any Group Company purchases the Company's equity share capital (treasury shares), the consideration paid, including any directly attributable incremental costs (net of income taxes) is deducted from equity attributable to the Company's equity holders, until the shares are cancelled or reissued. Where such shares are subsequently reissued, any consideration received, net of any directly attributable incremental transaction costs and the related income tax effects, is included in equity attributable to the Company's equity holders.
Share Incentive Plan ("SIP")
The Group has an incentive policy to encourage all members of staff to participate in the ownership and future prosperity of the Group. All employees can participate in the SIP following three months of service. Employees may contribute a maximum of 10% of their gross salary in regular monthly payments (being not less than £10 and not greater than £150) to acquire Ordinary Shares in the Parent Company (Partnership Shares). Partnership Shares are acquired monthly.
In response to mitigate some perceived impacts from the pandemic on the Group, the matching option was temporarily suspended during the twelve-month period to 31 March 2021. On 1 April 2021, the matching option was reinstated to one-half for every Partnership Share purchased. This arrangement will continue until 31 March 2022. All shares awarded under this scheme have been purchased in the market by the Trustees of the SIP.
Provisions
Provisions for environmental restoration, restructuring costs and legal claims are recognised when the Group has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation, and the amount has been reliably estimated. Restructuring provisions comprise lease termination penalties and employee termination payments. Provisions are not recognised for future operating losses.
Provisions are measured at the present value of the expenditures expected to be required to settle the obligation, using a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the obligation. The increase in the provision due to the passage of time is recognised as interest expense.
Long-term liabilities - deferred cash and shares consideration
Amounts payable to personnel under recruitment contracts in respect of the client relationships, which transfer to the Group, are treated as long-term liabilities if the due date for payment of cash consideration is beyond the period of one year after the year-end date. The value of shares in all cases is derived by a formula based on the value of client assets received in conjunction with the prevailing share price at the date of issue which in turn determines the number of shares issuable.
Pension costs
The Group contributes to defined contribution personal pension schemes for selected employees. For defined contribution schemes, the Group pays contributions to publicly or privately administered pension insurance plans on a mandatory, contractual or voluntary basis. The Group has no further payment obligations once the contributions have been paid. The contributions are recognised as employee benefit expenses when they are due. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in the future payments is available. The contribution rate is based on annual salary and the amount is charged to the income statement on an accrual basis.
Dividends paid
Equity dividends are recognised when they become legally payable. Dividend distribution to the Company's shareholders is recognized as a liability in the Group's financial statements in the period in which the dividends are approved by the Company's shareholders. There is no requirement to pay dividends unless approved by the shareholders by way of written resolution where there is sufficient cash to meet current liabilities, and without detriment of any financial covenants, if applicable.
Leases
The Group leases various offices, software and equipment that are recognised under IFRS 16. The Group's lease contracts are typically made for fixed periods of 2 to 10 years and extension and termination options enabling maximise operational flexibility is included in a number of property and software leases across the Group.
All leases are accounted for by recognising a right-of-use asset and a lease liability except for:
· Leases of low value assets; and
· Leases with a duration of 12 months or less.
Payments associated with short-term leases and leases of low-value assets are recognised on a straight-line basis as an expense in profit or loss. Short-term leases are leases with a lease term of 12 months or less. Low-value assets comprise IT equipment and small items of office furniture.
Leases are recognised as a right-of-use asset and a corresponding liability at the date at which the leased asset is available for use by the Group. Each lease payment is allocated between the liability and finance cost. The finance cost is charged to profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The right-of-use assets are depreciated over the shorter of the asset's useful life and the lease term on a straight-line basis.
Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of the following lease payments:
· fixed payments (including in-substance fixed payments), less any lease incentives receivable;
· variable lease 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 lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be readily determined, which is generally the case for leases held by the Group, the lessee's incremental borrowing rate is used.
To determine the incremental borrowing rate, the Group:
· where possible, uses recent third-party financing received by the individual lessee as a starting point, adjust to reflect changes in financing conditions since third party financing was received;
· uses a build-up approach that starts with a risk-free interest rate adjusted for credit risk for leases held by the Group, which does not have recent third-party financing; and
· make adjustments specific to the lease, for example term, country, currency and security.
Lease payments are allocated between principal and finance cost. The finance cost is charged to profit and loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period.
Right-of-use assets are measured at cost comprising the following:
· the amount of the initial measurement of lease liability;
· any lease payments made at or before the commencement date less any lease incentives received;
· any initial direct costs; and
· restoration costs.
Right-of-use assets are depreciated over the shorter of the lease term and the useful economic life of the underlying asset on a straight line basis.
The Group does not have any leasing activities acting as a lessor.
Earnings per share
Basic earnings per share is calculated by dividing:
· the profit attributable to owners of the company, excluding any costs of servicing equity other than ordinary shares;
· by the weighted average number of ordinary shares outstanding during the financial year, adjusted for bonus elements in ordinary shares issued during the year and excluding treasury shares (note 16).
There are currently no obligations present that could have a dilutive effect on ordinary shares.
4. Key sources of estimation uncertainty and judgements
The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.
Impairment of goodwill - estimation and judgement
Determining whether goodwill is impaired requires an estimation of the fair value less costs to sell and the value-in-use of the cash-generating units to which goodwill has been allocated. The fair value less costs to sell involves estimation of values based on the application of earnings multiples and comparison to similar transactions. The value-in-use calculation requires the entity to estimate the future cash flows expected to arise from the cash-generating unit and apply a discount rate in order to calculate present value. The assumptions used and inputs involve judgements and create estimation uncertainty. These assumptions have been stress-tested as described in note 17. The carrying amount of goodwill at the balance sheet date was £4.4 million (2020: £4.4 million) as shown in note 17.
Other intangible assets - judgement
Acquired client lists are capitalised based on current fair values. During the year, one intangible asset, a client list, was purchased by subsidiary Walker Crips Wealth Management Limited. When the Group purchases client relationships from other corporate entities, a judgement is made as to whether the transaction should be accounted for as a business combination, or a separate purchase of intangible assets. In making this judgement, the Group assesses the acquiree against the definition of a business combination in IFRS 3. Payments to newly recruited investment managers are capitalised when they are judged to be made for the acquisition of client relationship intangibles. The useful lives are estimated by assessing the historic rates of client retention, the ages and succession plans of the investment managers who manage the clients and the contractual incentives of the investment managers. The Directors conduct a review of indicators of impairment and also consider a life of up to twenty years to be both appropriate and in line with peers.
IFRS 16 "Leases" - estimation and judgement
IFRS 16 requires certain judgements and estimates to be made and those significant judgements are explained below.
· The Group has opted to use single discount rates for leases with reasonably similar characteristics. The discount rates used have had an impact on the right-of-use assets values, lease liabilities on initial recognition and lease finance costs included within the income statement.
· Where a lease includes the option for the Group to extend the lease term, the Group has exercised the judgement, based on current information, that such leases will be extended to the full length available, and this is included in the calculation of the value of the right of use assets and lease liabilities on initial recognition and valuation at the reporting date.
Provision for dilapidations - estimation and judgement
The Group has made provisions for dilapidations under six leases for its offices. The Group did not enter into any new property leases in the period. During the year, £14,000 of additional provisions were recognised, including £2,000 of interest, giving a new provision at year-end of £675,000.
The amounts of the provisions are, where possible, estimated using quotes from professional building contractors. The property, plant and equipment elements of the dilapidations are depreciated over the terms of their respective leases. The liabilities in relation to dilapidations are inflated using an estimated rate of inflation and discounted using appropriate gilt rates to present value. The change in liability attributable to inflation and discounting is recognised in interest expense.
