The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014 (MAR) as in force in the United Kingdom pursuant to the European Union (Withdrawal) Act 2018. Upon the publication of this announcement via Regulatory Information Service (RIS), this inside information is now considered to be in the public domain.
WH Ireland Group Plc
("WH Ireland" or the "Company" and with its subsidiaries the "Group")
Financial Results for the Twelve Months ended 31 March 2023
Notice of AGM
WH Ireland announces its final results for the year ended 31 March 2023.
Financial & Operating Highlights
· Revenue of £26.7m (FY 2022: £32.0m)
· Underlying* loss before tax £2.0m (FY 2022: underlying profit before tax of £1.4m)
· Statutory loss before tax £1.8m (FY 2022: profit before tax £0.1m) reflecting impact of:
o Substantial fall in revenue as above
o Significant reduction in administration expenses to £27.6m (FY 2022: £33.1m)
o Loss on investments of £2.7m (FY 2022: profit of £1.6m)
o Significant VAT rebate in Wealth Management of £2.2m (FY 2022: nil)
· Loss per share (basic) of 3.29p (FY 2022: profit of 0.13p)
· Cash and cash equivalents as at 31 March 2023 of £4.2m (FY 2022: £6.4m)
o Cash and cash equivalents of £7.8m as at 22 September 2023, ahead of the receipt of quarterly recurring cash from the Company's platform providers (anticipated to be c. £2.5m), due imminently
· Group Assets under Management ("AUM") of £2.1bn (FY 2022: £2.4bn)
*A reconciliation from underlying profits to statutory profits is shown within the financial review on page 8.
Divisional Highlights
Wealth Management:
· Revenue of £14.4m (FY 2022: £15.8m), principally reflecting a fall in commission income
· Returned to profitability during the year on an underlying and statutory basis
· Continued improvement in the quality of the business with fee income now representing 89% of total wealth management income (FY 2022: 85%)
· Discretionary managed assets ("DFM") at £1.00bn (FY2022: £1.02bn)
· Wealth Management total AUM at £1.4bn (FY2022: £1.6bn)
Capital Markets:
· Revenue of £12.2m (FY 2022: £16.2m) reflecting significant reduction in transaction fees, and despite increase in retainer fees and commissions & trading income
· £111m funds raised for public and private corporate clients (FY 2022: £236m)
· Total equity transactions 25 (FY 2022: 38) reflecting very challenging AIM market conditions
· Won 18 new quoted corporate clients to end the year with 90 quoted corporate clients (FY 2022: 88)
· Retained strong position as a top AIM broker: top three ranking as corporate broker and top five as NOMAD
· Ultra High Net Worth and Family Office AUM of £0.7bn (FY 2022: £0.7bn)
Current Trading and Outlook
· Challenging first half due to the continuing very difficult market backdrop
· Successful £5m placing completed in August 2023 to restore regulatory capital position
· Successful cost reduction exercise completed in September 2023 to reduce annualised costs by c.£3.8m
· Stable platform to navigate challenging markets and to take advantage of better market conditions in future
Commenting, Phillip Wale, Chief Executive Officer said:
"The market backdrop has been extremely challenging. While the FTSE 100 was relatively resilient compared with overseas exchanges, the AIM market fell 22% over the period and this severely impacted transactional business (and particularly fundraisings) in our Capital Markets business.
"Following the fundraise in July, we have a stable platform to navigate challenging markets and to take advantage of better market conditions in future. After significant first half losses, the completion of our cost reduction programme gives us the opportunity of returning to a break-even position in the remainder of the financial year."
Annual General Meeting
The Company confirms that it will today post to shareholders the annual report and accounts for the period ended 31 March 2023, and a notice convening the annual general meeting of the Company. A copy of the annual report and accounts along with the notice of AGM is available on the Company's website www.whirelandplc.com. The Annual General Meeting of the Company will be held at the Company's offices at 24 Martin Lane, London EC4R 0DR on 24 October 2023 at 10.00 a.m.
For further information please contact:
| WH Ireland Group plc | |
| Phillip Wale, Chief Executive Officer | +44(0) 20 7220 1666 |
| Canaccord Genuity Limited | |
| Emma Gabriel / Harry Rees | +44(0) 20 3523 8000 |
| MHP Communications | |
| Reg Hoare / Charles Hirst | +44 (0) 20 3128 8193 |
Notes to Editors:
About WH Ireland Group plc
Wealth Management Division
WH Ireland provides independent financial planning advice and discretionary investment management. Our goal is to build long term, mutually beneficial, working relationships with our clients so that they can make informed & effective choices about their money and how it can support their lifestyle ambitions. We help clients to build a long term financial plan and investment strategy for them and their families.
Capital Markets Division
Our Capital Markets Division is specifically focused on the public and private growth company marketplace. The team's significant experience in this exciting segment means that we are able to provide a specialist service to each of its respective participants. For companies, we raise public and private growth capital, as well as providing both day-to-day and strategic corporate advice. Our tailored approach means that our teams engage with all of the key investor groups active in our market - High Net Worth Individuals, Family Offices, Wealth Managers and Funds. Our broking, trading and research teams provide the link between growth companies and this broad investor base.
Chief Executive's statement
Phillip Wale, Chief Executive's statement
Market backdrop
The market backdrop has been extremely challenging. While the FTSE 100 has been relatively resilient compared with overseas exchange, the AIM All Share Index fell 22% over the period. These market conditions severely impacted transactional business (and particularly fundraisings) in our Capital Markets Divisions.
The Financial Year 2023
Overall revenue fell 17% from the previous year from £32.0m to £26.7m, but we also reduced administrative expenses by 17% from £33.1m to £27.6m. However in the previous financial year we had benefited from gains on investments (£1.6m), principally warrants or equity received in partial payment of fees. Many of these investments are in smaller companies, and the reversal in markets during the year saw a loss on investments of £2.7m. While we benefitted from significant VAT rebates during the year of £2.2m, this led to a loss overall for the business of £1.8m.
In October 2022, in response to continuingly poor market conditions the Board engaged external corporate advisors to assist in a review of the strategy for the group. As a result of this review the Board actively explored asset sales of parts of the business.
Following the end of the period under review, the Group announced in July 2023, it had conditionally raised £5m through a placing of shares in the Company. The placing with both new and existing shareholders was approved by shareholders on 15 August 2023 (see note 33 for further details).
At the same time, the Group also commenced a cost reduction exercise, the benefit of which is expected to take effect from Q3 of Financial Year ending 31 March 2024. The Directors believe the recent placing and the cost reduction exercise gives the Group an improved chance of returning to a break-even position and securing the future of the Group.
Clients
Our clients remain our priority and our central mission is to continue to provide excellent and improved service to our corporate, institutional and private clients. I would like to take the opportunity to thank all of our clients for their loyalty and flexibility as we have continued to introduce change and improvements during another year of challenges.
Employees
We have kept tight controls on costs throughout the year and finished the year with 159 employees against 158 at the start of the period. A further fall in headcount is expected after the year end following the cost reduction exercise.
On behalf of the Board, I would like to express our appreciation for the continuing hard work and loyalty of employees throughout a difficult period.
Shareholders
I would like to thank our shareholders for their continuing support and welcome the new investors who joined in our most recent placing in July 2023.
Wealth Management (WM)
WM income was more resilient, but market falls still led to a reduction of assets under management from £1.6bn to £1.4bn. This was the principal reason for a fall in revenue of 9% (from £15.8m to £14.4m). However we also acted to reduce costs, including the closure of our Cardiff office, and WM recorded a small profit for the year, after receipt of the VAT rebate.
Capital Markets (CM)
CM revenue is derived from retainer income, earned from our role as NOMAD or broker to clients, and transactional income. While retainer income held up well, and we finished the year with 90 clients, against 88 at the beginning of the period, transactional income was severely hit, with a particularly sharp fall in corporate fundraisings. This led to an overall drop in CM revenue of 25%, from £16.2m to £12.2m.
Looking forward
Following the July fundraise after the year-end and together with the implementation of our cost reduction programme, we believe the Group has an improved chance of returning to a break-even position.
Financial review
Overview
The WH Ireland Group consists of a principal operating subsidiary, WH Ireland Limited.
WH Ireland Limited consists of two business divisions: Wealth Management (WM), which provides investment management solutions and financial advisory services to retail clients and Capital Markets (CM) which provides a range of services to both public and private companies, including day to day regulatory and strategic corporate advice, institutional sales and broking services; and the production of equity research. It also provides trading services to Funds, High Net worth individuals and Family Offices.
Total assets managed by the Group are £2.1bn (FY22: £2.4bn). Of this total, £1.4bn (FY22: £1.6bn) is held in WM with a further £0.7bn (FY22: £0.7bn) within CM's Ultra High Net Worth business.
The Group's income is derived from activities conducted in the UK with a number of retail, high net worth, ultra-high net worth, institutional and corporate clients.
The average Group headcount for the year was 163 (FY22: 158) in the UK.
Strategy summary
Following the fundraise that took place after the year ended 31 March 2023 (see note 33 for further details), the Group's aim is to increase the value of discretionary assets under management in WM. We also aim to continue to service our new and existing corporate client list in CM, whilst sourcing new transactional activity utilising our strong distribution capability in public and private markets.
Group financial results summary
|
| Year to 31 Mar 2023 £'000 | Year to 31 Mar 2022 £'000 |
| Revenue | 26,688 | 32,035 |
| Administrative expenses | (27,550) | (33,062) |
| Expected credit loss | (239) | (81) |
| Operating loss | (1,101) | (1,108) |
| |
| |
| Net (loss) / gains on investments | (2,683) | 1,626 |
| Finance income | 10 | 1 |
| Finance expense | (224) | (511) |
| Other income | 2,175 | - |
| (Loss) / profit before tax | (1,823) | 8 |
| Taxation | (121) | 67 |
| (Loss) /profit and total comprehensive income for the year | (1,944) | 75 |
Reconciliation between underlying and statutory profits
Underlying profit before tax is considered by the Board to be an accurate reflection of the Group's performance when compared to the statutory results, as this excludes income and expense categories which are deemed of a non-recurring nature or non-cash operating item. Reporting at an underlying level is also considered appropriate for external analyst coverage and peer group benchmarking. A reconciliation between underlying and statutory profit before tax for the year ended 31 March 2023 with comparative is shown below:
|
| Year to 31 Mar 2023 £'000 | Year to 31 Mar 2022 £'000 | |||
| Underlying (loss) / profit before tax | (1,987) | 1,397 | |||
| Acquisition related items |
| | |||
| - Deal structuring and integration costs | - | (446) | |||
| Amortisation of acquired brand and client relationships | (496) | (505) | |||
| Changes in fair value and finance cost of deferred consideration | (173) | (416) | |||
| Restructuring costs | - | (835) | |||
| Other income | 1,957 | - | |||
| Net changes in the value of non-current investments | (1,124) | 813 | |||
| Total underlying adjustments | 164 | (1,389) | |||
| |
| | |||
| Statutory (loss) / profit before tax | (1,823) | 8 | |||
| Underlying earnings per share |
| |
| ||
| Weighted average number of shares in issue during the period (note 12) | 59,206 | 59,692 |
| ||
| Basic underlying earnings per share | (3.36p) | 2.34p |
| ||
These represent costs incurred in relation to the acquisition of Harpsden and include the integration and retention costs of staff and the costs of the transfer of assets on to the SEI operating platform.
These intangible assets are created in the course of acquiring funds under management and are amortised over their useful life which have been assessed between two to 12 years. This charge has been excluded from underlying profit as it is a significant non-cash item.
This comprises the fair value measurement arising on the deferred consideration payments from acquisitions together with the associated finance costs from the unwinding of the present value discount relating to the Harpsden acquisition.
These costs relate to the restructuring costs within both WM and CM and the resultant costs of redundancies of staff in the London office arising from the closure of the Cardiff office.
During the year the Group received a refund of £2.2m from HMRC. This was following confirmation from HMRC that the supply of certain Group services were exempt from VAT during the period from 2017 to 2022. This is presented net of commission payable to third parties of £218k.
As part of the fee arrangement with corporate clients in CM, there is often a grant of warrants over shares or the issue of actual shares in addition to the cash element of the fee. The value of such warrants and shares are credited to revenue on the date of the fee note and then any changes in the valuation are recorded as net gains or losses. In view of the nature of these gains or losses, including non-cash, these gains or losses have been excluded from underlying profit. Corresponding commission payable of £1,559k on the gain or loss of these warrants are included in the net changes above.
Revenue
The Wealth Management Division incorporates both investment management services and financial planning advice from offices in London, Manchester, Poole and Henley.
The strategy in this division is to focus our efforts on growing the number of discretionary portfolios. This will be achieved by a mixture of organic growth through new business initiatives, continued personal referrals and the movement of existing advisory and execution clients to our discretionary service.
Total WM AUM at 31 March 2023 was £1.4bn (FY22: £1.6bn) as detailed in the table below. The majority of client assets are managed on the SEI platform with a small balance of ex-Harpsden clients remaining on another third-party platform.
Discretionary funds on SEI fell by 5.8% over the year (FY22: increased by 6.2%), due to net business outflows of £26.7m (FY22: net inflows £64.9m) representing a loss of 2.6% of opening funds (FY22: a gain of 6.7%) and a market performance reduction of £30.6m (FY22: £22.1m) due to negative market conditions.
WM funds flow table for the year:
| | Discretionary £m | Advisory £m | Execution Only £m | Custody* £m | Total £m |
| As at 1 April 2022 | 1,019.5 | 84.8 | 362.9 | 101.2 | 1,568.4 |
| Inflows | 115.2 | 3.5 | 44.7 | 18.7 | 182.1 |
| Outflows | (141.9) | (6.8) | (102.3) | (22.0) | (273.0) |
| Service switches | (2.2) | (24.5) | 26.7 | - | - |
| Market Performance | (30.6) | (13.7) | (22.3) | (13.0) | (79.6) |
| SEI at 31 March 2023 | 960.0 | 43.3 | 309.7 | 84.9 | 1,397.9 |
| External platforms | 36.2 | - | - | - | 36.2 |
| Total WM AUM at 31 March 2023 | 996.2 | 43.3 | 309.7 | 84.9 | 1,434.1 |
*Custody represents discretionary managed assets held on our SEI platform by New Horizons LLP a company with whom revenues are shared. Note that growth in discretionary assets under management is represented by the sum of net inflows, net service switches and market performance.
Total WM revenue fell by 8.8% to £14.4m (FY22: increased 19.2%). Market conditions impacted on trading activity resulting in a reduction of commission revenue in the year of 48.0% to £1.2m (FY22: £2.2m).
| | 2023 £'000 | 2022 £'000 |
| Management fees and wealth planning | 13,223 | 13,549 |
| Commissions | 1,156 | 2,221 |
| Other | 64 | 67 |
| Total | 14,443 | 15,837 |
Our Capital Markets Division is specifically focused on the public and private growth company marketplace. The team's significant experience in this dynamic segment means that we are able to provide a specialist service to each of its respective participants. For companies, we raise public and private growth capital, as well as providing both day-to-day and strategic corporate advice. Our tailored approach means that our teams engage with all of the key investor groups active in our market - High Net Worth Individuals, Family Offices, Wealth Managers and Funds. Our broking, trading and research teams provide the link between growth companies and this broad investor base. Total CM AUM at 31 March 2023 was £0.7bn (FY22: £0.8bn). The client assets are managed on the Pershing platform and the majority are held as execution only.
Total revenue for the year decreased by 24.4% to £12.2m (FY22: £16.2m) due to challenging market conditions impacting on activity levels and the number of transactions. The number of retained clients increased to 90 at the year-end and an increase in retainer fees provided an uplift in retainer revenue of 12.4% to £4.2m (FY22: £3.8m). The completion of three successful IPOs (compared to five in the previous period) and fall in total number of transactions to 25 (FY22: 38) were the drivers for the 48.6% decrease to £5.1m (FY22: £9.9m) in transaction fees. CM also executed a wide range of advisory work for its clients. Despite the market backdrop, trading and commission revenue increased by 17.7% in the year.
| | 2023 £'000 | 2022 £'000 |
| Transaction fees | 5,128 | 9,979 |
| Retainer fees | 4,234 | 3,769 |
| Equity Commissions and Trading | 2,883 | 2,450 |
| Total | 12,245 | 16,198 |
Transaction fees are further analysed as follows:
| | 2023 £'000 | 2022 £'000 |
| IPOs | 934 | 1,878 |
| Secondary equity issues | 4,060 | 4,311 |
| Other revenue incl. advisory and M&A | 134 | 3,790 |
| Total | 5,128 | 9,979 |
Expenses
Total operational costs decreased by 16.7%. As part of cost of sales, third party commission reduced by 87.6%, due to agreements that are revenue contingent. Variable people costs, mainly related to bonus payments have reduced by 40%.
| | 2023 £'000 | 2022 £'000 |
| Cost of sales - non-salaried staff costs (note 7) | 605 | 4,895 |
| Fixed non-people costs | 10,826 | 10,464 |
| Fixed people costs | 14,243 | 14,577 |
| Variable people costs | 1,876 | 3,126 |
| Total | 27,550 | 33,062 |
Financial position and regulatory capital: Net assets decreased to £13.6m at 31 March 2023 (FY22: £15.4m) and tangible net assets (net assets excluding intangible assets and goodwill) decreased by 14.1% to £6.5m (FY22: £7.6m).
The Investment Firms Prudential Regime (IFPR) applies to all solo-regulated MiFID investment firms and WH Ireland is a non-SNI (small and non-interconnected) MIFIDPRU investment firm.
Accordingly, the Group's regulatory capital requirement is its fixed overhead requirement as defined by the Financial Conduct Authority (FCA). Due to market conditions remaining challenging and losses incurred during the period, the Group notified the FCA that it had fallen within its regulatory capital planning buffer. The Group had further discussions with the FCA in order to ensure that, in the absence of the injection of further capital pursuant to the Placing, the Company could deliver a solvent wind down for the Group, if required, in line with the Company's solvent wind down plan (SWDP). A solvent wind down plan is a plan drawn up in accordance with regulatory requirements in order to facilitate an orderly wind down of a regulated firm. After the year-end the Group carried out a placing to raise £5m by way of the issue of ordinary shares (further details can be found in note 33), to ensure that the Group's own funds are in excess of its regulatory capital requirement.
Cost reduction exercises were also implemented after the year-end, including certain members of senior management agreeing to sacrifice a proportion of their salary in return for share options, alongside a collective consultation regarding headcount reduction.
As a result, the Directors have reviewed the forward-looking position as part of the going concern modelling and stress testing and in light of post year-end events believe that the regulatory requirements will be met.
Future developments
The Group was subject to challenging market conditions resulting from a number of well documented public events. The Directors believe that the combination of the placing, approved by shareholders in August 2023, and the cost reduction exercise gives the Group an improved chance of returning to a break-even position. The funds from the placing have been used to provide working capital, secure the current regulatory capital position and achieve a more stable financial position for the Group against the current market backdrop. Prior to the placing, the Board had actively explored asset sales. The Directors will continue to assess the benefit of asset sales to shareholders should any future market opportunities arise.
Key Performance Indicators
The following financial and strategic measures have been identified as the key performance indicators (KPIs) of the Group's overall performance for the financial year.
| 1. GROUP ASSETS UNDER MANAGEMENT The total value of funds under management has a direct impact on the Group's revenue.
-11%
|
|
| 2. NUMBER OF RETAINED CAPITAL MARKETS CORPORATE CLIENTS The number of retained clients has a direct relationship to the value of fees earned from success fees and retainer income in Capital Markets.
+2
|
|
| 3. TOTAL REVENUE The amount of revenue generated by Wealth Management and Capital Markets together is one of the key growth indicators.
-16%
|
*FY 2021 revenue has been restated to reflect the reclassification from revenue to net gains on investments.
|
| 4. DISCRETIONARY AND ADVISORY ASSETS UNDER MANAGEMENT (WM) Discretionary and advisory funds are the main income driver for our Wealth Management business.
-10%
|
|
*FY 2021 includes acquisition of Harpsden Wealth Management Limited.
Dividends
The Board does not propose to pay a dividend in respect of the financial year (FY22: £nil).
Statement of Financial Position and Capital Structure
Maintaining a strong and liquid statement of financial position remains a key objective for the Board, alongside its regulatory capital requirement. Due to losses during the period, the group notified the FCA on 21 December 2022 that it was within its Capital Planning Buffer of £2.8m, which forms part of its regulatory capital requirement, and further losses in the final quarter of the financial year meant that at the year-end the Group was £0.9m below the regulatory capital requirement of £9.6m. The Group has been in discussion with the FCA with regard to its capital position and having actively explored the option of an asset sale, undertook a successful placing of shares subsequent to the year-end as detailed in note 33 below in order to provide working capital, secure the current regulatory capital position and achieve a more stable financial position for the Group against the current market backdrop. As at 31 March 2023, total net assets were £13.6m (FY22: £15.4m) and net current assets £4.6m (FY22: £3.9m). Cash balances at year-end were £4.2m (FY22: £6.4m).
Risks and Uncertainties
Risk appetite is established, reviewed and monitored by the Board. The Group, through the operation of its Committee structure, considers all relevant risks and advises the Board as necessary. The Group maintains a comprehensive risk register as part of its risk management framework encouraging a risk-based approach to the internal controls and management of the Group. The risk register covers all categories including human capital risk, regulatory risk, conduct (client) risk, competition, financial risk, IT and operational resilience risk and legal risk. Each risk is ranked on impact and likelihood and mitigating strategies are identified. In addition, the Executive Committee which is formed of the Executive Directors, the Heads of the business divisions, a representative from HR and Chief Risk and Compliance Officer meet to assess and monitor these. An Executive Risk Committee has recently been established to manage and monitor risks and report into the Board.
The Group has outsourced its internal audit function to Deloitte since April 2021. Deloitte formally report to Tom Wood, Chair of the Audit Committee with Stephen Balonwu, Chief Risk and Compliance Officer, being the principal day to day contact.
The Group continues to focus on managing the costs of its business and returning to growth and sustainable profitability whilst increasing the proportion of recurring revenue with CM and the building of its discretionary fee paying client base in WM to better fit the regulatory environment in which it operates.
To mitigate risk, the Board continues to focus on ensuring that the financial position remains robust and suitably liquid with sufficient regulatory capital being maintained over the minimum common equity tier 1 capital requirements. Regulatory capital and liquid assets are monitored on a daily basis.
Operational risk is the risk of loss to the Group resulting from inadequate or failed internal processes, people and systems, or from external events.
Business continuity risk is the risk that serious damage or disruption may be caused as a result of a breakdown or interruption, from either internal or external sources, of the business of the Group. This risk is mitigated in part by the number of branches across the UK and the Group having business continuity and disaster recovery arrangements including business interruption insurance.
The Group seeks to ensure that its risk management framework and control environment is continuously evolving which Compliance and Risk monitor on an ongoing basis.
The Board takes active steps to minimise credit losses including formal new business approval, and the close supervision of credit limits and exposures, and the proactive management of any overdue accounts. Additionally, risk assessments are performed on an ongoing basis on all deposit taking banks and custodians and our outsourced relationships.
The Company operates in a highly regulated environment in the UK. The Directors monitor changes and developments in the regulatory environment and ensure that sufficient resources are available for the Group to implement any required changes. The impact of the regulatory environment on the Group's management of its capital is discussed in note 27 of the financial statements.
Section 172 Statement
Directors of the Group must consider Section 172 of the Companies Act 2006 which requires them to act in the way that would most likely promote the success of the Group for the benefit of all its stakeholders. The Board and its committees consider who its key stakeholders are, the potential impact of decisions made on them taking into account a wider range of factors, including the impact on the Company's operations and the likely consequences of decisions made in the long-term. The Group's key stakeholders and how the Board and the Group have engaged with them during the year is set out below.
The CEO and his management team on behalf of the Board engage with employees through a variety of methods including periodic 'all staff' updates, information and points of interest, staff forums, group meetings and Town Hall meetings. Further details can be found in the corporate social responsibility section on page 29.
Our shareholders have been pivotal in supporting the Group and its management team and Board. The Board recognise and frequently discuss the importance of good, open and constructive relationships with both potential new shareholders as well as existing shareholders and is committed to this communication. The way in which this has been achieved during the year has been by our Chief Executive Officer, supported by the management team, maintaining regular contact and meetings with individual and institutional shareholders, both existing and potential, and communicating and discussing shareholders' views with the Board. A number of Board members and employees also hold the Group's shares and regular communications are provided. The Group's strategy and results are presented to shareholders through meetings following announcements of the final and interim results. Shareholders are also invited to meet the Board and management team, who attend the Annual General Meeting. The annual report and accounts for the year ended 31 March 2023 along with all past accounts, regulatory communications and other material is set out on the Group's website at https://www.whirelandplc.com/investor-relations.
The Board maintains continuous and open communication with our regulators at the FCA as well as with the London Stock Exchange. Regular ongoing dialogue has continued through the CEO and CFO with the FCA who receive regular Management information. The FCA have approved the appointments of each member of the Management team and the Board members as required.
Our clients are fundamental to the business of the Group and the Board recognise that their interests are of paramount importance. Management of WM and CM closely engage with clients to understand their objectives so that the service provided by the business is appropriate. In WM the client's profile and the suitability of the investment strategy provided is frequently assessed by our professional investment managers and this is supplemented by a second line of review from management and our compliance team. It is recognised that the status of our clients can and does change in line with the environment and vulnerable clients in particular are identified and discussed at management and at Committee level to ensure that they are provided with the best possible advice.
In CM the Group's objective is also to achieve the best outcome and this applies equally to institutional corporate clients. Regular contact is maintained with them across all departments including corporate broking, corporate finance, trading and research. Our investor relations team arranges meetings with investors, undertakes site visits and organises events for a wide range of our clients' teams.
The Board through its Executive Directors is keenly focused on its key supplier relationships and regularly challenges and reviews its arrangements. The Group openly encourages its offices and employees to engage in local charitable, community groups and other causes. Further detail can be found on page 31.