5. Revenue
An analysis of the Group's revenue is as follows:
|
|
|
| 2021 |
|
| 2020 |
|
|
| Non- |
|
| Non- |
|
|
| Broking | broking |
| Broking | broking |
|
|
| income | income | Total | income | income | Total |
|
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 |
| Stockbroking commission | 9,009 | - | 9,009 | 8,095 | - | 8,095 |
| Fees and other revenue | - | 19,733 | 19,733 | - | 21,468 | 21,468 |
| Investment Management | 9,009 | 19,733 | 28,742 | 8,095 | 21,468 | 29,563 |
| Wealth Management, |
|
|
|
|
|
|
| Financial Planning & Pensions | - | 1,606 | 1,606 | - | 1,859 | 1,859 |
| Revenue | 9,009 | 21,339 | 30,348 | 8,095 | 23,327 | 31,422 |
| Investment revenue (see note 11) | - | 10 | 10 | - | 76 | 76 |
| Total Income | 9,009 | 21,349 | 30,358 | 8,095 | 23,403 | 31,498 |
| % of total income | 29.7% | 70.3% | 100.0% | 25.7% | 74.3% | 100.0% |
Timing of revenue recognition
The following table presents operating income analysed by the timing of revenue recognition of the operating segment providing the service:
|
|
|
|
| Consolidated |
|
|
|
|
| year ended |
|
| Investment | Wealth |
| 31 March |
|
| Management | Management | SaaS | 2021 |
| 2021 | £'000 | £'000 | £'000 | £'000 |
| Revenue from contracts with customers |
|
|
|
|
| Products and services transferred at a point in time | 10,389 | 161 | 16 | 10,566 |
| Products and services transferred over time | 16,393 | 1,425 | - | 17,818 |
|
|
|
|
|
|
| Other revenue |
|
|
|
|
| Products and services transferred at a point in time | 1,089 | 20 | - | 1,109 |
| Products and services transferred over time | 855 | - | - | 855 |
|
| 28,726 | 1,606 | 16 | 30,348 |
|
|
|
|
| Consolidated |
|
|
|
|
| year ended |
|
| Investment | Wealth |
| 31 March |
|
| Management | Management | SaaS | 2020 |
| 2020 | £'000 | £'000 | £'000 | £'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 |
6. Segmental analysis
For segmental reporting purposes, the Group currently has three operating segments; Investment Management, being portfolio-based transaction execution and investment advice; Wealth Management, being financial planning and pensions administration; and Software as a Service ("SaaS") comprising provision of regulatory and admin software to regulated companies. Unallocated corporate expenses, assets and liabilities are not considered to be allocatable accurately, or fairly, under any known basis of allocation and are therefore disclosed separately.
Walker Crips Investment Management's activities focus predominantly on investment management of various types of portfolios and asset classes.
Walker Crips Wealth Management provides advisory and administrative services to clients in relation to their financial planning, life insurance, inheritance tax and pension arrangements.
EnOC Technologies Limited ("EnOC" or "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 have been eliminated on consolidation and are excluded from segmental analysis.
Revenues between Group entities, and in turn reportable segments, are excluded from the segmental analysis presented below.
The Group does not derive any revenue from geographical regions outside of the United Kingdom.
|
|
|
|
| Consolidated |
|
|
|
|
| year ended |
|
| Investment | Wealth |
| 31 March |
|
| Management | Management | SaaS | 2021 |
| 2021 | £'000 | £'000 | £'000 | £'000 |
| Revenue |
|
|
|
|
| Revenue from contracts with customers | 26,782 | 1,586 | 16 | 28,384 |
| Other revenue | 1,944 | 20 | - | 1,964 |
| Total revenue | 28,726 | 1,606 | 16 | 30,348 |
|
|
|
|
|
|
| Results |
|
|
|
|
| Segment result | 1,333 | (127) | (127) | 1,079 |
| Unallocated corporate expenses |
|
|
| (1,057) |
|
|
|
|
| 22 |
| Investment revenue |
|
|
| 10 |
| Finance costs |
|
|
| (146) |
| Loss before tax |
|
|
| (114) |
| Tax |
|
|
| (144) |
| Loss after tax |
|
|
| (258) |
|
|
|
|
| Consolidated |
|
|
|
|
| year ended |
|
| Investment | Wealth |
| 31 March |
|
| Management | Management | SaaS | 2021 |
| 2021 | £'000 | £'000 | £'000 | £'000 |
| Other information |
|
|
|
|
| Capital additions | 35 | 201 | - | 236 |
| Depreciation | 304 | 71 | - | 375 |
|
|
|
|
|
|
| Statement of financial positions |
|
|
|
|
| Assets |
|
|
|
|
| Segment assets | 67,297 | 1,138 | 369 | 68,804 |
| Unallocated corporate assets |
|
|
| 6,151 |
| Consolidated total assets |
|
|
| 74,955 |
|
|
|
|
|
|
| Liabilities |
|
|
|
|
| Segment liabilities | 48,486 | 328 | 10 | 48,824 |
| Unallocated corporate liabilities |
|
|
| 3,809 |
| Consolidated total liabilities |
|
|
| 52,633 |
|
|
|
|
| Consolidated |
|
|
|
|
| year ended |
|
| Investment | Wealth |
| 31 March |
|
| Management | Management | SaaS | 2020 |
| 2020 | £'000 | £'000 | £'000 | £'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 | £'000 | £'000 | £'000 | £'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 assets |
|
|
| 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 |
7. Commissions and fees paid
Commissions and fees paid comprises:
|
| 2021 | 2020 |
|
| £'000 | £'000 |
| To authorised external agents | 63 | 65 |
| To self-employed certified persons | 9,639 | 9,706 |
|
| 9,702 | 9,771 |
8. Investment in associate/joint venture
|
| 2021 | 2020 |
|
| £'000 | £'000 |
| Brought forward | - | 44 |
| Disposals | - | (33) |
| Share of after-tax profit/(loss) | 66 | (11) |
| Dividends | (64) | - |
| Carried forward | 2 | - |
Associate
The Group has a 33.33% (2020: 33.33%) interest in its associate, Walker Crips Property Income Limited ("WCPIL"), a company incorporated and operating in the United Kingdom. The brought forward value of the Group's share of net assets in WCPIL was £1. The Board of WCPIL submitted management accounts to 31 March 2021 reporting an after-tax profit of £198,000, giving the Group a £66,000 entitlement from which a dividend of £64,000 was paid to the Group in the period.
Joint venture
As reported in the 2020 Annual Report and Accounts, the Group acquired the remaining interest in the former joint venture, JWPCreers Wealth Management Limited, which is now a 100% owned subsidiary and has changed its name to Walker Crips Ventures Limited.
9. (Loss)/profit for the year
(Loss)/profit for the year on continuing operations has been arrived at after charging:
|
| 2021 | 2020 |
|
| £'000 | £'000 |
| Depreciation of property, plant and equipment (see note 19) | 375 | 590 |
| Depreciation of right-of-use assets (see note 20) | 961 | 867 |
| Amortisation of intangibles (see note 18) | 837 | 609 |
| Staff costs (see note 13) | 12,690 | 13,268 |
| Recharge of staff costs | (710) | (581) |
| Settlement costs | 1,148 | 1,049 |
| Communications | 1,195 | 1,474 |
| Regulatory costs | 756 | 523 |
| Computer expenses | 595 | 642 |
| Other expenses | 2,221 | 2,262 |
| Auditor's remuneration | 203 | 220 |
|
| 20,271 | 20,923 |
A more detailed analysis of auditor's remuneration is provided below:
|
| 2021 | 2021 | 2020 | 2020 |
|
| £'000 | % | £'000 | % |
| Audit services |
|
|
|
|
| Fees payable to the Company's auditor for the audit of its annual accounts | 57 | 28 | 60 | 27 |
| The audit of the Company's subsidiaries pursuant to legislation - current year | 133 | 66 | 145 | 66 |
|
|
|
|
|
|
| Non-audit services |
|
|
|
|
| FCA client assets reporting | 13 | 6 | 12 | 6 |
| Interim review | - | - | 3 | 1 |
|
| 203 | 100 | 220 | 100 |
10. Exceptional items
Certain amounts are disclosed separately in order to present results which are not distorted by significant items of income and expenditure due to their nature and materiality.
|
| 2021 | 2020 |
|
| £'000 | £'000 |
| Changes in fair value of deferred consideration | 31 | (166) |
| Insurance recovery of historical claim against the Group | - | (209) |
| Reorganisation and other costs | 388 | - |
|
| 419 | (375) |
The change in deferred consideration fair value is the impact of revaluing, based on latest financial performance, future amounts due in respect of acquired client relationships.
The prior year insurance recovery was a large receipt recovered following completion of arbitration proceedings in respect of a historic claim expensed several years before.
In the current year the Group has incurred professional fees and other expenses relating to the actions taken in response to the pandemic, including redundancy costs and those relating to the Group reorganisation, and a contractual dispute.