Each of the Board members consider that they have acted together, in good faith in a way most likely to promote the success of the Group for the benefit of its broader range of stakeholders as a whole taking into account section 172 (1) (a-f) of the Companies Act 2006.
The Strategic Report on pages 7 - 14 has been approved by the Board and signed on its behalf by:
S Jackson
Chief Finance Officer
September 2023
Consolidated statement of comprehensive income
| | | Year ended |
| Year ended | |||
| | | 31 March 2023 |
| 31 March 2022 | |||
| | Note | £'000 |
| £'000 | |||
|
|
|
|
| | |||
| Revenue | 5 | 26,688 |
| 32,035 | |||
| Administrative expenses |
| (27,550) |
| (33,062) | |||
| Expected credit loss |
| (239) |
| (81) | |||
| Operating loss | 6 | (1,101) |
| (1,108) | |||
| | |
|
| | |||
| Net (loss) / gains on investments | 17, 21 | (2,683) |
| 1,626 | |||
| Finance income | 8 | 10 |
| 1 | |||
| Finance expense | 8 | (224) |
| (511) | |||
| Other income | 9 | 2,175 |
| - | |||
| (Loss) / profit before tax |
| (1,823) |
| 8 | |||
| Taxation | 10 | (121) |
| 67 | |||
| (Loss) / profit and total comprehensive income for the year |
| (1,944) |
| 75 | |||
| Earnings per share | 12 |
|
| |
| ||
| From continuing operations |
|
|
|
|
| ||
| Basic |
| (3.29p) |
| 0.13p |
| ||
| Diluted |
| - |
| 0.12p |
| ||
|
|
| ||||||
There were no items of other comprehensive income for the current year or prior years.
Consolidated and Company statement of financial position
| | | Group | Company | ||
| | | 31 March | 31 March | 31 March | 31 March |
| | | 2023 | 2022 | 2023 | 2022 |
| | Note | £'000 | £'000 | £'000 | £'000 |
| ASSETS |
|
|
|
|
|
| Non-current assets |
|
|
|
|
|
| Intangible assets | 15 | 3,763 | 4,259 | - | - |
| Goodwill | 14 | 3,539 | 3,539 | - | - |
| Investment in subsidiaries | 16 | - | - | 26,448 | 26,448 |
| Property, plant and equipment | 13 | 569 | 325 | - | 4 |
| Investments | 17 | 820 | 3,013 | - | - |
| Right of use asset | 18 | 635 | 1,168 | - | - |
| Deferred tax asset | 19 | - | 190 | - | - |
| Treasury note | 28 | - | - | 1,093 | 900 |
| |
| 9,326 | 12,494 | 27,541 | 27,352 |
| Current assets |
|
|
|
|
|
| Trade and other receivables | 20 | 5,444 | 5,758 | 29 | 113 |
| Other investments | 21 | 2,049 | 1,912 | - | - |
| Cash and cash equivalents | 22 | 4,234 | 6,446 | - | 1,246 |
| |
| 11,727 | 14,116 | 29 | 1,359 |
| Total assets |
| 21,053 | 26,610 | 27,570 | 28,711 |
| LIABILITIES |
|
|
|
|
|
| Current liabilities |
|
|
|
|
|
| Trade and other payables | 23 | (4,013) | (6,681) | (1,136) | (2,357) |
| Lease liability | 18 | (319) | (376) | - | - |
| Deferred consideration | 24 | (2,121) | (2,412) | (2,121) | (2,412) |
| Deferred tax liability | 19 | (663) | (732) | - | - |
|
|
| (7,116) | (10,201) | (3,257) | (4,769) |
| Non-current liabilities |
|
|
|
|
|
| Lease liability | 18 | (293) | (999) | - | - |
|
|
| (293) | (999) | - | - |
| Total liabilities |
| (7,409) | (11,200) | (3,257) | (4,769) |
| Total net assets |
| 13,644 | 15,410 | 24,313 | 23,942 |
| | |
|
|
|
|
| Capital and reserves |
|
|
|
|
|
| Share capital | 27 | 3,116 | 3,104 | 3,116 | 3,104 |
| Share premium | 27 | 19,014 | 19,014 | 19,014 | 19,014 |
| Other reserves | | 981 | 981 | 228 | 228 |
| Retained earnings | | (8,374) | (6,789) | 1,955 | 1,596 |
| Treasury shares | 28 | (1,093) | (900) | - | - |
| Shareholders' funds |
| 13,644 | 15,410 | 24,313 | 23,942 |
The Company has elected to take the exemption under Section 408 of the Companies Act 2006 not to present the Company statement of comprehensive income. The loss after tax of the Company for the year was £nil (FY22: £nil).
These financial statements were approved by the Board of Directors on 26 September 2023 and were signed on its behalf by:
S Jackson
Director
Consolidated and Company statement of cash flows
| | | Group | Company | ||
|
| | Year ended | Year ended | Year ended | Year ended |
| | | 31 Mar 2023 | 31 Mar 2022 | 31 Mar 2023 | 31 Mar 2022 |
| | Notes | £'000 | £'000 | £'000 | £'000 |
| Operating activities: |
|
| |
| |
| (Loss) / profit for the year: | | (1,944) | 75 | - | - |
| |
| (1,944) | 75 | - | - |
| Adjustments for non-cash items: |
|
|
|
|
|
| Depreciation and amortisation | 13, 15, 18 | 1,093 | 1,229 | - | - |
| Finance income | 8 | (10) | (1) | - | - |
| Finance expense | 8 | 224 | 511 | 173 | 416 |
| Tax | 10 | 121 | (67) | - | - |
| Non-cash adjustment for share option charge | 7 | 359 | 470 | 359 | 470 |
| Non-cash adjustment for investment gains | 17, 21 | 2,683 | (1,626) | - | - |
| Non-cash consideration for revenue |
| (1,096) | (1,651) | - | - |
| Non-cash adjustment for right of use assets | 18 | (125) | - | - | - |
| Working capital changes: |
|
|
|
|
|
| Decrease / (increase) in trade and other receivables | | 314 | (601) | 88 | (57) |
| (Decrease) / increase in trade and other payables | | (2,668) | (942) | (1,221) | (603) |
| Net cash (used in) / generated from operations |
| (1,049) | (2,603) | (601) | 226 |
| Income taxes received/(paid) | 10 | - | - | - |
|
| Net cash inflows / (outflows) from operating activities |
| (1,049) | (2,603) | (601) | 226 |
| Investing activities: |
|
|
|
|
|
| Acquisition of property, plant and equipment | 13 | (475) | (103) | - | (4) |
| Decrease / (increase) in loan receivables | | - | - | (193) | (256) |
| Interest received | 8 | 10 | - | - | - |
| Movement in current asset investments | 17, 21 | 430 | 1,933 | - | - |
| Net cash (used in) / generated from investing activities |
| (35) | 1,830 | (193) | (260) |
| Finance activities: |
|
|
|
|
|
| Proceeds from issue of share capital | 27 | 12 | 34 | 12 | 34 |
| Purchase of own shares by Employee Benefit Trust | | (193) | (256) | - | - |
| Interest paid | 8 | - | (2) | - | - |
| Deferred consideration paid | 24 | (464) | - | (464) | - |
| Lease liability payments | | (483) | (768) | - | - |
| Net cash (used in) / generated from financing activities |
| (1,128) | (992) | (452) | 34 |
| Net (decrease) / increase in cash and cash equivalents |
| (2,212) | (1,765) | (1,246) | - |
| Cash and cash equivalents at beginning of year | | 6,446 | 8,211 | 1,246 | 1,246 |
| Cash and cash equivalents at end of year |
| 4,234 | 6,446 | - | 1,246 |
Reconciliation of Group and Company liabilities arising from financing activities in the year:
| | As at | Cash flows | Non-cash | As at |
| | 1 April 2022 | | changes | 31 March 2023 |
| Group | £'000 | £'000 | £'000 | £'000 |
| Lease liability | 1,375 | (483) | (280) | 612 |
| | 1,375 | (483) | (280) | 612 |
Reconciliation of Group and Company liabilities arising from financing activities in the prior year:
| | As at | Cash flows | Non-cash | As at |
| | 1 April 2021 | | changes | 31 March 2022 |
| Group | £'000 | £'000 | £'000 | £'000 |
| Lease liability | 2,058 | (768) | 85 | 1,375 |
| | 2,058 | (768) | 85 | 1,375 |
There are no Company liabilities arising from financing activities.
Consolidated and Company statement of changes in equity
| | Share | Share | Other | Retained | Treasury | Total |
|
| capital | premium | reserves | earnings | shares | equity |
| Group | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 |
| Balance at 1 April 2021 | 3,101 | 18,983 | 981 | (7,334) | (644) | 15,087 |
| Profit and total comprehensive income for the year | - | - | - | 75 | - | 75 |
| Transactions with owners in their capacity as owners: |
| | | | | |
| Employee share option scheme | - | - | - | 470 | - | 470 |
| New share capital issued | 3 | 31 | - | - | - | 34 |
| Purchase of own shares by Employee Benefit Trust | - | - | - | - | (256) | (256) |
| Balance at 31 March 2022 | 3,104 | 19,014 | 981 | (6,789) | (900) | 15,410 |
| | | | | | | |
| Loss and total comprehensive income for the year | - | - | - | (1,944) | - | (1,944) |
| Transactions with owners in their capacity as owners: |
| | | | | |
| Employee share option scheme | - | - | - | 359 | - | 359 |
| New share capital issued | 12 | - | - | - | - | 12 |
| Purchase of own shares by Employee Benefit Trust | - | - | - | - | (193) | (193) |
| Balance at 31 March 2023 | 3,116 | 19,014 | 981 | (8,374) | (1,093) | 13,644 |
Retained earnings include £10k (2022: £10k) ESOT reserve.
| | Share | Share | Other | Retained | Treasury | Total |
|
| capital | premium | reserves | earnings | shares | equity |
| Company | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 |
| Balance at 1 April 2021 | 3,101 | 18,983 | 228 | 1,126 | - | 23,438 |
| Profit / (loss) and total comprehensive income for the year | - | - | | - | - | - |
| Transactions with owners in their capacity as owners: |
| | | | | |
| Employee share option scheme | - | - | - | 470 | - | 470 |
| New share capital issued | 3 | 31 | - | - | - | 34 |
| Balance at 31 March 2022 | 3,104 | 19,014 | 228 | 1,596 | - | 23,942 |
| | | | | | | |
| Profit / (loss) and total comprehensive income for the year | - | - | - | - | - | - |
| Transactions with owners in their capacity as owners: |
| | | | | |
| Employee share option scheme | - | - | - | 359 | - | 359 |
| New share capital issued | 12 | - | - | - | - | 12 |
| Balance at 31 March 2023 | 3,116 | 19,014 | 228 | 1,955 | - | 24,313 |
The nature and purpose of each reserve, whether consolidated or Company only, is summarised below:
The share premium is the amount raised on the issue of shares that is in excess of the nominal value of those shares and is recorded less any direct costs of issue.
Other reserves comprise a (consolidated) merger reserve of £753k (FY22: £753k) and a (consolidated and company) capital redemption reserve of £228k (FY22: £228k).
Retained earnings reflect accumulated income, expenses, gains and losses, recognised in the statement of comprehensive income and the statement of recognised income and expense and is net of dividends paid to shareholders. It includes £10k (FY22: £10k) of ESOT reserve.
Purchases of the Company's own shares in the market are presented as a deduction from equity, at the amount paid, including transaction costs. That is, shares are shown as a separate class of shareholders' equity with a debit balance. This includes shares in the Company held by the EBT or ESOT, both of which are consolidated within the consolidated figures.
Notes to the financial statements
1. General information
WH Ireland Group plc is a public company incorporated in the United Kingdom. The shares of the Company are traded on the AIM, a market of the London Stock Exchange Group plc. The address of its registered office is 24 Martin Lane, London, EC4R 0DR.
The consolidated and Parent Company financial statements have been prepared in accordance with International Accounting Standards as adopted by the UK and in accordance with 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 British Pounds (GBP), which is also the Group's functional currency. Amounts are rounded to the nearest thousand, unless otherwise stated.
The financial statements of the Group have been prepared on a going concern basis. In making this assessment, the Directors have prepared detailed financial forecasts for the period to September 2024 which consider the funding and capital position of the Group and Company. Those forecasts make assumptions in respect of future trading conditions, notably the economic environment and its impact on the Group's revenues and costs. In addition to this, the nature of the Group's business is such that there can be considerable variation in the timing of cash inflows. The forecasts take into account foreseeable downside risks, based on the information that is available to the Directors at the time of the approval of these financial statements.
Certain activities of the Group are regulated by the FCA, the statutory regulator for financial services business in the UK which has responsibility for policy, monitoring and discipline for the financial services industry. The FCA requires the Group's capital resources to be adequate; that is sufficient in terms of quantity, quality and availability, in relation to its regulated activities. The Directors monitor the Group's regulatory capital resources on a regular basis.