11. Investment revenue
Investment revenue comprises:
|
| 2021 | 2020 |
|
| £'000 | £'000 |
| Interest on bank deposits | 2 | 59 |
| Dividends from equity investment | 8 | 17 |
|
| 10 | 76 |
12. Finance costs
Finance costs comprises:
|
| 2021 | 2020 |
|
| £'000 | £'000 |
| Interest on lease liabilities | (134) | (157) |
| Interest on dilapidation provisions | (2) | (41) |
| Interest on overdue liabilities | (10) | (7) |
|
| (146) | (205) |
13. Staff costs
Particulars of employee costs (including Directors) are as shown below:
|
| 2021 | 2020 |
|
| £'000 | £'000 |
| Wages and salaries | 10,643 | 10,909 |
| Social security costs | 1,074 | 1,182 |
| Share incentive plan | 94 | 239 |
| Other employment costs | 879 | 938 |
|
| 12,690 | 13,268 |
Staff costs do not include commissions payable mainly to self-employed account executives, as these costs are included in total commissions payable to self-employed certified persons disclosed in note 7. At the end of the year there were 40 certified self-employed account executives (2020: 44).
The average number of staff employed during the year was:
|
| 2021 | 2020 |
|
| Number | Number |
| Executive Directors | 2 | 2 |
| Certification and approved Staff | 60 | 60 |
| Other staff | 150 | 156 |
|
| 212 | 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 loss/profit for the year of continuing operations and comprises:
|
| 2021 | 2020 |
|
| £'000 | £'000 |
| UK corporation tax at 19% (2020: 19%) | 96 | 328 |
| Prior year adjustments | 111 | (16) |
| Origination and reversal of timing differences during the current period | (63) | (67) |
|
| 144 | 245 |
Corporation tax is calculated at 19% (2020: 19%) of the estimated assessable profit for the year.
The charge for the year can be reconciled to the (loss)/profit per the income statement as follows:
|
| 2021 | 2020 |
|
| £'000 | £'000 |
| (Loss)/profit before tax | (114) | 963 |
| Tax on (loss)/profit on ordinary activities at the standard rate UK corporation tax rate of 19% (2020: 19%) | (22) | 183 |
|
|
|
|
| Effects of: |
|
|
| Tax rate changes for deferred tax | - | (15) |
| Expenses not deductible for tax purposes | 22 | 7 |
| Prior year adjustment | 111 | (1) |
| Fixed asset differences | 63 | 74 |
| Other | (30) | (3) |
|
| 144 | 245 |
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% (2020: 19%).
The exceptional charge of £419,000 (2020: the exceptional credit of £375,000), disclosed separately on the consolidated income statement, is tax deductible to the value of £80,000 (2020: tax chargeable £71,000) of corporation tax. Classifying these credits/costs as exceptional has no effect on the tax liability.
In the Spring Budget 2021, the Government announced that from 1 April 2023, the UK corporation tax rate will increase from 19% to 25%. This will have a consequential effect on the Group's future tax charge.
15. Dividends
When determining the level of proposed dividend in any year a number of factors are taken into account including levels of profitability, future cash commitments, investment needs, shareholder expectations and prudent buffers for maintaining an adequate regulatory capital surplus. Amounts recognised as distributions to equity holders in the period:
|
| 2021 | 2020 |
|
| £'000 | £'000 |
| Final dividend for the year ended 31 March 2020 of 0.00p (2019: 0.33p) per share | - | 142 |
| Interim dividend for the year ended 31 March 2021 of 0.15p (2020: 0.60p) per share | 64 | 254 |
|
| 64 | 396 |
| Proposed final dividend for the year ended 31 March 2021 of 0.60p (2020: 0.00p) per share | 256 | - |
The proposed final dividends are subject to approval by shareholders at the Annual General Meeting and have not been included as liabilities in these financial statements.
16. (Loss)/earnings per share
The calculation of basic (loss)/earnings per share for continuing operations is based on the post-tax loss for the financial year of £258,000 (2020: post-tax profit of £718,000) and divided by 42,577,328 (2020: 42,577,328) Ordinary Shares of 62/3 pence, being the weighted average number of Ordinary Shares in issue during the year.
No dilution to (loss)/earnings per share in the current year or in the prior year.
The calculation of the basic (loss)/earnings per share is based on the following data:
|
| 2021 | 2020 |
|
| £'000 | £'000 |
| (Loss)/earnings for the purpose of basic (loss)/earnings per share |
|
|
| being net (loss)/profit attributable to equity holders of the Parent Company | (258) | 718 |
Number of shares
|
| 2021 | 2020 |
|
| Number | Number |
| Weighted average number of Ordinary Shares for the purposes of basic earnings per share | 42,577,328 | 42,577,328 |
This produced basic loss per share of 0.61 pence (2020: basic earnings per share of 1.69 pence).
17. Goodwill
|
| £'000 |
| Cost |
|
| At 1 April 2019 | 7,056 |
| At 1 April 2020 | 7,056 |
| At 31 March 2021 | 7,056 |
|
|
|
| Accumulated impairment |
|
| At 1 April 2019 | 2,668 |
| At 1 April 2020 | 2,668 |
| Impaired during the year | - |
| At 31 March 2021 | 2,668 |
|
|
|
| Carrying amount |
|
| At 31 March 2021 | 4,388 |
| At 31 March 2020 | 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:
|
| 2021 | 2020 |
|
| £'000 | £'000 |
| London York Fund Managers Limited CGU ("London York") | 2,901 | 2,901 |
| Barker Poland Asset Management LLP CGU ("BPAM") | 1,487 | 1,487 |
|
| 4,388 | 4,388 |
The recoverable amounts of the CGUs have been determined based upon value-in-use calculations for the London York CGU and fair value less costs of disposal for the BPAM CGU.
The London York computation was based on discounted five-year cash flow projections and terminal values. The key assumptions for these calculations are a pre-tax discount rate of 12%, terminal growth rates of 2% and the expected changes to revenues and costs during the five-year projection period based on discussions with senior management, past experience, future expectations in light of anticipated market and economic conditions, comparisons with our peers and widely available economic and market forecasts. The pre-tax discount rate is determined by management based on current market assessments of the time value of money and risks specific to the London York CGU. The base value-in-use cash flows were stress tested for an increase in discount rates to 16% and a 20% fall in net inflows resulting in no impairment.
The discount rate would need to increase to 29% for the London York CGU value-in-use to equal the respective carrying values. Revenues would need to fall by £565,000 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 £5.4 million (2020: £4.7 million) with headroom, after selling costs, of £1.7 million (2020: £0.9 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 30% decrease in BPAM's profit after tax would result in potential impairment of £11,000.
18. Other intangible assets
|
| Software |
|
|
|
| licences | Client lists | Total |
|
| £'000 | £'000 | £'000 |
| Cost |
|
|
|
| At 1 April 2019 | 44 | 10,524 | 10,568 |
| Additions in the year | - | 48 | 48 |
| At 1 April 2020 | 44 | 10,572 | 10,616 |
| Reclassification of software as intangibles* | 2,783 | - | 2,783 |
| Additions in the year | 56 | 93 | 149 |
| At 31 March 2021 | 2,883 | 10,665 | 13,548 |
|
|
|
|
|
| Amortisation |
|
|
|
| At 1 April 2019 | 16 | 3,290 | 3,306 |
| Charge for the year | 9 | 600 | 609 |
| At 1 April 2020 | 25 | 3,890 | 3,915 |
| Reclassification of software as intangibles* | 2,230 | - | 2,230 |
| Charge for the year | 204 | 633 | 837 |
| At 31 March 2021 | 2,459 | 4,523 | 6,982 |
|
|
|
|
|
| Carrying amount |
|
|
|
| At 31 March 2021 | 424 | 6,142 | 6,566 |
| At 31 March 2020 | 19 | 6,682 | 6,701 |
* The cost and accumulated depreci4ation of software assets were reclassified as intangible assets from property, plant and equipment. There was no impact to the Consolidated Income Statement in the current or prior years.