The Group had been in discussion with the FCA (including in respect of the Group's relevant net asset and regulatory capital positions) in order to ensure that, in the absence of the injection of further capital pursuant to the Placing, the Company could deliver a solvent wind down for the Group, if required, in line with the Company's solvent wind down plan (SWDP). A solvent wind down plan is a plan drawn up in accordance with regulatory requirements in order to facilitate an orderly wind down of a regulated firm, as further described below. On the basis of the adverse current and forecast trading and resultant losses, without further funding pursuant to the placing, the SWDP would have been required to be implemented post year-end.
The Directors have conducted full and thorough assessments of the Group's business and the past financial year has provided a thorough test of those assessments. The significant market turbulence presented a range of challenges to the business and as a result after the year-end the Group proceeded to raise additional capital by way of placing of ordinary shares to existing shareholders and new investors (further details can be found in note 33) raising £5m. Additionally, cost reduction exercises were implemented and the benefits expected to take effect from quarter 3 of the financial year. The cost savings have been factored into the forecasts.
Whilst there always remains uncertainty over the economic environment, after the year-end the business has improved its capital position and likelihood of a return to a break-even position. Further actions open to the Directors include incremental cost reductions, regulatory capital optimisation programmes or further capital raising.
An analysis of the potential downside impacts was conducted as part of the going concern assessment to assess the potential impact on revenue and asset values with a particular focus on the variable component parts of our overall revenue, such as corporate finance fees and commission. Furthermore, reverse stress tests were modelled to assess what level the Group's business would need to reduce to before resulting in a liquidity crisis or a breach of regulatory capital. That modelling concluded that transactional, non-contractual revenue would need to decline by more than 60% from management's forecasts to create such a crisis situation within 18 months' time.
Based on all the aforementioned, the Directors believe that regulatory capital requirements will continue to be met and that the Group and Company has sufficient liquidity to meet its liabilities for the next twelve months and that the preparation of the financial statements on a going concern basis remains appropriate.
2. Adoption of new and revised standards
A number of new or amended standards became applicable for the current reporting period and as a result the Group and Company has applied the following standards:
- Amendments to IFRS 16: Property, Plant and Equipment - Proceeds before Intended Use
- Amendments to IFRS 3: Reference to Conceptual Framework
- Amendments to IAS 37: Onerous Contracts - Cost
The above requirements did not have a material impact on the financial statements of the group or company.
| Name | Description | Effective date |
| IAS 1 (amendments) | Presentation of Financial Statements: Classification of Liabilities as Current or Non-Current and Classification of Liabilities as Current or Non-Current - Deferral of Effect Date. | 1 January 2023 |
| IAS 1 (amendments) | Non-current Liabilities with covenants | 1 January 2024 |
The Directors do not expect the adoption of these standards and amendments to have a material impact on the Financial Statements.
3. Significant accounting policies
Where the company has control over an investee, it is classified as a subsidiary. The company controls an investee if all three of the following elements are present: power over the investee, exposure to variable returns from the investee and the ability of the investor to use its power to affect those variable returns. Control is reassessed whenever facts and circumstances indicate that there may be a change in any of these elements of control.
The consolidated financial statements present the results of the Company and its subsidiaries ("the Group") as if they formed a single entity. Intercompany transactions and balances between group companies are therefore eliminated in full. The consolidated financial statements incorporate the results of business combinations using the acquisition method. In the statement of financial position, the acquiree's identifiable assets, liabilities and contingent liabilities are initially recognised at their fair values at the acquisition date. The results of acquired operations are included in the consolidated statement of comprehensive income from the date on which control is obtained until the date on which control ceased.
In the Company's accounts, investments in subsidiary undertakings are stated at cost less any provision for impairment.
All business combinations are accounted for by applying the purchase method. The purchase method involves recognition, at fair value, of all identifiable assets and liabilities, including contingent liabilities, of the subsidiary at the acquisition date, regardless of whether or not they were recorded in the financial statements of the subsidiary prior to acquisition. The cost of business combinations is measured based on the fair value of the equity or debt instruments issued and cash or other consideration paid, plus any directly attributable costs. Any directly attributable costs relating to business combinations before or after the acquisition date are charged to the statement of comprehensive income in the period in which they are incurred.
Goodwill arising on a business combination represents the excess of cost over the fair value of the Group's share of the identifiable net assets acquired and is stated at cost less any accumulated impairment losses. The cash generating units to which goodwill is allocated are tested annually for impairment. Any impairment is recognised immediately in administrative expenses in the statement of comprehensive income and is not subsequently reversed. On disposal of a subsidiary the attributable amount of goodwill that has not been subject to impairment is included in the determination of the profit or loss on disposal.
WEalth management (WM)
Management and custody fees
Investment management fees are recognised in the period in which the related service is provided. It is a variable fee based on the average daily market value of assets under management and is invoiced on a calendar quarter basis in arrears. The performance obligation is satisfied over time as the contractual obligations are on ongoing throughout the period under contract. The revenue accrued but not yet invoiced is recognised as a contract asset.
Initial and ongoing advisory fees
Initial advisory fees are charged to clients on a fixed one-off fee agreement. The performance obligation is satisfied as the initial advice is provided. Ongoing advisory fees are variable fees based on the average daily market value of assets under management and invoiced on a calendar quarter basis in arrears. Both initial and ongoing advisory fees are recognised in the period in which the related service is provided. The performance obligation of ongoing advice is satisfied over time as the contractual obligations are ongoing throughout the period under contract. The revenue accrued but not yet invoiced is recognised as a contract asset.
Commission and transaction charges
Commission is recognised when receivable in accordance with the date of settlement. It is a variable fee based on a percentage of the transaction and therefore the performance obligation is satisfied at the date of the underlying transaction. The transaction price is calculated based on the agreed percentage of the underlying consideration of the trade. The underlying consideration being the number of shares multiplied by the share price at the time of the underlying transaction.
CApital markets (cM)
Commission
Brokerage commission is recognised when receivable in accordance with the date of settlement. It is a variable fee based on a percentage of the transaction and therefore performance obligation is satisfied at the date of the underlying transaction. The transaction price is calculated based on the agreed percentage of the underlying consideration of the trade. The underlying consideration being the number of shares multiplied by the share price at the time of the underlying transaction.
Corporate finance advisory fees
Corporate finance advisory fees are fixed fees agreed on a deal by deal basis and might include non-cash consideration received in the form of shares, loan notes, warrants or other financial instruments recognised at the fair value on the date of receipt and therefore the performance obligation is satisfied at a point in time when the Group has fully completed the performance obligations per the contract.
Retainer fees
Retainer fees are recognised over the length of time of the agreement. Fees are fixed and invoiced quarterly in advance based on the agreed engagement letter. The performance obligation is satisfied over time as the contractual obligations are on ongoing throughout the period under contract. The deferred revenue is recognised as a contract liability.
Corporate placing commissions
Corporate placing commissions are variable fees agreed on a deal-by-deal basis based on a percentage of the funds raised as part of a transaction. This includes non-cash consideration received in the form of shares, loan notes, warrants or other financial instruments recognised at the fair value on the date of receipt. Given that fees related to this work are success based, there is a significant risk of reversal of the variable revenue and therefore the performance obligation is satisfied at a point in time when the transaction is completed. The combination of corporate placing commissions and corporate finance advisory fees are referred to as corporate success fees.
The Group contributes to employees' individual money purchase personal pension schemes. The assets of the schemes are held separately from those of the Group in independently administered funds. The amount charged to the statement of comprehensive income represents the contributions payable to the schemes in respect of the period to which they relate.
Short-term employee benefits are those that fall due for payment within 12 months of the end of the period in which employees render the related service. The cost of short-term benefits is not discounted and is recognised in the period in which the related service is rendered. Short-term employee benefits include cash-based incentive schemes and annual bonuses.
The share option programmes allow Group employees to receive remuneration in the form of equity-settled share-based payments granted by the Company.
The cost of equity-settled transactions with employees is measured by reference to the fair value at the date at which they are granted. The fair value of the options granted is measured using an option valuation model. The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over the period in which the performance or service conditions are fulfilled (the vesting period), ending on the date on which the relevant employees become fully entitled to the award (the vesting date). The cumulative expense recognised for equity settled transactions, at each reporting date until the vesting date, reflects the extent to which the vesting period has expired and the Group's best estimate of the number of equity instruments that will ultimately vest. The statement of comprehensive income charge or credit for a period represents the movement in cumulative expense recognised at the beginning and end of that period.
Where the terms of an equity-settled award are modified, an incremental value is calculated as the difference between the fair value of the repriced option and the fair value of the original option at the date of re-pricing. This incremental value is then recognised as an expense over the remaining vesting period in addition to the amount recognised in respect of the original option grant.
Where an equity-settled award is cancelled or settled (that is, cancelled with some form of compensation) it is treated as if it had vested on the date of cancellation and any expense not yet recognised for the award is recognised immediately.
However, if a new award is substituted for the cancelled award and is designated as a replacement award on the date that it is granted, the cancelled and new awards are treated as if they were a modification of the original award, as described in the previous paragraph. Any compensation paid up to the fair value of the award is accounted for as a deduction from equity. Where an award is cancelled by forfeiture, when the vesting conditions are not satisfied, any costs already recognised are reversed (subject to exceptions for market conditions).
In all instances, the charge/credit is taken to the statement of comprehensive income of the Group or Company by which the individual concerned is employed.
The cost of purchasing own shares held by the EBT are shown as a deduction against equity. The proceeds from the sale of own shares held increase equity. Neither the purchase nor sale of own shares leads to a gain or loss being recognised in the consolidated statement of comprehensive income.
The Company has established an ESOT. The assets and liabilities of this trust comprise shares in the Company and loan balances due to the Company. The Group includes the ESOT within these consolidated Financial Statements and therefore recognises a Treasury shares reserve in respect of the amounts loaned to the ESOT and used to purchase shares in the Company. Any cash received by the ESOT on disposal of the shares it holds, will be used to repay the loan to the Company.
The costs of purchasing Treasury shares are shown as a deduction against equity. The proceeds from the sale of own shares held increase equity. Neither the purchase nor sale of treasury shares leads to a gain or loss being recognised in the consolidated statement of comprehensive income.
Income tax on the profit or loss for the years presented, comprising current tax and deferred tax, is recognised in the statement of comprehensive income except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity.
Current tax is the expected tax payable on the taxable income for the year, using rates enacted or substantively enacted at the reporting year-end date and any adjustment to tax payable in respect of previous years.
Deferred tax is provided for temporary differences, at the reporting year-end date, between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. The following temporary differences are not provided for;
· goodwill which is not deductible for tax purposes;
· the initial recognition of assets or liabilities that affect neither accounting nor taxable profit; and
· temporary differences relating to investments in subsidiaries to the extent that they will probably not reverse in the foreseeable future.
The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the reporting period end date (note 19).
A deferred tax asset is recognised for all deductible temporary differences and unused tax losses only to the extent that it is probable that future taxable profits will be available against which the assets can be utilised. The deferred tax asset of £190k was released during the period in light of recent forecasts (FY22: £190k).
Plant and equipment is stated at cost less accumulated depreciation and impairment. Depreciation is calculated, using the straight-line method, to write down the cost or revalued amount of plant and equipment over the assets' expected useful lives, to their residual values, as follows:
Computers, fixtures and fittings - 4 to 7 years
Intangible assets with finite useful lives that are acquired separately are measured, on initial recognition at cost. Following initial recognition, they are carried at cost less accumulated amortisation and any accumulated impairment. The cost of intangible assets acquired in a business combination is their fair value at the date of acquisition.
Intangible assets other than goodwill are amortised over the expected pattern of their consumption of future economic benefits, to write down the cost of the intangible assets to their residual values as follows:
Client relationships - 10 to 12 years
Brand - 2 years
The amortisation period and method for an intangible asset are reviewed at least at each financial year end. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset or its residual value are accounted for by changing the amortisation period or method.
The carrying amounts of the Group's intangible assets, excluding goodwill, are reviewed when there is an indicator of impairment and the asset's recoverable amount is estimated.
The recoverable amount is the higher of the asset's fair value less costs to sell (or net selling price) and its value-in-use. Value-in-use is the discounted present value of estimated future cash inflows expected to arise from the continuing use of the asset and from its disposal at the end of its useful life. Where the recoverable amount of an individual asset cannot be identified, it is calculated for the smallest cash-generating unit (CGU) to which the asset belongs. A CGU is the smallest identifiable group of assets that generates cash inflows independently.
When the carrying amount of an asset (or CGU) exceeds its recoverable amount, the asset (or CGU) is considered to be impaired and is written down to its recoverable amount. An impairment loss is immediately recognised as an expense. Any subsequent reversal of impairment credited to the statement of comprehensive income shall not cause the carrying amount of the intangible asset to exceed the carrying amount that would have been determined had no impairment been recognised.
Goodwill and other intangible assets that have an indefinite life are not subject to amortisation, they are tested annually for impairment. Other assets are tested for impairment when any changes in circumstance indicate the carrying amount is possibly not recoverable. An impairment loss is recognised when the asset's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset's fair value less costs to sell and the value in use. Goodwill is allocated to cash generating units for the purpose of assessing impairment, assets (excluding goodwill) are grouped together based on the assets that independently generates cash flow whose cash flow is largely independent of the cash flows generated by other assets (cash generating units).
For any new lease contracts entered into on or after 1 April 2019, as permitted under IFRS 16, the Group recognises a right of use asset and a lease liability except for:
· Leases with a term of 12 months or less from the lease commencement date
· Leases of low value assets
Lease liabilities are measured at the present value of the unpaid lease payments discounted using an incremental borrowing rate.
Right of use assets are initially measured at the amount of the lease liabilities plus initial direct costs, costs associated with removal and restoration and payments previously made. Right of use assets are amortised on a straight-line basis over the term of the lease.
Lease liabilities are subsequently increased by the interest charge using the incremental borrowing rate and reduced by the principal lease.
Financial assets and financial liabilities are recognised in the Group's balance sheet when the Group becomes a party to the contractual provisions of the instrument.
Investments are recognised and derecognised on the trade date where the purchase or sale of an investment is under a contract whose terms require delivery of the investment within the timeframe established by the market concerned, and are initially measured at fair value, plus transaction costs, except for those financial assets classified as at fair value through profit or loss, which are initially measured at fair value.
Assets and liabilities are presented net where there is a legal right to offset and an intention to settle in that way.
The three principal classification categories for financial assets are: measured at amortised cost, fair value through other comprehensive income (FVOCI) and fair value through profit or loss (FVTPL). The classification of financial assets under IFRS 9 is generally based on the business model in which a financial asset is managed and its contractual cash flow characteristics.
Financial assets are not reclassified after their initial recognition unless the Group changes its business model for managing financial assets, in which case all affected financial assets are reclassified on the first day of the first reporting period following the change in the business model.
A financial asset is measured at amortised cost if it meets both of the following conditions and is not designated as at FVTPL:
· it is held within a business model whose objective is to hold assets to collect contractual cash flows; and
· its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
On initial recognition of an equity investment that is not held for trading, the Group may irrevocably elect to present subsequent changes in the investment's fair value in OCI. This election is made on an investment-by-investment basis.
All financial assets not classified as measured at amortised cost or FVOCI as described above are measured at FVTPL. This includes all derivative financial assets. On initial recognition, the Group may irrevocably designate a financial asset that otherwise meets the requirements to be measured at amortised cost or at FVOCI as at FVTPL if doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise.
Assets held at FVTPL are subsequently measured at fair value. Net gains and losses, including any interest or dividend income, are recognised in profit or loss.
Financial assets at amortised cost are subsequently measured at amortised cost using the effective interest method. The amortised cost is reduced by impairment losses. Trade receivables and other receivables are measured and carried at amortised cost using the effective interest method, less any impairment. If impaired, the carrying amount of other receivables is reduced by the impairment loss directly and a charge is recorded in the Income Statement. For trade receivables, the carrying amount is reduced by the expected credit lifetime losses under the simplified approach permitted under IFRS9. Subsequent recoveries of amounts previously written off are credited against the allowance account and changes in the carrying amount of the allowance account are recognised in the Income Statement.
Equity investments at OCI are subsequently measured at fair value. Dividends are recognised as income in profit or loss unless the dividend clearly represents a recovery of part of the cost of the investment. Other net gains and losses are recognised in OCI and are never reclassified to profit or loss.
The following financial assets & liabilities are held at FVTPL; investments and deferred consideration. The following financial assets and liabilities are held at amortised cost; Cash and cash equivalents, trade and other receivables, accrued income, trade and other lease liabilities.
Trade payables principally comprise amounts outstanding for trade purchases and ongoing costs. The Directors consider that the carrying amount of trade payables approximates to their fair value.
Deferred consideration is recognised at the discounted present value of amounts payable. After initial recognition, it is rebased over the period in which the consideration is payable, with the unwinding of the discount being taken to the statement of comprehensive income.
4. Critical accounting judgements and key sources of estimation and uncertainty
The preparation of financial statements in accordance with IFRS requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.
Estimates and judgements are continually evaluated and are based on historical experience and other factors, including reasonable expectations of future events. The estimates and judgements 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:
As noted above, the Group estimates the useful economic lives of intangible assets, in order to calculate the appropriate amortisation charge. This is done by the Directors using their knowledge of the markets and business conditions that generated the asset, together with their judgement of how these will change in the foreseeable future.
Where an indicator of impairment exists, value in use calculations are performed to determine the appropriate carrying value of the asset. The value in use calculation requires the Directors to estimate the future cash flows expected to arise for the CGU and a suitable discount rate in order to calculate present value. Where the actual future cash flows are less than expected, a material impairment loss may arise (see note 15).
Goodwill is subject to an annual impairment review which is performed by comparing the balance value with the recoverable amount of the asset or it's CGU. The recoverable amount is the higher of the value in use and fair value to sell less costs.
Where an indicator of impairment exists, management uses its judgement to assess the carrying value of the asset by determining the fair value by independent assessment of the carrying value of the business units and by comparative analysis against other similar businesses in the peer group. The carrying value of investments in subsidiaries on 31 March 2023 was £26.4m (FY22: £26.4m) (see note 16).
At the year-ended 31 March 2023, the carrying values of the investments in subsidiaries were assessed for indicators of impairment.
The value of Harpsden Wealth Managements Limited (Harpsden) forming part of the total value of investments in subsidiaries, is tested as part of the annual impairment of goodwill. Since this test showed no impairment due (see note 19 for further detail) it has been viewed there is no requirement for a further impairment to the carrying value of the related investment.
The value of WH Ireland Limited can be considered in the sum of two parts, for the two divisions. The Wealth Management (WM) revenue, excluding Harpsden (tested separately), is predominantly derived from the assets under management. An AUM multiple was applied to obtain an indication of the value of the total WM. Capital Markets was valued by a multiple of annual revenue based on success fees and retainer fee revenue.
The total value of the two divisions together did not indicate an impairment was necessary for WH Ireland Limited, therefore no adjustment has been made for the year ended 31 March 2023.
Included in non-current investments are warrants valued at the estimated fair value at the reporting date. These values are obtained by applying an appropriate valuation model for which most of the inputs are based on contracts and external sources. Therefore, no reasonable change in assumptions would lead to a material change in the fair value, see note 17 for details of the fair value at 31 March 2023.
As described in note 24, the Group has a deferred consideration balance in respect of the acquisition in December 2020 of Harpsden Wealth Management Limited. The expected future payment is recognised at its fair value, this being the estimate of future payments due. This was previously discounted to present value, however as at 31 January 2023 was fully unwound.
5. Segment information
The Group has two principal operating segments, Wealth Management (WM) and Capital Markets (CM) and a number of minor operating segments that have been aggregated into one operating segment.
WM offers investment management advice and services to individuals and contains our Wealth Planning business, giving advice on and acting as intermediary for a range of financial products. CM provides corporate finance and corporate broking advice and services to companies and acts as Nominated Adviser (Nomad) to clients traded on the AIM and contains our Institutional Sales and Research business, which carries out stockbroking activities on behalf of companies as well as conducting research into markets of interest to its clients.
Both divisions are located in the UK. Each reportable segment has a segment manager who is directly accountable to, and maintains regular contact with, the Chief Executive Officer.
No customer represents more than ten percent of the Group's revenue (FY22: nil).
The following tables represent revenue and cost information for the Group's business segments. The key line items below are not consistent with the statement of comprehensive income.
| Year ended 31 March 2023 | Wealth Management | Capital Markets | Group and consolidation adjustments | Group |
| | £'000 | £'000 | £'000 | £'000 |
| Revenue | 14,443 | 12,245 | - | 26,688 |
| Direct costs | (11,400) | (11,604) | - | (23,004) |
| Contribution | 3,043 | 641 | - | 3,684 |
| Indirect costs | (2,798) | (1,994) | (879) | (5,671) |
| Underlying profit / (loss) before tax | 245 | (1,353) | (879) | (1,987) |
| Amortisation of acquired brand and client relationships | (496) | - | - | (496) |
| Changes in fair value and finance cost of deferred consideration | (173) | - | - | (173) |
| Other income | 1,957 | - | - | 1,957 |
| Net changes in the value of non-current investment assets | - | (1,124) | - | (1,124) |
| Profit / (loss) before tax | 1,533 | (2,477) | (879) | (1,823) |
| Tax | 69 | - | (190) | (121) |
| Profit / (loss) for the year | 1,602 | (2,477) | (1,069) | (1,944) |
| Year ended 31 March 2023 | Wealth Management | Capital Markets | Group |
| | £'000 | £'000 | £'000 |
| Statutory operating costs included the following: | | | |
| Amortisation | 496 | - | 496 |
| Depreciation | 141 | 90 | 231 |
| Depreciation from Right of Use assets | 218 | 148 | 366 |
| Year ended 31 March 2022 | Wealth Management | Capital Markets | Group and consolidation adjustments | Group | |
| | £'000 | £'000 | £'000 | £'000 | |
| Revenue | 15,837 | 16,198 | - | 32,035 | |
| Direct costs | (13,072) | (12,475) | - | (25,547) | |
| Contribution | 2,765 | 3,723 | - | 6,488 | |
| Indirect costs | (3,013) | (1,427) | (651) | (5,091) | |
| Underlying profit/(loss) before tax | (248) | 2,296 | (651) | 1,397 |
|
| Acquisition related costs | (446) | - | - | (446) |
|
| Amortisation of acquired brand and client relationships | (505) | - | - | (505) |
|
| Changes in fair value and finance cost of deferred consideration | (416) | - | - | (416) |
|
| Restructuring costs | (478) | (357) | - | (835) |
|
| Net changes in the value of non-current investment assets | - | 813 | - | 813 |
|
| Profit/(loss) before tax | (2,093) | 2,752 | (651) | 8 |
|
| Tax | 67 | - | - | 67 |
|
| Profit/(loss) for the year | (2,026) | 2,752 | (651) | 75 |
|
| Year ended 31 March 2022 | Wealth Management | Capital Markets | Group |
| | £'000 | £'000 | £'000 |
| Statutory operating costs included the following: | | | |
| Amortisation | 505 | - | 505 |
| Depreciation | 199 | 90 | 289 |
| Depreciation from Right of Use assets | 267 | 168 | 435 |
Segment assets and segment liabilities are reviewed by the Chief Executive Officer based on the consolidated statement of financial position. Accordingly, this information is replicated in the Group Consolidated statement of financial position. As no measure of assets or liabilities for individual segments is reviewed regularly by the Chief Executive Officer, no disclosure of total assets or liabilities has been made.
The accounting policies of the operating segments are the same as those described in the summary of significant accounting policies.
Revenue disaggregated by division and timing of recognition below:
| Year ended 31 March 2023 | Wealth Management | Capital Markets | Group and consolidation adjustments | Group |
| | £'000 | £'000 | £'000 | £'000 |
| Point in time | 1,528 | 8,011 | - | 9,539 |
| Over time | 12,915 | 4,234 | - | 17,149 |
| | 14,443 | 12,245 | - | 26,688 |
| Year ended 31 March 2022 | Wealth Management | Capital Markets | Group and consolidation adjustments | Group (continuing operations) |
| | £'000 | £'000 | £'000 | £'000 |
| Point in time | 2,443 | 12,429 | - | 15,187 |
| Over time | 13,394 | 3,769 | - | 13,554 |
| | 15,837 | 16,198 | - | 28,741 |
The following movement of contract liabilities was recognised in the year:
| | As at 31 Mar 2022 | Recognised in revenue | Amounts deferred | As at 31 Mar 2023 |
| Group | £'000 | £'000 | £'000 | £'000 |
| Contract liabilities | 39 | (39) | 7 | 7 |
Contract liabilities relate to deferred recognition of retainer fees invoices quarterly. During the year the billing period was aligned to the financial year quarters causing a reduction in contract liabilities at the year-end 31 March 2023.
6. Operating profit/ (loss)
| | Year ended | Year ended |
| | 31 Mar 2023 | 31 Mar 2022 |
| Group | £'000 | £'000 |
| Operating (loss)/profit is stated after charging/(crediting): |
|
|
| Depreciation of property, plant and equipment (note 13) | 231 | 289 |
| Amortisation of intangibles (note 15) | 496 | 505 |
| Short term and low value leases | 112 | 59 |
| IFRS 16 depreciation (note 18) | 366 | 435 |
| Employee benefit expense (note 7) | 16,744 | 21,300 |
| Restructuring and non-recurring legal and regulatory costs | - | 1,191 |
| Other administrative expenses | 9,326 | 9,083 |
|
|
|
|
| Auditors' remuneration: |
|
|
| Audit of these financial statements | 60 | 50 |
| Amounts payable to the principal auditors and their associates in respect of: |
|
|
| - audit of financial statements of subsidiaries pursuant to legislation | 115 | 95 |
| - audit related assurance services | 50 | 55 |
| - audit of financial statements relating for prior year | 50 | - |
| | 27,550 | 33,062 |
| Expected credit loss (note 20) | 239 | 81 |
| Total | 27,789 | 33,143 |
Other administrative expenses are incurred in the ordinary course of the business and do not include any non-recurring items.
7. Employee benefit expense
The Group claimed £nil of grants during the year (FY22: £7k) from the UK Government through the Coronavirus Job Retention Scheme. No staff remained on furlough from 30 June 2021.