The intangible assets are amortised over their estimated useful lives in order to determine amortisation rates. 'Client lists' are assessed on a client-by-client basis and are amortised over periods of three to twenty years and 'Software 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 equipment | Computer software | Computer hardware | Total |
| Owned fixed assets | £'000 | £'000 | £'000 | £'000 |
| Cost |
|
|
|
|
| 1 April 2019 | 2,734 | 2,568 | 1,359 | 6,661 |
| Disposal of fully depreciated assets | - | (58) | - | (58) |
| Additions | 99 | 283 | 76 | 458 |
| 1 April 2020 | 2,833 | 2,793 | 1,435 | 7,061 |
| Reclassification of assets* | (121) | (10) | 126 | (5) |
| Reclassification of software as intangibles** | - | (2,783) | - | (2,783) |
| Additions | 54 | - | 21 | 75 |
| At 31 March 2021 | 2,766 | - | 1,582 | 4,348 |
|
|
|
|
|
|
| Accumulated depreciation |
|
|
|
|
| 1 April 2019 | 880 | 2,042 | 1,219 | 4,141 |
| Reclassification of depreciation charge on IFRS 16 reclassified assets | - | (6) | - | (6) |
| Charge for the year | 183 | 265 | 148 | 596 |
| 1 April 2020 | 1,063 | 2,301 | 1,367 | 4,731 |
| Reclassification of assets* | 19 | (71) | 47 | (5) |
| Reclassification of software as intangibles** | - | (2,230) | - | (2,230) |
| Charge for the year | 298 | - | 77 | 375 |
| At 31 March 2021 | 1,380 | - | 1,491 | 2,871 |
|
|
|
|
|
|
| Carrying amount |
|
|
|
|
| At 31 March 2021 | 1,386 | - | 91 | 1,477 |
| At 31 March 2020 | 1,770 | 492 | 68 | 2,330 |
* Adjustments were made in the year to reclassify assets more appropriately between asset classes. The net impact of these adjustments in asset costs and accumulated depreciation was nil and did not require changes or corrections to depreciation policy.
** The cost and accumulated depreciation of software assets were reclassified as intangible assets from property, plant and equipment. There was no impact to the Consolidated Income Statement in the current or prior years.
20. Right-of-use assets
|
|
| Computer | Computer |
|
|
| Offices | software | hardware | Total |
|
| £'000 | £'000 | £'000 | £'000 |
| Cost |
|
|
|
|
| 1 April 2020 | 4,601 | 533 | 95 | 5,229 |
| Additions | - | 211 | - | 211 |
| At 31 March 2021 | 4,601 | 744 | 95 | 5,440 |
|
|
|
|
|
|
| Accumulated depreciation |
|
|
|
|
| 1 April 2020 | 660 | 187 | 20 | 867 |
| Charge for the year | 659 | 282 | 20 | 961 |
| At 31 March 2021 | 1,319 | 469 | 40 | 1,828 |
|
|
|
|
|
|
| Carrying amount |
|
|
|
|
| At 31 March 2021 | 3,282 | 275 | 55 | 3,612 |
| At 31 March 2020 | 3,941 | 346 | 75 | 4,362 |
21. Investments - fair value through profit or loss
Non-current asset investments
|
| Investments at fair value through profit or loss | Total |
|
| £'000 | £'000 |
| At 31 March 2019 | 51 | 51 |
| At 31 March 2020 | 51 | 51 |
| Disposals in the period | (11) | (11) |
| Change in value in the period | (3) | (3) |
| At 31 March 2021 | 37 | 37 |
The Group's investments include £37,000 unregulated collective investment scheme ("UCIS") investments held in relation to a number of customer complaints (see note 27 for current provisions made against customer complaints).
Current asset investments
|
| As at | As at |
|
| 31 March | 31 March |
|
| 2021 | 2020 |
|
| £'000 | £'000 |
| Trading investments |
|
|
| Investments - fair value through profit or loss | 920 | 638 |
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 |
|
| £'000 | £'000 | £'000 | £'000 |
| At 31 March 2021 |
|
|
|
|
| Financial assets held at fair value through profit and loss | 920 | - | 37 | 957 |
| At 31 March 2020 |
|
|
|
|
| Financial assets held at fair value through profit and loss | 638 | - | 51 | 689 |
Further IFRS 13 disclosures have not been presented here as the balance represents 1.277% (2020: 1.336%) of total assets. There were no transfers of investments between any of the Levels of hierarchy during the year.
22. Trade and other receivables
|
| 2021 | 2020 |
|
| £'000 | £'000 |
| Amounts falling due within one year: |
|
|
| Due from clients, brokers and recognised stock exchanges at amortised cost | 40,633 | 16,184 |
| Other debtors at amortised cost | 2,447 | 2,380 |
| Prepayments and accrued income | 6,018 | 5,951 |
|
| 49,098 | 24,515 |
23. Cash and cash equivalents
|
| 2021 | 2020 |
|
| £'000 | £'000 |
| Cash deposits held at bank, repayable on demand without penalty | 8,855 | 8,609 |
|
| 8,855 | 8,609 |
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 2021 was £274,145,000 (2020: £305,300,000).
The credit quality of banks holding the Group's cash at 31 March 2021 is analysed below with reference to credit ratings awarded by Fitch.
|
| 2021 | 2020 |
|
| £'000 | £'000 |
| A+ | 5,256 | 5,221 |
| A | - | 1,829 |
| AA- | 3,337 | - |
| A- | 25 | 1,558 |
| Unrated or held in cash | 237 | 1 |
|
| 8,855 | 8,609 |
24. Deferred tax liability
|
|
| Short-term |
|
|
|
| temporary |
|
|
| Capital | differences |
|
|
| allowances | and other | Total |
|
| £'000 | £'000 | £'000 |
| At 1 April 2019 | 13 | (330) | (317) |
| Use of loss brought forward | - | 78 | 78 |
| Debit to the income statement | (78) | (18) | (96) |
| At 1 April 2020 | (65) | (270) | (335) |
| Use of loss brought forward | - | 32 | 32 |
| Debit to the income statement | (59) | (38) | (97) |
| At 31 March 2021 | (124) | (276) | (400) |
Deferred income tax assets are recognised for tax loss carry-forwards to the extent that the realisation of the related tax benefit through future taxable profits is probable. The Group did not recognise deferred income tax assets of £11,000 (2020: £nil) in respect of losses amounting to £58,000 (2020: £nil) that can be carried forward against future taxable income. Losses amounting to £nil (2020: £nil) and £nil (2020: nil) expire in 2020 and 2021, respectively.
25. Financial instruments and risk profile
Financial risk management
Procedures and controls are in place to identify, assess and ultimately control the financial risks faced by the Group arising from its use of financial instruments. Steps are taken to mitigate identified risks with established and effective procedures and controls, efficient systems and the adequate training of staff.
The Group's risk appetite, along with the procedures and controls mentioned above, are laid out in the Group's Internal Capital Adequacy Assessment Process document prepared in accordance with the requirements of the Financial Conduct Authority ("the FCA").
The overall risk appetite for the Group is considered by Management to be low, despite operating in a marketplace where financial risk is inherent in investment management and financial services.
The Group considers its financial risks arising from its use of financial instruments to fall into three main categories:
(i) credit risk;
(ii) liquidity risk; and
(iii) market risk.
Financial risk management is a central part of the Group's strategic management which recognises that an effective risk management programme can increase a business's chances of success and reduce the possibility of failure. Continual assessment, monitoring and updating of procedures and benchmarks are all essential parts of the Group's risk management strategy.
(i) Credit risk management practices
The Group's credit risk is the risk of loss through default by a counterparty and, accordingly, the Group's definition of default is primarily attributable to its trade receivables or pledged collateral which is the risk that a client, market counterparty or recognised stock exchange will be unable to pay amounts to settle a trade in full when due. Other credit risks, such as free delivery of securities or cash, are not deemed to be significant. Significant changes in the economy or a particular sector could result in losses that are different from those that the Group has provided for at the year-end date.
All financial assets at the year-end were assessed for credit impairment and no material amounts have arisen having evaluated the age of overdue debtors, the quality of recourse to third parties and the availability of mitigation through the disposal of liquid collateral in the form of marketable securities. The Group's write-off policy is driven by the historic dearth of instances where material irrecoverable losses have been incurred. Where the avenues of recourse and mitigation outlined above have not been successful, the outstanding balance, or residual balance if sale proceeds do not fully cover an exposure, will be written off.
The Board is responsible for oversight of the Group's credit risk. The Group accepts a limited exposure to credit risk but aims to mitigate and minimise the risk through various methods. There is no material concentrated credit risk as the exposures are spread across a substantial number of clients and counterparties.
Trade receivables (includes settlement balances)
Settlement risk arises in any situation where a payment of cash or transfer of a security is made in the expectation of a corresponding delivery of a security or receipt of cash. Settlement balances arise with clients, market counterparties and recognised stock exchanges.
In the vast majority of cases, control of the stock purchased will remain with the Group until client monetary balances are fully settled.
Where there is an absence of securities collateral, clients are usually required to hold sufficient funds in their managed deposit account prior to the trade being conducted. Holding significant amounts of client money helps the Group to manage credit risks arising with clients. Many of our clients also hold significant amounts of stock and other securities in our nominee subsidiary company, providing additional security should a specific transaction fail to be settled and the proceeds of such securities disposed of can be used to settle all outstanding obligations.
In addition, the client side of settlement balances are normally fully guaranteed by our commission-sharing certified persons who conduct transactions and manage the relationships with our mutual clients.