Non-salaried staff are commission-only brokers and therefore do not receive a salary.
| | Year ended | Year ended |
| | 31 Mar 2023 | 31 Mar 2022 |
| Group | £'000 | £'000 |
| Wages and salaries | 11,970 | 12,139 |
| Bonuses | 1,537 | 2,148 |
| Social security costs | 1,734 | 1,975 |
| Other pension costs | 539 | 508 |
| | 15,780 | 16,770 |
| Non salaried staff | 605 | 4,895 |
| Other administrative expenses | 16,385 | 21,665 |
| Charge for share options granted to employees (note 30) | 359 | 470 |
| Less amounts included within Restructuring and non-recurring costs | - | (835) |
| | 16,744 | 21,300 |
| |
| |
| | Year ended | Year ended |
| | 31 Mar 2023 | 31 Mar 2022 |
| Company | £'000 | £'000 |
| Wages and salaries | 207 | 260 |
| |
| |
| | | |
| The average number of persons (including Directors) employed during the year was: |
| |
| | | |
| | Year ended | Year ended |
| Group | 31 Mar 2023 | 31 Mar 2022 |
| Executive and senior management | 6 | 8 |
| Capital Markets | 50 | 42 |
| Wealth Management | 74 | 75 |
| Support staff | 30 | 26 |
| Salaried staff | 160 | 151 |
| Non salaried staff | 3 | 7 |
| Total | 163 | 158 |
| |
|
|
| | Year ended | Year ended |
| Company | 31 Mar 2023 | 31 Mar 2022 |
| Executive and senior management | 4 | 4 |
The total amount paid to Directors in the period, including social security costs was £0.9m (FY22: £1.6m).
8. Finance income and expense
| | Year ended | Year ended |
| | 31 Mar 2023 | 31 Mar 2022 |
| Group | £'000 | £'000 |
| Bank interest receivable | 10 | 1 |
| Other interest | - | - |
| Finance income | 10 | 1 |
| | | - |
| |
|
|
| Interest payable on lease liabilities | 51 | 93 |
| Fair value and present value discount of deferred consideration (see note 24) | 173 | 416 |
| Other interest | - | 2 |
| Finance expense | 224 | 511 |
9. Other income
| | Year ended | Year ended |
| | 31 Mar 2023 | 31 Mar 2022 |
| Group | £'000 | £'000 |
| VAT refund | 2,175 | - |
| Total other income | 2,175 | - |
During the year the Group received a refund of £2.2m from HMRC. This was following confirmation from HMRC that the supply of certain Group services were exempt from VAT during the period from 2017 to 2022.
10. Taxation
| | Year ended | Year ended |
| | 31 Mar 2023 | 31 Mar 2022
|
| Group | £'000 | £'000 |
| Current tax expense: | | |
| United Kingdom corporation tax at 19% (FY22: 19%) | - | - |
| Total current tax | - | - |
| |
| |
| Deferred tax credit (note 19): | | |
| Current year | 121 | (67) |
| Effect of change in tax rate | - | - |
| Total deferred tax | 121 | (67) |
| Total tax in the statement of comprehensive income | 121 | (67) |
The tax credit for the year and the amount calculated by applying the standard United Kingdom corporation tax rate of 19% (FY22: 19%) to profit before tax can be reconciled as follows:
| | Year ended | Year ended |
| | 31 Mar 2023 | 31 Mar 2022 |
| Group | £'000 | £'000 |
| (Loss)/ profit before tax | (1,823) | 8 |
| Tax expense using the United Kingdom corporation tax rate of 19% (FY22: 19%) | (346) | 2 |
| Other expenses not tax deductible | 334 | 183 |
| Income not chargeable to tax | (11) | (6) |
| Movement in unrecognised deferred tax | (60) | (246) |
| Movement in recognised deferred tax | 190 | - |
| Amounts not recognised | 14 | - |
| Total tax credit in the statement of comprehensive income | 121 | (67) |
11. Dividend
No dividend is proposed in respect of 2023 (FY22: none).
12. Earnings per share (EPS)
Basic EPS is calculated by dividing the profit or loss attributable to equity holders of the Company by the weighted average number of ordinary shares in issue during the year, excluding ordinary shares purchased by the Company (note 28).
Diluted EPS is the basic EPS, adjusted for the effect of the conversion into fully paid shares of the weighted average number of all employee share options outstanding. In a year when the Company presents positive earnings attributable to ordinary shareholders, anti-dilutive options represent options issued where the exercise price is greater than the average market price for the period.
Reconciliations of the earnings and weighted average number of shares used in the calculations are set out below:
| | Year ended | Year ended |
| | 31 Mar 2023 | 31 Mar 2022 |
| Group |
| |
| Weighted average number of shares in issue during the period | 59,172 | 59,692 |
| Effect of dilutive share options | - | 1,190 |
| (thousands) |
|
|
| | 59,172 | 60,882 |
| |
| |
| Total |
|
|
| Profit for the year attributable to ordinary shareholders (£'000) | (1,944) | 75 |
| Basic | (3.29p) | 0.13p |
| Diluted | - | 0.12p |
13. Property, plant and equipment
| | Group |
| Company |
| | Computers, |
| Computers, |
| | fixtures and fittings |
| fixtures and fittings |
|
| £'000 | | £'000 |
| Cost |
| | |
| At 31 March 2021 | 5,645 | | 33 |
| Additions | 103 | | 4 |
| At 31 March 2022 | 5,748 | | 37 |
| Additions | 475 | | - |
| Disposal | - | | (4) |
| At 31 March 2023 | 6,223 |
| 33 |
|
| | | - |
| Depreciation and impairment |
| | |
| At 31 March 2021 | 5,134 | | 33 |
| Depreciation charge | 289 | | - |
| At 31 March 2022 | 5,423 | | 33 |
| Depreciation charge | 231 | | - |
| At 31 March 2023 | 5,654 |
| 33 |
|
| | | - |
| Net book values |
| | |
| At 31 March 2023 | 569 | | - |
| At 31 March 2022 | 325 | | 4 |
Included in the above, are software costs capitalised in the year with a net book value at 31 March 2023 of £116k (FY22: £nil).
14. Goodwill
Goodwill acquired in a business combination is allocated to a cash generating unit (CGU) that will benefit from that business combination.
The carrying amount of goodwill acquired in the acquisition of Harpsden Wealth Management is set out below:
| | Year ended | Year ended |
| | 31 Mar 2023 | 31 Mar 2022 |
| Group | £'000 | £'000 |
| Beginning of year | 3,539 | 3,539 |
| End of year | 3,539 | 3,539 |
Goodwill is assessed annually for impairment and the recoverability has been assessed at 31 January 2023 by comparing the carrying value of the CGU to which the goodwill is allocated against its recoverable amount. The recoverable amount is the higher of the CGU's fair value less cost to sell and the value in use. The value in use has been calculated using pre-tax discounted cash flow projections based on the most recent budgets and forecasts approved by the Board of Directors.
The projections cover a five-year period and a terminal multiple has been applied to the cash-flows extrapolating the projections consistent with the assumed indefinite useful life of the goodwill.
The Harpsden CGU recoverable amount was calculated as £10.0m (FY22: £10.94m), indicating that there is no impairment. The main underlying assumptions used in the calculations are the pre-tax discount rate, the short-term growth in revenue and expenditure and the long-term growth rate to perpetuity. The revenue growth used in the cash flow forecast is based on the AUM forecasts multiplied by the relevant yields. AUM forecasted growth ranges from -2.6% to 5.0% (FY22: 5% to 13%). Cash outflows have been estimated at 5% (FY22: 5%) annual increase where no other significant growth has been forecasted. A pre-tax discount rate of 17.9% (14.7%) has been used. This is based on the Group's assessment of the risk-free rate of interest and specific risks relating to Harpsden. A 2% (FY22: 2%) long-term growth rate has been applied, which is prudent when compared against the growth rates used in the forecast calculations for the first five years.
Sensitivity analysis has been performed and no impairment would arise if the following scenarios occurred:
· An increase in pre-tax discount rate from 17.9% to 21.0%
· A fall in perpetuity growth rate from 2% to -3%
· If there was no increase in AUM over the five-year forecast and the subsequent terminal growth was 0%.
· A further fall in AUM in FY25 of 8%, no AUM growth in FY26 and 2% and 5% growth in AUM in FY26 & FY27 respectively would result in a break-even position
Further sensitivity was performed post year-end due to non-adjusting subsequent events that could materially impact the results of the impairment calculation. These events were not known at the reporting date and could not reliably be measured at the time of approval of these finance statements as certain elements remained under negotiation. For instance if AUM were to fall in FY25 from FY24 forecasts by a further 14.6% an impairment charge would be required. Given the uncertainty no impairment charge has been recognised at the year-end 31 March 2023.
15. Intangible assets
Client relationships arise when the group acquires a broker business with an existing client base. The assets below represent the fair value of future benefits arising from these client relationships. Amortisation of client relationships is charged to administrative expenses in the consolidated statement of comprehensive income on a straight-line basis over the estimated useful lives (2 to 12 years). No impairment indicators were present for the acquired client relationship contracts.
| | Client |
|
|
|
| relationships | Brand | Total |
| Group | £'000 | £'000 | £'000 |
| Cost |
|
|
|
| At 31 March 2021 | 8,731 | 75 | 8,806 |
| Additions | - | - | - |
| At 31 March 2022 | 8,731 | 75 | 8,806 |
| Additions | - | - | - |
| At 31 March 2023 | 8,731 | 75 | 8,806 |
|
| | |
|
| Amortisation |
|
|
|
| At 31 March 2021 | 4,033 | 9 | 4,042 |
| Charge for the year | 467 | 38 | 505 |
| At 31 March 2022 | 4,500 | 47 | 4,547 |
| Charge for the year | 468 | 28 | 496 |
| At 31 March 2023 | 4,968 | 75 | 5,043 |
|
| | |
|
| Net book values |
|
|
|
| At 31 March 2023 | 3,763 | - | 3,763 |
| At 31 March 2022 | 4,231 | 28 | 4,259 |
During the year ended 31 March 2021, the group acquired client relationships totalling £4.2m as part of the Harpsden acquisition and at the year ending 31 March 2023 the net book value was £3.37m (FY22: £3.72m) and remaining useful economic life of 8 years (FY22: 9 years). An intangible asset was also recognised representing the Harpsden brand totalling £75k and at the year ending 31 March 2023 the net book value was fully amortised.
An intangible asset was recognised relating to the client relationships brought in by Robert Race when he joined the group. At the year ended 31 March 2023 the net book value was £367k (FY22: £489k) and remaining useful economic life of 3 years (FY22: 4 years).
The company did not have any intangible assets either at 31 March 2023 or 31 March 2022.
16. Subsidiaries
| | Year ended | Year ended |
| | 31 Mar 2023 | 31 Mar 2022 |
| Company | £'000 | £'000 |
| Beginning of year | 26,448 | 26,448 |
| End of year | 26,448 | 26,448 |
Investments in subsidiaries are stated at cost less impairment.
The Company's subsidiaries, all of which are included in the consolidated financial statements, are presented below:
| Subsidiary | Country of incorporation | Principal activity | Class of shares | Proportion held by Group | Proportion held by Company |
| WH Ireland Limited | England & Wales | WM and CIB | Ordinary | 100% | 100% |
| Harpsden Wealth Management Limited | England & Wales | WM | Ordinary | 100% | 100% |
| WH Ireland (Financial Services) Limited | England & Wales | Dormant | Ordinary | 100% | - |
| Readycount Limited | England & Wales | Dormant | Ordinary | 100% | 100% |
| Stockholm Investments Limited | England & Wales | Dormant | Ordinary | 100% | 100% |
| ARE Business and Professional Limited | England & Wales | Dormant | Ordinary | 100% | - |
| SRS Business and Professional Limited | England & Wales | Dormant | Ordinary | 100% | - |
| WH Ireland Nominees Limited | England & Wales | Nominee | Ordinary | 100% | - |
| WH Ireland Trustee Limited | England & Wales | Trustee | Ordinary | 100% | - |
| Fitel Nominees Limited | England & Wales | Nominee | Ordinary | 100% | - |
The registered office of all companies listed above is 24 Martin Lane, London, EC4R 0DR.