Exposures to market counterparties also arise in the settlement of trades or when collateral is placed with them to cover open trading positions. Market counterparties are usually other FCA-regulated firms and are considered creditworthy, some reliance being placed on the fact that other regulated firms would be required to meet the stringent capital adequacy requirements of the FCA.
Maximum exposure to credit risk:
|
| 2021 | 2020 |
|
| £'000 | £'000 |
| Cash | 8,855 | 8,609 |
| Trade receivables | 40,633 | 16,184 |
| Other debtors | 2,447 | 2,380 |
| Accrued interest income | 55 | 56 |
|
| 51,990 | 27,229 |
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 2021 | £'000 | £'000 | £'000 | £'000 | £'000 |
| Trade receivables | 39,634 | 932 | 33 | 34 | 40,633 |
| Cash and cash equivalent | 8,855 | - | - | - | 8,855 |
| Other debtors | 2,291 | 2 | 24 | 130 | 2,447 |
| Accrued interest income | 55 | - | - | - | 55 |
|
| 50,835 | 934 | 57 | 164 | 51,990 |
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.
The Group undertakes a daily assessment of credit risk which includes monitoring of client and counterparty exposure and credit limits. New clients are individually assessed for their creditworthiness using external ratings where available and all institutional relationships are monitored at regular intervals.
As at 31 March 2021, the Directors of the Company reviewed and assessed the Group's existing assets for impairment using the IFRS 9 simplified approach to measuring expected credit losses using a lifetime expected credit loss provision for trade receivables and contract assets and no additional impairments have been recognised on application and no material defaults are anticipated within the next twelve months.
Concentration of credit risk
In addition, daily risk management procedures to actively monitor disproportionately large trades by a customer or market counterparty are in place. The financial standing, pattern of trading, type and size of security or instrument traded are amongst the factors taken into consideration.
(ii) Liquidity risk
Liquidity risk is the risk that the Group is unable to meet its payment obligations associated with its financial liabilities when they fall due.
Historically, sufficient underlying cash has been prevalent in the business for many years as the Group is normally cash-generative. The risk of unexpected large cash outflows could arise where large amounts are being settled daily of which only a fraction forms the commission earned by the Group. This could be due to clients settling late or bad deliveries to the market or CREST, also resulting in a payment delay from the market side.
The Group's policy with regard to liquidity risk is to carefully monitor balance sheet structure and borrowing limits, including:
· monitoring of cash positions on a daily basis;
· exercising strict control over the timely settlement of trade debtors; and
· exercising strict control over the timely settlement of market debtors and creditors.
The Group holds its cash and cash equivalents spread across a number of highly rated financial institutions. All cash and cash equivalents are short-term highly liquid investments that are readily convertible to known amounts of cash without penalty.
All the regulated Group subsidiaries are subject to the provisions of FCA Liquidity standards if they are within the scope of the rules in the FCA Handbook chapter IFPRU 7.
The table below analyses the Group's cash outflow based on the remaining period to the contractual maturity date.
|
| Less than |
|
|
| 1 year | Total |
| 2021 | £'000 | £'000 |
| Trade and other payables | 47,395 | 47,395 |
|
| 47,395 | 47,395 |
|
|
|
|
| 2020 |
|
|
| Trade and other payables | 22,750 | 22,750 |
|
| 22,750 | 22,750 |
Future contractual undiscounted cash flows for deferred cash consideration amounts to £46,000, which is within current liabilities, and £33,000, which is within 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 are valued at their realisable values. The Group's financial assets that are classed as current asset and non-current asset investments (fair value through profit or loss) have been revalued at 31 March 2021 using closing market prices.
A 10% fall in global equity markets would, in isolation, result in a pre-tax decrease to net assets of £92,000 (2020: £63,800). A 10% rise would have an equal and opposite effect.
The impact of foreign exchange and interest rate risk is not material and is therefore not presented.
26. Trade and other payables
|
| 2021 | 2020 |
|
| £'000 | £'000 |
| Amounts owed to clients, brokers and recognised stock exchanges | 39,951 | 15,167 |
| Other creditors | 3,059 | 3,548 |
| Contract liability | 28 | 3 |
| Accrued expenses | 4,357 | 4,032 |
|
| 47,395 | 22,750 |
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 14 days (2020: 10 days). The Directors consider that the carrying amount of trade payables approximates to their fair value.
27. Provisions
Provisions included in other current liabilities and long-term liabilities are made up as follows:
|
| Claims/ |
|
|
|
| complaints | Dilapidations | Total |
|
| £'000 | £'000 | £'000 |
| At start of year | 178 | 659 | 837 |
| Additions | 55 | 16 | 71 |
| Utilisation of provision | (28) | - | (28) |
| At 31 March 2021 | 205 | 675 | 880 |
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 £16,000 (including interest) for dilapidations in connection with acquired leasehold premises (2020: total additional provision of £117,000). 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 £675,000.
The Group had six leased properties, all of which had contractual dilapidation requirements. The dilapidation provisions in relation to these leases range from net present values as at the year-end of £10,000 to £530,000 per lease.
28. Lease liabilities
|
|
| Computer | Computer |
|
|
| Offices | software | hardware | Total |
| Lease liabilities | £'000 | £'000 | £'000 | £'000 |
| At 1 April 2020 | 4,209 | 306 | 74 | 4,589 |
| Additions | - | 212 | - | 212 |
| Interest | 123 | 9 | 2 | 134 |
| Lease payments | (846) | (266) | (21) | (1,133) |
| At 31 March 2021 | 3,486 | 261 | 55 | 3,802 |
|
| 2021 | 2020 |
| Lease liabilities profile (statement of financial position) | £'000 | £'000 |
| Amounts due within one year | 946 | 969 |
| Amounts due after more than one year | 2,856 | 3,620 |
|
| 3,802 | 4,589 |
|
| 2021 | 2020 |
| Undiscounted lease maturity analysis | £'000 | £'000 |
| Within one year | 1,069 | 1,099 |
| Between one and two years | 266 | 942 |
| Between two and five years | 3,898 | 2,643 |
| Over five years | 65 | 1,496 |
| Total undiscounted lease liabilities | 5,298 | 6,180 |
29. Called-up share capital
|
| 2021 | 2020 |
|
| £'000 | £'000 |
| Called-up, allotted and fully paid |
|
|
| 43,327,328 (2020: 43,327,328) Ordinary Shares of 62/3p each | 2,888 | 2,888 |
The Group's Articles were amended in 2010 since when there has been no authorised share capital. Shareholders have no restrictions on their holdings except for certain investment managers who were awarded shares in the Group soon after joining as part of the consideration for their client relationships. These holdings cannot be sold for a period of four to six years from commencement date.
The following movements in share capital occurred during the year:
|
|
| Share | Share |
|
|
| Number of | Capital | premium | Total |
|
| shares | £'000 | £'000 | £'000 |
| At 1 April 2020 | 43,327,328 | 2,888 | 3,763 | 6,651 |
| At 31 March 2021 | 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 2021, this totalled £22,322,000 (2020: £22,644,000).
The Group's objectives when managing capital are to:
· safeguard the Group's ability to continue as a going concern so that it can continue to provide returns for shareholders and benefits for other stakeholders;
· maintain a strong capital base to support the development of the business;
· optimise the distribution of capital across the Group's subsidiaries, reflecting the requirements of each company;
· strive to make capital freely transferable across the Group where possible; and
· comply with regulatory requirements at all times.
Walker Crips Group plc is classified for capital purposes as an investment management group and performs an Internal Capital Adequacy Assessment Process ("ICAAP"), which is presented to the FCA on request. Regulatory capital resources for ICAAP purposes are calculated in accordance with published rules. These require certain adjustments to and certain deductions from accounting capital, the latter largely in respect of intangible assets. The ICAAP compares regulatory capital resources against regulatory capital requirements derived using the FCA's Pillar 1 and Pillar 2 methodology.
The Group has adopted the standardised approach to calculating its Pillar 1 credit risk component and the basic indicator approach to calculating its operational risk component. Capital management policy and practices are applied at both Group and entity level.
In addition to a variety of stress tests performed as part of the ICAAP process, and daily reporting in respect of treasury activity, capital levels are monitored and forecast to ensure that dividends and investment requirements are appropriately managed and appropriate buffers are kept against adverse business conditions.
Regulatory capital
No breaches were reported to the FCA during the financial years ended 31 March 2021 and 2020.