The following dormant subsidiaries are guaranteed by the Company and therefore take advantage of the Companies Act (2006) in obtaining exemption from an individual audit:
| Subsidiary | Country of incorporation | Company registration number |
| WH Ireland (Financial Services) Limited | England & Wales | 4279349 |
| Readycount Limited | England & Wales | 3164863 |
| Stockholm Investments Limited | England & Wales | 4215675 |
| ARE Business and Professional Limited | England & Wales | 3681185 |
| SRS Business and Professional Limited | England & Wales | 4238969 |
| WH Ireland Nominees Limited | England & Wales | 2908691 |
| WH Ireland Trustee Limited | England & Wales | 3559373 |
| Fitel Nominees Limited | England & Wales | 1401140 |
17. Investments
| Group |
| | |
| | Quoted | Unquoted | Total |
| Financial assets at fair value through profit or loss | £'000 | £'000 | £'000 |
| At 31 March 2022 | - | 48 | 48 |
| At 31 March 2023 | - | 48 | 48 |
|
| | | |
| | Quoted | Warrants* | Total |
| Other financial assets at fair value through profit or loss | £'000 | £'000 | £'000 |
| At 31 March 2021 | 1 | 1,050 | 1,051 |
| Additions | - | 850 | 850 |
| Fair value gain | - | 1,072 | 1,072 |
| Disposals | - | (8) | (8) |
| At 31 March 2022 | 1 | 2,964 | 2,965 |
| Additions | - | 286 | 286 |
| Fair value loss | - | (2,060) | (2,060) |
| Disposals | (1) | (370) | (371) |
| At 31 March 2023 | - | 820 | 820 |
|
| | | |
| Total investments at 31 March 2023 | - | 820 | 820 |
| Total investments at 31 March 2022 | 1 | 3,012 | 3,013 |
Financial assets at fair value through profit or loss include equity investments other than those in subsidiary undertakings. These are measured at fair value with fair value gains and losses recognised through profit and loss.
Other investments, in the main, comprise financial assets designated as fair value through profit or loss and include warrants and equity investments.
Warrants may be received during the ordinary course of business and are designated as fair value through profit or loss. There is no cash consideration associated with the acquisition.
Fair value, in the case of quoted investments, represents the bid price at the reporting year-end date. In the case of unquoted investments, the fair value is estimated by reference to recent arm's length transactions. The fair value of warrants is estimated using established valuation models.
The fair value of the warrants was determined using the Black Scholes model and grouped within level 3 with fair value measurements derived from formal valuation techniques (see note 25). The key inputs into this calculation are the share price as at 31 March 2023, exercise price, risk free interest rate and volatility which is based on the share price movements during the same length as the remaining time of exercise.
Included in non-operational income is the fair value loss totalling £2,060k (2022 gain: £1,072k).
| | | Year ended | Year ended |
| | | 31 Mar 2023 | 31 Mar 2022 |
| Net gains on investing activities | | £'000 | £'000 |
| Fair value (loss) / gain on warrants | | (2,060) | 1,072 |
| Fair value (loss) / gain on investments |
| (623) | 554 |
| Total net gain on investing activities | | (2,683) | 1,626 |
|
18. Right of use asset and lease liability
| | Leasehold Properties |
|
| £'000 |
| Cost |
|
| At 31 March 2021 | 2,667 |
| Additions | - |
| At 31 March 2022 | 2,667 |
| Additions | 445 |
| Disposals | (1,185) |
| Deferred rent release | 125 |
| At 31 March 2023 | 2,052 |
|
| |
| Depreciation and impairment |
|
| At 31 March 2021 | 1,064 |
| Charge for the year | 435 |
| At 31 March 2022 | 1,499 |
| Charge for the year | 366 |
| Disposal | (448) |
| At 31 March 2023 | 1,417 |
|
|
|
| Net book values |
|
| At 31 March 2023 | 635 |
| At 31 March 2022 | 1,168 |
The table below represents the minimum lease payments in relation to non-cancellable leases where the group is a lessee:
| | Group | |||
|
| Payable within 1 year | Payable in 2 to 5 years | Payable after more than 5 years | Total contractual payments |
| Group | £'000 | £'000 | £'000 | £'000 |
| 2023 | 319 | 281 | 12 | 612 |
| 2022 | 376 | 956 | 43 | 1,375 |
The following represents the lease expense in relation to leases which is recognised in the statement of comprehensive income:
| | Year ended | Year ended |
| | 31 Mar 2023 | 31 Mar 2022 |
| Group | £'000 | £'000 |
| Depreciation of right of use asset | 366 | 435 |
| Deferred rent release | (125) | - |
| Interest charge | 51 | 85 |
| Total charge | 417 | 520 |
The Group leases a number of properties in the jurisdictions it operates.
These leases are usually for a fixed term although the Group sometimes negotiates break clauses in its leases. On a case-by-case basis, the Group will consider whether the absence of a break clause would expose the group to excessive risk. Typically factors considered in deciding to negotiate a break clause include:
· the length of the lease term;
· the economic stability of the environment in which the property is located; and
· whether the location represents a new area of operations for the Group
As at 31 March 2023, the carrying amounts of the lease liabilities are not reduced by the amounts that would not be paid as a result of exercising the break clauses because the Group does not anticipate exercising its rights to the break clauses.
The total cash outflow for leases, including short-term leases, in the year ending 31 March 2023 was £540k (FY22: £827k)
Payments associated with short-term leases and all leases of low-value assets are recognised on a straight-line basis in administrative expenses. Short-term leases are leases with a lease term of 12 months or less without a purchase option.
The Company did not have any right of use assets or lease liabilities either at 31 March 2023 or 31 March 2022.
19. Deferred tax assets and liabilities
Deferred tax is provided for temporary differences, at the reporting year-end date, between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes using a tax rate of 19% (FY22: 19%). A deferred tax asset is recognised for all deductible temporary differences and unutilised tax losses only to the extent that it is probable that future taxable profits will be available against which the assets can be utilised. Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefit will be realised.
A net deferred tax liability has been recognised in the year:
| | Year ended | Year ended |
| | 31 Mar 2023 | 31 Mar 2022 |
| Group | £'000 | £'000 |
| Tax losses | - | 190 |
| Intangible acquired on business combinations | (663) | (736) |
| Other | - | 4 |
| Deferred tax liability | (663) | (542) |
The change in deferred tax assets and liabilities during the year was as follows:
| | Trading losses carried forward | Total |
| Group | £'000 | £'000 |
| Deferred tax asset | | |
| As at 31 March 2022 | 190 | 190 |
| As at 31 March 2023 | - | - |
| | | |
| The carrying amount of the deferred tax asset is reviewed at each reporting date and is only recognised to the extent that it is probable that future taxable profits of the Group will allow the asset to be recovered. Based on budgets for FY24 it was determined that while there is an improved chance of return to a break-even position, there is uncertainty on when the deferred tax asset will be realised in the foreseeable future. Therefore the deferred tax asset has been reduced to nil and a tax charge has been recognised accordingly. | ||
| | | |
| | Intangible asset amortisation | Total |
| Group | £'000 | £'000 |
| Deferred tax liabilities | | |
| As at 1 April 2021 | 799 | 799 |
| Credit to the Consolidated statement of comprehensive income | (67) | (67) |
| As at 31 March 2022 | 732 | 732 |
| Credit to the Consolidated statement of comprehensive income | (69) | (69) |
| As at 31 March 2023 | 663 | 663 |
The unrecognised tax losses and fixed asset timing differences amount to £16.0m (FY22: £13.4m). No deferred tax has been recognised in respect of these losses due to the uncertainty over the timing of future profits.
The Company had no deferred tax balances either at 31 March 2023 or 31 March 2022.
20. Trade and other receivables
| | Group | Company | ||
| | 31 Mar 2023 | 31 Mar 2022 | 31 Mar 2023 | 31 Mar 2022 |
| | £'000 | £'000 | £'000 | £'000 |
| Trade receivables | 643 | 751 | - | - |
| Other receivables | 528 | 893 | 14 | 95 |
| Accrued income | 3,008 | 3,079 | - | - |
| Prepayments | 1,265 | 1,035 | 15 | 18 |
|
| 5,444 | 5,758 | 29 | 113 |
The carrying value of trade and other receivable balances are denominated fully in British pounds (FY22: 100%).
Accrued income relates to management fee accruals. Management fees are accrued on a monthly basis and reconciled to fees collected quarterly. Consideration to IFRS 9 has been made and it has been determined that there is a low probability of default and therefore the expected credit loss is not material.
The impact of applying IFRS 9 to intercompany balances for the Company has been considered and probability of default was assessed and consequently, it was determined that the expected credit loss is not material.
Fees and charges owed by clients are generally considered to be past due where they remain unpaid five working days after the relevant billing date. At 31 March 2023, trade receivables (net of provisions for impairment and doubtful debts) comprised of the following:
| | Group | Company | ||
| | 31 Mar 2023 | 31 Mar 2022 | 31 Mar 2023 | 31 Mar 2022 |
| | £'000 | £'000 | £'000 | £'000 |
| Not past due | 17 | 194 | - | - |
| Up to 5 days due | - | 9 | - | - |
| from 6 to 15 days past due | - | 219 | - | - |
| From 16 to 30 days past due | - | 1 | - | - |
| From 31 to 45 days past due | 467 | 113 | - | - |
| More than 45 days past due | 159 | 215 | - | - |
|
| 643 | 751 | - | - |
Included in aged receivables more than 45 days past due is the provisions for impairment of £254k (FY22: £502k).
Trade receivables are largely amounts due from retainer clients, who are invoiced on a quarterly basis in advance. The Group's policy is to allow 30 days for payment. Consequently, these receivables have no significant financing component and the Group have applied the simplified approach in line with IFRS 9. Calculation of loss allowances are measured at an amount equal to lifetime expected credit losses (ECLs). The approach taken by the Group in arriving at the expected credit loss is as follows:
Step 1: The Group have determined the appropriate brackets by grouping each trade receivables based on the ageing structure.
Step 2: Having determined the appropriate groupings, a historical loss rate (adjusted for forward looking information) was calculated for each age bracket by reviewing the pattern of payment of trade receivables over the past 12 months.
Step 3: This historical loss rate (adjusted for forward looking information) has been applied to each ageing bracket of trade receivables as at the balance sheet date to arrive at an expected credit loss for each grouping. All trade receivables over 365 days have a 100% historical loss rate loss applied to them.
Based on the above, the group recognised an expected credit loss of £239k (FY22: £81k expected credit loss).
The maximum exposure to credit risk, before any collateral held as security, is the carrying value of each class of receivable set out above.
The Directors consider that the carrying amounts of trade and other receivables approximate their fair value.
Movements in impairment provisions were as follows:
| | Group | Company | ||
| | 31 Mar 2023 | 31 Mar 2022 | 31 Mar 2023 | 31 Mar 2022 |
| | £'000 | £'000 | £'000 | £'000 |
| Opening balance | 502 | 421 | - | - |
| Amount released from provision due to recovery | (25) | (57) | - | - |
| Amounts written off, previously fully provided | (493) | - | - | - |
| Amount charged to the statement of comprehensive income | 264 | 138 | - | - |
| Closing balance | 248 | 502 | - | - |
21. Other investments
| | Group | Company | |||
| | 31 Mar 2023 | 31 Mar 2022 | | 31 Mar 2023 | 31 Mar 2022 |
| | £'000 | £'000 | | £'000 | £'000 |
| Current asset investment | 922 | 1,490 | | - | - |
| Restricted cash | 1,127 | 422 | | - | - |
| Total | 2,049 | 1,912 | | - | - |
Current asset investments represent short-term principal positions in the form of listed and unquoted investments which are held at market value.
Included in current asset investments are unquoted investments totalling a value of £nil (FY22: £701k).
Restricted cash represents monies held by the Group which have some restrictions on their conversion to cash.
Included in non-operational income is the fair value gain and the sale of investments. Further details can be found in note 17.
22. Cash and cash equivalents
| | Group | Company | ||
| | 31 Mar 2023 | 31 Mar 2022 | 31 Mar 2023 | 31 Mar 2022 |
| | £'000 | £'000 | £'000 | £'000 |
| Cash and cash equivalents | 4,234 | 6,446 | - | 1,246 |
For the purposes of the cash flow statement, cash and cash equivalents comprise cash in hand and deposits with banks and financial institutions with a maturity of up to three months.
Cash and cash equivalents represent the Group's and the Company's money and money held for settlement of outstanding transactions.
Money held on behalf of clients is not included in cash and cash equivalents on the statement of financial position. Client money at 31 March 2023 for the Group was £301k (FY22: £366k). There is no client money held in the Company (FY22: £nil).
23. Trade and other payables
| | Group | Company | ||
| | 31 Mar 2023 | 31 Mar 2022 | 31 Mar 2023 | 31 Mar 2022 |
| | £'000 | £'000 | £'000 | £'000 |
| Trade payables | 1,148 | 2,963 | 12 | 84 |
| Amounts due to Group companies | - | - | 790 | 2,194 |
| Other payables | 89 | 319 | - | - |
| Tax and social security | 588 | 886 | - | - |
| Deferred income | 7 | 39 | - | 1 |
| Accruals | 2,181 | 2,474 | 334 | 78 |
|
| 4,013 | 6,681 | 1,136 | 2,357 |
The Directors consider that the carrying amounts of trade and other payables approximate their fair value.
Deferred income relates to retainer fees invoiced in advance and spread over the length of the period, typically quarterly. The balance at year-end was fully recognised in the following financial year.
Amounts due to Group companies are unsecured, interest free and repayable on demand.