Treasury shares
The Group holds 750,000 of its own shares, purchased for total cash consideration of £312,000. In line with the principles of IAS 32 these treasury shares have been deducted from equity (note 30). No gain or loss has been recognised in the income statement in relation to these shares.
30. Reserves
Apart from share capital and share premium, the Group holds reserves at 31 March 2021 under the following categories:
| Own shares held | (£312,000) (2020: (£312,000)) | · the negative balance of the Group's own shares, which have been bought back and held in treasury. |
| Retained earnings | £11,260,000 (2020: £11,582,000) | · the net cumulative earnings of the Group, which have not been paid out as dividends, are retained to be reinvested in our core, or developing, companies. |
| Other reserves | £4,723,000 (2020: £4,723,000) | · the cumulative premium on the issue of shares as deferred consideration for corporate acquisitions £4,612,000 (2020: £4,612,000) and non-distributable reserve into which amounts are transferred following the redemption or purchase the Group's own shares £111,000 (2020: £111,000). |
31. Cash generated by operations
|
| 2021 | 2020 |
|
| £'000 | £'000 |
| Operating profit for the year | 22 | 1,092 |
| Adjustments for: |
|
|
| Amortisation of intangibles | 837 | 609 |
| Changes in the fair value of deferred consideration | 31 | (166) |
| Net change in fair value of financial instruments at fair value through profit or loss* | (362) | 367 |
| Share of associate/joint venture after tax result | (66) | 11 |
| Depreciation of property, plant and equipment | 375 | 590 |
| Depreciation of right-of-use assets | 961 | 867 |
| (Increase)/decrease in debtors** | (24,572) | 11,044 |
| Increase/(decrease) in creditors** | 24,580 | (10,884) |
|
|
|
|
| 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 | 1,806 | 3,483 |
* Revaluation (profit)/loss on proprietary positions.
** £8,000 cash inflow from working capital movement (2020: £160,000).
32. Financial commitments
Capital commitments
At the end of the year, there were capital commitments of £nil (2020: £nil) contracted but not provided for and £nil (2020: £nil) capital commitments authorised but not contracted for.
33. Related parties
Directors and their close family members have dealt on standard commercial terms with the Group. The commission and fees earned by the Group included in revenue through such dealings is as follows:
|
| 2021 | 2020 |
|
| £'000 | £'000 |
| Commission and fees received from Directors and their close family members | 15 | 14 |
Other related parties include Charles Russell Speechlys, of which M. J. Wright, Chairman, is a Partner. Charles Russell Speechlys provides certain legal services to the Group on normal commercial terms and the amount paid and expensed during the year (including the fees paid to the firm for Mr. Wright's services as Director) was £154,000 (2020: £84,000).
Commission of £7,587 (2020: £4,746) 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 below.
|
| 2021 | 2020 |
|
| £'000 | £'000 |
| Key management personnel compensation |
|
|
| Short-term employee benefits | 432 | 446 |
| Post-employment benefits | 31 | 34 |
| Share-based payment | - | 7 |
|
| 463 | 487 |
34. Contingent liability
From time to time, the Group receives complaints or undertakes past business reviews, the outcomes of which remain uncertain and/or cannot be reliably quantified based upon information available and circumstances falling outside the Group's control. Accordingly contingent liabilities arise, the ultimate impact of which may also depend upon availability of recoveries under the Group's indemnity insurance and other contractual arrangements. Other than the complaints deemed to be probable, the Directors presently consider a negative outcome to be remote or a reliable estimate of the amount of a possible obligation cannot be made. As a result, no disclosure has been made in these financial statements.
35. Subsequent events
There are no material events arising after 31 March 2021, which have an impact on these financial statements.
36. Long-term liabilities - deferred cash consideration
|
| 2021 | 2020 |
|
| £'000 | £'000 |
| Amounts due to personnel under recruitment contracts/acquisition agreements | 33 | 15 |
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. During the year, deferred consideration of £46,000 was reclassified within other creditors in current liabilities. This liability was a long-term liability of £15,000 in the prior year and was reassessed to a current liability of £46,000 in the current year.
Company balance sheet
as at 31 March 2021
|
|
| 2021 | 2020 |
|
| Note | £'000 | £'000 |
| Non-current assets |
|
|
|
| Other intangible assets | 41 | 3,215 | 3,556 |
| Property, plant and equipment | 40 | 856 | 1,420 |
| Investments measured at cost less impairment | 42 | 17,775 | 17,425 |
|
|
| 21,846 | 22,401 |
| Current assets |
|
|
|
| Trade and other receivables | 43 | 759 | 737 |
| Deferred tax asset | 44 | 74 | 179 |
| Cash and cash equivalents |
| 359 | 141 |
|
|
| 1,192 | 1,057 |
| Total assets |
| 23,038 | 23,458 |
|
|
|
|
|
| Current liabilities |
|
|
|
| Trade and other payables | 45 | (3,162) | (2,363) |
|
|
| (3,162) | (2,363) |
| Net current liabilities |
| (1,970) | (1,306) |
|
|
|
|
|
| Long-term liabilities |
|
|
|
| Deferred cash consideration | 48 | - | (15) |
| Dilapidation provisions | 48 | - | (554) |
| Landlord contribution to leasehold improvements | 48 | (335) | (398) |
|
|
| (335) | (967) |
| Net assets |
| 19,541 | 20,128 |
|
|
|
|
|
| Equity |
|
|
|
| Share capital | 47 | 2,888 | 2,888 |
| Share premium account | 47 | 3,763 | 3,763 |
| Own shares | 47 | (312) | (312) |
| Retained earnings | 47 | 8,479 | 9,066 |
| Other reserves | 47 | 4,723 | 4,723 |
| Equity attributable to equity holders of the Company |
| 19,541 | 20,128 |
As permitted by section 408 of the Companies Act 2006 the Parent Company has elected not to present its own profit and loss account for the year. Walker Crips Group plc reported an after-tax loss for the financial year of £523,000 (2020: £328,000).
The financial statements of Walker Crips Group plc (Company registration no: 01432059) were approved by the Board of Directors and authorised for issue on 20 August 2021.
Signed on behalf of the Board of Directors:
S. S. Dandeniya FCCA
Director
Company statement of changes in equity
year ended 31 March 2021
| | Called up | Share | Own | | | |
| | share | premium | shares | | Retained | Total |
| | capital | account | held | Other | earnings | equity |
| | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 |
| Equity as at 31 March 2019 | 2,888 | 3,763 | (312) | 4,723 | 9,790 | 20,852 |
| Total comprehensive loss 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 |
| Total comprehensive loss for the period | - | - | - | - | (523) | (523) |
| Contributions by and distributions to owners |
|
|
|
|
|
|
| Dividends paid | - | - | - | - | (64) | (64) |
| Total contributions by and distributions to owners | - | - | - | - | (64) | (64) |
| Equity as at 31 March 2021 | 2,888 | 3,763 | (312) | 4,723 | 8,479 | 19,541 |
Notes to the Company accounts
year ended 31 March 2021
37. Significant accounting policies
The separate financial statements of Walker Crips Group plc, the Parent Company, are presented as required by the Companies Act 2006.
The financial statements have been prepared under the historical cost convention except for the modification to a fair value basis for certain financial instruments as specified in the accounting policies below, and in accordance with Financial Reporting Standard (FRS 102), the Financial Reporting Standard applicable in the UK and the Republic of Ireland, and the Companies Act 2006.
The preparation of financial statements in compliance with FRS 102 requires the use of certain critical accounting estimates. It also requires Management to exercise judgement in applying the Parent Company's accounting policies (see note 38).
The financial statements are presented in the currency of the primary activities of the Parent Company (its functional currency). For the purpose of the financial statements, the results and financial position are presented in Sterling (£). The principal accounting policies have been summarised below. They have all been applied consistently throughout the year and the preceding year.
The Parent Company has chosen to adopt the disclosure exemption in relation to the preparation of a cash flow statement under FRS 102.
Going concern
After conducting enquiries, the Directors believe that the Parent Company has adequate resources to continue in existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the financial statements. The Parent Company's business activities, together with the factors likely to affect its future development, performance and position, has been rigorously assessed.
Property, plant and equipment
Fixtures and equipment are stated at historical cost less accumulated depreciation and provision for any impairment. Depreciation is charged so as to write-off the cost or valuation of assets over their estimated useful lives using the straight-line method on the following bases:
Computer hardware 331/3% per annum on cost
Computer software between 20% and 331/3% per annum on cost
Leasehold improvements over the term of the lease
Furniture and equipment 33 1/3% per annum on cost
The gain or loss on the disposal or retirement of an asset is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in income. The residual values and estimated useful life of items within property, plant and equipment are reviewed at least at each financial year end. Any shortfalls in carrying value are impaired immediately through profit or loss.
Intangible assets
Client lists
Client lists are recognised when it is probable that future economic benefits will flow to the Parent Company and the cost of the asset can be measured reliably whilst the risk and rewards have also transferred into the Parent Company's ownership.
Intangible assets classified as client lists are recognised when acquired as part of a business combination or when separate payments are made to acquire clients' assets by adding teams of investment managers.
The cost of acquired client lists and businesses generating revenue from clients and investment managers are capitalised. These costs are amortised on a straight-line basis over their expected useful lives of three to twenty years. The amortisation period and amortisation method for intangible assets are reviewed at least each financial year end. All intangible assets have a finite useful life.
Impairment of non-financial assets
At each reporting date, the Parent Company reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). If there is an indication of possible impairment, the recoverable amount of any affected asset (or group of related assets) is estimated and compared with its carrying amount. If the estimated recoverable amount is lower, the carrying amount is reduced to its estimated recoverable amount, and an impairment loss is recognised immediately in profit or loss.
Taxation
The tax expense represents the sum of the tax currently payable and any deferred tax.
Current tax, including UK corporation tax and foreign tax, is provided at amounts expected to be paid or recovered using the tax rates and laws that have been enacted or substantively enacted by the balance sheet date. Current tax charges arising on the realisation of revaluation gains recognised in the statement of comprehensive income are also recorded in this statement.
Deferred tax is recognised in respect of all timing differences that have originated but not reversed at the balance sheet date where transactions or events that result in an obligation to pay more tax in the future or a right to pay less tax in the future have occurred at the balance sheet date.
A deferred tax asset is regarded as recoverable and therefore recognised only when, on the basis of all available evidence, it can be regarded as probable that there will be suitable taxable profits from which the future reversal of the underlying timing differences can be deducted. Deferred tax assets and liabilities are not discounted.
Own shares held
Own shares consist of treasury shares which are recognised at cost as a deduction from equity shareholders' funds. Subsequent consideration received for the sale of treasury shares is also recognised in equity with any difference being taken to retained earnings. No gain or loss is recognised on sale of treasury shares.
Financial instruments
Financial assets and financial liabilities are recognised in the balance sheet when the Parent Company becomes a party to the contractual provisions of the instrument. Section 11 of FRS 102 has been applied in classifying financial instruments depending on the nature of the instrument held.
Revenue
Income consists of interest received or accrued over time and dividend income recorded when received.
Investments in subsidiaries
Investments in subsidiaries are stated at cost less, where appropriate, provisions for impairment.
Debtors
Other debtors are classified as basic financial instruments and measured at initial recognition at transaction price. Debtors are subsequently measured at amortised cost using the effective interest rate method. A provision is established when there is objective evidence that the Group will not be able to collect all amounts due.
Cash and cash equivalents
Cash and cash equivalents comprise cash in hand and demand deposits, together with other short-term highly liquid investments, which are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value.
Financial liabilities and equity
Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the Parent Company after deducting all of its liabilities. Equity instruments issued by the Parent Company are recorded at the proceeds received, net of direct issue costs.
Leases
Rentals under operating leases are charged on a straight-line basis over the lease term even if the payments are not made on such a basis. Benefits received as an incentive to enter into an operating lease are also spread on a straight-line basis over the lease term.
38. Key sources of estimation uncertainty and judgements
The preparation of financial statements in conformity with generally accepted accounting practice requires Management to make estimates and judgements that affect the reported amounts of assets and liabilities as well as the disclosure of contingent assets and liabilities at the balance sheet date and the reported amounts of revenues and expenses during the reporting period.
Intangible assets
Acquired client lists are capitalised based on current fair values. By assessing the historic rates of client retention, the ages and succession plans of the investment managers who manage the clients and the contractual incentives of the investment managers, the Directors consider a life of up to twenty years to be both appropriate and in line with our peers. There were no acquisitions made in the period to 31 March 2021. Additions in the period relate to existing client lists and are disclosed in note 41.
39. Loss for the year
Loss for the financial year of £523,000 (2020: £328,000) is after an amount of £57,000 (2020: £60,000) 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:
|
| 2021 | 2020 |
|
| £'000 | £'000 |
| Employee costs during the year amounted to: |
|
|
| Wages and salaries | 147 | 170 |
| Social security costs | 12 | 14 |
| Other costs | 3 | 4 |
|
| 162 | 188 |
In the current year, employee costs are those of the Non-Executive Directors, a proportion of Executive Directors and the cost of the Group's profit share scheme. The remaining Executive Directors Employee costs are borne by Walker Crips Investment Management Limited.
The monthly average number of staff employed during the year was:
|
| 2021 | 2020 |
|
| Number | Number |
| Executive Directors | 2 | 2 |
| Non-Executive Directors | 4 | 4 |
|
| 6 | 6 |
40. Property, plant and equipment
|
| Leasehold |
|
|
|
| improvements, |
|
|
|
| furniture and | Computer |
|
|
| equipment | software | Total |
|
| £'000 | £'000 | £'000 |
| Cost |
|
|
|
| At 1 April 2020 | 2,192 | 858 | 3,050 |
| Asset transfers on 1 April 2020 * | (518) | - | (518) |
| At 31 March 2021 | 1,674 | 858 | 2,532 |
|
|
|
|
|
| Amortisation |
|
|
|
| At 1 April 2020 | 772 | 858 | 1,630 |
| Asset transfers on 1 April 2020 * | (106) | - | (106) |
| Charge for the year | 152 | - | 152 |
| At 31 March 2021 | 818 | 858 | 1,676 |
|
|
|
|
|
| Net book value |
|
|
|
| At 31 March 2021 | 856 | - | 856 |
| At 31 March 2020 | 1,420 | - | 1,420 |
* The cost and accumulated depreciation of leasehold property dilapidation assets and liabilities were transferred on 1 April 2020 to subsidiary Walker Crips Investment Management Limited to reflect the real obligation of the subsidiary to pay for the future works. The adjustment had no impact on the financial performance or position of the Group, in the current year or prior periods, due to the fact that Walker Crips Investment Management Limited is a wholly owned subsidiary.
41. Other intangible assets
|
| Client lists | Total |
|
| £'000 | £'000 |
| Cost |
|
|
| At 1 April 2020 | 5,076 | 5,076 |
| At 31 March 2021 | 5,076 | 5,076 |
|
|
|
|
| Amortisation |
|
|
| At 1 April 2020 | 1,520 | 1,520 |
| Charge for the year | 341 | 341 |
| At 31 March 2021 | 1,861 | 1,861 |
|
|
|
|
| Net book value |
|
|
| At 31 March 2021 | 3,215 | 3,215 |
| At 31 March 2020 | 3,556 | 3,556 |
42. Investments measured at cost less impairment
|
| 2021 | 2020 |
|
| £'000 | £'000 |
| Subsidiary undertakings | 17,775 | 17,425 |
During the year, the Company subscribed to a further 349,999 new shares in its subsidiary EnOC Technologies Limited, a 100% owned subsidiary, for consideration of £349,999.
A complete list of subsidiary undertakings can be found in note 53.
43. Trade and other receivables
|
| 2021 | 2020 |
|
| £'000 | £'000 |
| Amounts owed by group undertakings | 751 | 436 |
| Prepayments and accrued income | 8 | 8 |
| Other debtors | - | 293 |
|
| 759 | 737 |
A presentational change was made in this note to exclude the deferred tax asset from this grouping and to present it in its own line on the face of the statement of financial position. The deferred tax asset is presented separately in note 44.
44. Deferred taxation
|
| 2021 | 2020 |
|
| £'000 | £'000 |
| At 1 April | 179 | 224 |
| Use of Group Relief | (40) | (86) |
| (Charge)/credit to the income statement | (65) | 41 |
| At 31 March | 74 | 179 |
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% (2020: 19%).
In the Spring Budget 2021, the Government announced that from 1 April 2023, the UK corporation tax rate will increase from 19% to 25%. This will have a consequential effect on the Company's future tax charge.
45. Trade and other payables
|
| 2021 | 2020 |
|
| £'000 | £'000 |
| Accruals and deferred income | 142 | 99 |
| Amounts due to subsidiary undertakings | 2,730 | 2,195 |
| Other creditors | 290 | 69 |
|
| 3,162 | 2,363 |
46. Risk management policies
Procedures and controls are in place to identify, assess and ultimately control the financial risks faced by the Parent Company arising from its use of financial instruments. Steps are taken to mitigate identified risks with established and effective procedures and controls, efficient systems and the adequate training of staff.
The Parent Company's risk appetite, along with the procedures and controls mentioned above, are laid out in the Group's Internal Capital Adequacy Assessment Process document prepared in accordance with the requirements of the Financial Conduct Authority ("FCA").
The overall risk appetite for the Parent Company and for the Group as a whole is considered by Management to be low, despite operating in a market-place where financial risk is inherent in the core businesses of investment management and financial services.
The Group considers its financial risks arising from its use of financial instruments to fall into three main categories:
(i) credit risk;
(ii) liquidity risk; and
(iii) market risk.
Further information on the disclosures and policies carried out by the Parent Company and the Group are made in note 25 of the consolidated financial statements.
(i) Credit risk
Maximum exposure to credit risk:
|
| 2021 | 2020 |
|
| £'000 | £'000 |
| Cash | 359 | 141 |
| Other debtors | - | 293 |
| As at 31 March | 359 | 434 |
The credit quality of banks holding the Group's cash at 31 March 2021 is analysed below with reference to credit ratings awarded by Fitch.
|
| 2021 | 2020 |
|
| £'000 | £'000 |
| A | - | 11 |
| A+ | 359 | - |
| AA- | - | 130 |
| As at 31 March | 359 | 141 |
Analysis of other debtors due from financial institutions:
|
|
| 2021 | 2020 |
|
|
| £'000 | £'000 |
| Neither past due, nor impaired |
| - | 293 |
|
|
|
|
|
| Amounts past due, but not impaired | < 30 Days | - | - |
|
| > 30 Days | - | - |
|
| > 3 months | - | - |
|
|
| - | 293 |
(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:
|
| 2021 | 2020 |
|
| £'000 | £'000 |
| Creditors due within one year | 3,162 | 2,363 |
| Creditors due after more than one year | - | 569 |
| As at 31 March | 3,162 | 2,932 |
|
| 2021 | 2020 |
|
| £'000 | £'000 |
| Within one year | 3,162 | 2,363 |
| Within two to five years | - | 15 |
| After more than five years | - | 554 |
| As at 31 March | 3,162 | 2,932 |
(iii) Market risk
Market risk is the risk that changes in market prices such as foreign exchange rates or equity prices will affect the Group's income.
These relate to price risk breached on available-for-sale and trading investments and closely monitored using limits to prevent significant losses.
Fair value of financial instruments
No financial instruments at fair value were held by the Parent Company in the current or prior financial year.
47. Called-up share capital
|
| 2021 | 2020 |
|
| £'000 | £'000 |
| Called-up, allotted and fully paid |
|
|
| 43,327,328 (2020: 43,327,328) Ordinary Shares of 62/3p each | 2,888 | 2,888 |
No new shares were issued in the year to 31 March 2021 or the prior year.
The Parent Company holds 750,000 of its own shares, purchased for a total cash consideration of £312,000. 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 | £'000 | £'000 | £'000 |
| At 1 April 2020 | 43,327,328 | 2,888 | 3,763 | 6,651 |
| At 31 March 2021 | 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 2021 under the following categories:
| Own shares held | (£312,000) (2020: (£312,000)) | · the negative balance of the Parent Company's own shares that have been bought back and held in treasury. |
| Retained earnings | £8,479,000 (2020: £9,066,000) | · 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 | £4,723,000 (2020: £4,723,000) | · the cumulative premium on the issue of shares as deferred consideration for corporate acquisitions £4,612,000 (2020: £4,612,000) and non-distributable reserve into which amounts are transferred following the redemption or purchase the Group's own shares £111,000 (2020: £111,000). |
48. Creditors: amounts falling due after more than one year
|
| 2021 | 2020 |
|
| £'000 | £'000 |
| Dilapidation provision | - | 554 |
| Landlord contribution to leasehold improvements | 335 | 398 |
| Deferred cash consideration | - | 15 |
|
| 335 | 967 |
The cost and accumulated depreciation of leasehold property dilapidation assets and liabilities were transferred on 1 April 2020 to subsidiary Walker Crips Investment Management Limited to reflect the real obligation of the subsidiary to pay for the future works. The adjustment had no impact on the financial performance or position of the Group, in the current year or prior periods, due to the fact that Walker Crips Investment Management Limited is a wholly owned subsidiary.
During the year, deferred consideration of £46,000 was reclassified within other creditors in current liabilities. This liability was a long-term liability of £15,000 in the prior year and was reassessed to a current liability of £46,000 in the current year.
49. Financial commitments
Capital commitments
At the end of the year, there were capital commitments of £nil (2020: £nil) contracted but not provided for and £nil (2020: £nil) capital commitments authorised but not contracted for.
Lease commitments
The annual commitments under non-cancellable operating leases fall due as follows:
|
| 2021 | 2020 |
|
| £'000 | £'000 |
| Within one year | - | 765 |
| Within two to five years | - | 2,616 |
| More than five years | - | 1,390 |
As part of a review of Group-wide assets and lease commitments, it was the view of the Directors that the lease commitments previously disclosed in this Company in fact belong in the Company's subsidiary Walker Crips Investment Management Limited. This is reflected in the individual company accounts of the subsidiary. The resulting adjustment to this disclosure has had no impact on profit or loss in either entity.
50. Related party transactions
Key Management are those persons having authority and responsibility for planning, controlling and directing the activities of the Parent Company and Group. In the opinion of the Board, the Parent Company and Group's key Management are the Directors of Walker Crips Group plc.
Total compensation to key management personnel is £463,000 (2020: £487,000).
51. Contingent liability
From time to time, the Company receives complaints or undertakes past business reviews, the outcomes of which remain uncertain and/or cannot be reliably quantified based upon information available and circumstances falling outside the Company's control. Accordingly contingent liabilities arise, the ultimate impact of which may also depend upon availability of recoveries under the Company's indemnity insurance and other contractual arrangements. Other than the complaints deemed to be probable, the Directors presently consider a negative outcome to be remote or a reliable estimate of the amount of a possible obligation cannot be made. As a result, no disclosure has been made in these financial statements.
52. Subsequent events
There are no material events arising after 31 March 2021, which have an impact on these financial statements.
53. Subsidiaries and associates
|
| Principal place |
| Class and percentage |
|
| of business | Principal activity | of shares held |
| Group |
|
|
|
| Trading subsidiaries |
|
|
|
| Walker Crips Investment Management Limited1 | United Kingdom | Investment management | Ordinary Shares 100% |
| London York Fund Managers Limited3 | United Kingdom | Management services | Ordinary Shares 100% |
| Walker Crips Wealth Management Limited3 | United Kingdom | Financial services advice | Ordinary Shares 100% |
| Ebor Trustees Limited3 | United Kingdom | Pensions management | Ordinary Shares 100% |
| EnOC Technologies Limited1 | United Kingdom | Financial regulation and other software | Ordinary Shares 100% |
| Barker Poland Asset Management LLP1 | United Kingdom | Investment management | Membership 100% |
|
|
|
|
|
| Non-trading subsidiaries |
|
|
|
| Walker Crips Financial Services Limited1 | United Kingdom | Financial services | Ordinary Shares 100% |
| G & E Investment Services Limited3 | United Kingdom | Holding company | Ordinary Shares 100% |
| Ebor Pensions Management Limited3 | United Kingdom | Dormant company | Ordinary Shares 100% |
| Investorlink Limited1 | United Kingdom | Agency stockbroking | Ordinary Shares 100% |
| Walker Cambria Limited1 | United Kingdom | Dormant company | Ordinary Shares 100% |
| Walker Crips Trustees Limited1 | United Kingdom | Dormant company | Ordinary Shares 100% |
| W.B. Nominees Limited2 | United Kingdom | Nominee company | Ordinary Shares 100% |
| WCWB (PEP) Nominees Limited2 | United Kingdom | Nominee company | Ordinary Shares 100% |
| WCWB (ISA) Nominees Limited2 | United Kingdom | Nominee company | Ordinary Shares 100% |
| WCWB Nominees Limited2 | United Kingdom | Nominee company | Ordinary Shares 100% |
| Walker Crips Consultants Limited1 | United Kingdom | Dormant company | Ordinary Shares 100% |
| Walker Crips Ventures Limited3 | United Kingdom | Financial services advice | Ordinary Shares 100% |
|
|
|
|
|
| Associate |
|
|
|
| Walker Crips Property Income Limited1 | United Kingdom | Holding company | Ordinary Shares 33.3% |
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.
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