24. Deferred consideration
| Group | £'000 |
| At 31 March 2021 | 1,996 |
| Additions during the year: | - |
| Charged to Statement of Comprehensive Income | 416 |
| Paid during the year | - |
| At 31 March 2022 | 2,412 |
| Additions during the year: | - |
| Charged to Statement of Comprehensive Income | 173 |
| Paid during the year | (464) |
| At 31 March 2023 | 2,121 |
The increase in deferred consideration in the year ended 31 March 2023 represents the fair value adjustment and unwinding of present value discount, offset by the payment made to the former shareholders of Harpsden Wealth Management Limited.
| | 31 Mar 2023 | 31 Mar 2022 |
| | £'000 | £'000 |
| Included in current liabilities | 2,121 | 2,412 |
| Included in non-current liabilities | - | - |
| | 2,121 | 2,412 |
Deferred consideration relates to the acquisition of Harpsden and the maximum amounts payable over a two-year period. The following assumptions were made: revenue growth of 2%, attrition rate of 3% for larger clients and 10% for smaller clients, discount rate of 13.5%.
During the year £464k was paid to former shareholders of Harpsden Wealth Management Limited (Harpsden) in relation to the deferred consideration due. After the year-end further settlement to the former shareholders of Harpsden of £654k was made by way of share issue, see note 33 for further details.
25. Financial risk management
The fair value of all the Group's and the Company's financial assets and liabilities approximated to their carrying value at the reporting year-end date. The carrying amount of non-current financial instruments, including floating interest rate borrowing, are not significantly different from the fair value of these instruments based on discounted cash flows. The significant methods and assumptions used in estimating fair values of financial instruments are summarised below:
Financial assets at fair value through profit or loss include equity investments, other than those in subsidiary undertakings. In the case of listed investments, the fair value represents the quoted bid price at the reporting period end date. The fair value of unlisted investments is estimated by reference to recent arm's length transactions.
Other investments include warrants and equity investments, categorised as fair value through profit or loss. In the case of listed investments, the fair value represents the quoted bid price at the reporting year-end date. The fair value of unlisted investments is estimated by reference to recent arm's length transactions. In the case of warrants, the fair value is estimated using established valuation models.
The carrying value less impairment provision of trade receivables and payables is assumed to approximate to their fair values due to their short-term nature.
Borrowings are measured at amortised cost using the effective interest rate method. The tables below summarise the Group's main financial instruments by financial asset type:
| | 31 March 2023 |
| |||||
|
| Amortised cost | Fair value through profit or loss | Total |
| |||
| Group | £'000 | £'000 | £'000 |
| |||
| Financial assets |
| | |
| |||
| Other investments | - | 2,869 | 2,869 |
| |||
| Trade and other receivables | 4,179 | - | 4,179 |
| |||
| Cash and cash equivalents | 4,234 | - | 4,234 |
| |||
| Financial liabilities | | | |
| |||
| Trade and other payables | 3,418 | - | 3,418 |
| |||
| Deferred consideration | 2,121 | - | 2,121 |
| |||
| Lease liability | 612 | - | 612 |
| |||
|
| 31 March 2022 | ||||||
|
| Amortised cost | Fair value through profit or loss | Total | ||||
| Group | £'000 | £'000 | £'000 | ||||
| Financial assets |
| | | ||||
| Investments | - | 48 | 48 | ||||
| Other investments | - | 4,877 | 4,877 | ||||
| Trade and other receivables | 4,723 | - | 4,723 | ||||
| Cash and cash equivalents | 6,446 | - | 6,446 | ||||
| Financial liabilities | | | | ||||
| Trade and other payables | 5,756 | - | 5,756 | ||||
| Deferred consideration | 2,412 | - | 2,412 | ||||
| Lease Liability | 1,375 | - | 1,375 | ||||
The tables below summarise the Company's main financial instruments by financial asset type:
| | 31 March 2023 | ||
|
| Amortised cost | Fair value through profit or loss | Total |
| Company | £'000 | £'000 | £'000 |
| Financial assets |
| | |
| Trade and other receivables | 14 | - | 14 |
| Cash and cash equivalents | - | - | - |
| Financial liabilities | | | |
| Trade and other payables | 346 | - | 346 |
| Group balances | 790 | - | 790 |
| | 31 March 2022 | ||
|
| Amortised cost | Fair value through profit or loss | Total |
| Company | £'000 | £'000 | £'000 |
| Financial assets |
| | |
| Trade and other receivables | 95 | - | 95 |
| Cash and cash equivalents | 1,246 | - | 1,246 |
| Financial liabilities | | | |
| Trade and other payables | 162 | - | 162 |
| Group balances | 2,194 | - | 2,194 |
The main risks arising from the Group's financial instruments are credit risk, liquidity risk and market risk. Market risk comprises, interest rate risk and other price risk. The Directors review and agree policies for managing each of these risks which are summarised below:
Credit risk is the risk that clients or other counterparties to a financial instrument will cause a financial loss by failing to meet their obligations. Credit risk relates, in the main, to the Group's trading and investment activities and is the risk that third parties fail to pay amounts as they fall due. Formal credit procedures include approval of client limits, approval of material trades, collateral in place for trading clients and chasing of overdue accounts. Additionally, risk assessments are performed on banks and custodians.
The maximum exposure to credit risk at the end of the reporting period is equal to the statement of financial position figure. The impairment policy can be found in note 20. There were no other past due, impaired or unsecured debtors.
Financial assets that are neither past due nor impaired in respect of trade receivables relate mainly to accrued management fees.
The credit risk on liquid funds, cash and cash equivalents is limited due to deposits being held at the Group's main bank with a credit rating of "A", assigned by Standard and Poor's.
There has been no change to the Group's exposure to credit risk or the manner in which it manages and measures the risk during the period.
The credit risk in the Company principally comes from intercompany balances and subordinated loan. Since these are all within the Group, the Directors can closely monitor the risk of default on a regular basis to minimise any potential losses.
Liquidity risk is the risk that obligations associated with financial liabilities will not be met. The Group monitors its risk to a shortage of funds by considering the maturity of both its financial investments and financial assets (for example, trade receivables) and projected cash flows from operations.
The Group's objective is to maintain the continuity of funding using bank facilities where necessary, which are reviewed annually with the Group's Banker, the Bank of Scotland. Items considered are limits in place with counterparties which the bank are required to guarantee, payment facility limits, as well as the need for any additional borrowings.
The table below summarises the maturity profile of the Group's financial liabilities based on contractual undiscounted payments:
| | 31 March 2023 | |||
|
| Payable within 1 year | Payable in 2 to 5 years | Payable after more than 5 years | Total contractual payments |
| Group | £'000 | £'000 | £'000 | £'000 |
| Trade and other payables | 3,418 | - | - | 3,418 |
| Lease liability | 340 | 306 | 14 | 660 |
| Deferred consideration | 2,121 | - | - | 2,121 |
| | 5,879 | 306 | 14 | 6,199 |
| | 31 March 2022 | |||
|
| Payable within 1 year | Payable in 2 to 5 years | Payable after more than 5 years | Total contractual payments |
| Group | £'000 | £'000 | £'000 | £'000 |
| Trade and other payables | 5,756 | - | - | 5,756 |
| Lease liability | 568 | 1,032 | 31 | 1,631 |
| Deferred consideration | 2,500 | - | - | 2,500 |
| | 8,824 | 1,032 | 31 | 9,887 |
The table below summarises the maturity profile of the Company's financial liabilities based on contractual undiscounted payments:
| | 31 March 2023 | |||
|
| Payable within 1 year | Payable in 2 to 5 years | Payable after more than 5 years | Total contractual payments |
| Company | £'000 | £'000 | £'000 | £'000 |
| Trade and other payables | 346 | - | - | 346 |
| | 31 March 2022 | |||
|
| Payable within 1 year | Payable in 2 to 5 years | Payable after more than 5 years | Total contractual payments |
| Company | £'000 | £'000 | £'000 | £'000 |
| Trade and other payables | 162 | - | - | 162 |
The Group's exposure to the risk of changes in market interest rates relates to the Group's amount of interest receivable on cash deposits. The maximum exposure for interest is not significant.
Other price risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices (other than those arising from interest rate risk) whether those changes are caused by factors specific to the individual financial instrument or its issuer or factors affecting all similar financial instruments traded in the market. Other investments are recognised at fair value and subject to changes in market prices.
The Group manages other price risk by monitoring the value of its financial instruments monthly and reporting these to the Directors and Senior Management. The Group has disposed of several of its investments during the year, which has helped mitigate risk. However, the risk of deterioration in prices remains high whilst the market continues to be volatile.
The risk of future losses is limited to the fair value of investments as at the year-end of £2,869k (FY22: £4,925k). See note 17 and 21.
The following table provides an analysis of financial instruments that are measured after initial recognition at fair value, grouped into Levels 1 to 3 based on the degree to which the fair value is observable:
· Level 1 at fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets and liabilities;
· Level 2 fair value measurements are those derived from inputs other than the quoted price included within Level 1 that are observable for the asset or a liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and
· Level 3 fair value measurements are those derived from formal valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs). The valuation technique used in determining the fair value is the Black Scholes model. The key inputs into this calculation are the share price as at 31 March 2022, exercise price, risk free interest rate and volatility which is based on the share price movements during the period 1 December 2021 to 31 March 2022.
| | 31 March 2023 | |||
|
| Level 1 | Level 2 | Level 3 | Total |
| | £'000 | £'000 | £'000 | £'000 |
| Financial assets at fair value through profit or loss |
| | | |
| Unquoted equities | - | - | - | - |
| Financial instruments designated at fair value through profit or loss |
| | | |
| Quoted equities | - | - | - | - |
| Other investments (note 17 & 21) | 2,049 | - | 820 | 2,869 |
| Deferred consideration | - | - | (2,121) | (2,121) |
| Total | 2,049 | - | (1,301) | 748 |
| | 31 March 2022 | |||
|
| Level 1 | Level 2 | Level 3 | Total |
| | £'000 | £'000 | £'000 | £'000 |
| Financial assets at fair value through profit or loss |
| | | |
| Unquoted equities | 701 | - | 48 | 749 |
| Financial instruments designated at fair value through profit or loss |
| | | |
| Quoted equities | - | - | 1 | 1 |
| Other investments (note 17 & 21) | 1,211 | - | 2,964 | 4,175 |
| Deferred consideration | - | - | (2,412) | (2,412) |
| Total | 1,912 | - | 601 | 2,513 |
26. Capital management
The capital of the Group comprises share capital, share premium, retained earnings and other reserves. The total capital at 31 March 2023 amounted to £13.8m for the Group (FY22: £15.4m) and £24.3m for the Company (FY22: £23.9m). The primary objective of the Group's capital management is to ensure that it maintains a strong capital structure to support the development of its business, to maximise shareholder value and to provide benefits for its other stakeholders.
These objectives are met by managing the level of debt and setting dividends paid to shareholders at a level appropriate to the performance of the business.
Certain activities of the Group are regulated by the FCA which is the statutory regulator for financial services business and has responsibility for policy, monitoring and discipline for the financial services industry. The FCA requires the Group's resources to be adequate, that is, sufficient in terms of quantity, quality and availability, in relation to its regulated activities.
The Group monitors capital on a daily basis by measuring movements in the Group regulatory capital requirement and through its Internal Capital Adequacy and Risk Assessment Process (ICARA), which was formerly through its Internal Capital Adequacy Assessment Process (ICAAP). Compliance with FCA minimum common equity tier 1 regulatory capital requirements was maintained during the year and the Group is satisfied that there is and will be, sufficient capital to meet these regulatory requirements for the foreseeable future.
27. Share capital and share premium account
| | Number of | Share | Share |
|
| shares | capital | premium |
|
| £'000 | £'000 | £'000 |
| As at 1 April 2021 | 62,022 | 3,101 | 18,983 |
| Shares issued: | | | |
| On placing | 64 | 3 | 31 |
| Balance at 31 March 2022 | 62,086 | 3,104 | 19,014 |
| | | | |
| Shares issued: | | | |
| On placing | 225 | 12 | - |
| Balance at 31 March 2023 | 62,311 | 3,116 | 19,014 |
At 31 March 2023 the total number of issued ordinary shares is 62.31 million shares of 5p each (FY22: 62.09 million shares of 5p each). 0.23 million shares were issued during the period (FY22: 0.06 million) in respect of vested employee share options.
28. Treasury shares
| | Year ended 31 March 2023 | Year ended 31 March 2022 |
| Group | £'000 | £'000 |
| At 31 March | 900 | 644 |
| Additions | 193 | 256 |
| At 31 March | 1,093 | 900 |
At 31 March 2023 no shares in the Company were held in the EBT (FY22: nil shares) and the ESOT held 3,017,418 shares (FY22: 2,639,500), at a nominal value of 5p per share and represents the full balance above. This represents 4.84% of the called up share capital (FY22: 4.25%).
During the year the Company's Employee Share Option trust (ESOT) purchased the following ordinary shares in the Company:
| | Number of shares | Nominal value | Total consideration |
| Date of issue | £'000 | £'000 | £'000 |
| 07-Apr-22 | 50,000 | 5p | 22,500 |
| 04-May-22 | 50,000 | 5p | 21,000 |
| 07-Jun-22 | 50,000 | 5p | 19,425 |
| 06-Jul-22 | 50,000 | 5p | 19,225 |
| 03-Aug-22 | 50,000 | 5p | 18,250 |
| 07-Sep-22 | 50,000 | 5p | 17,075 |
| 03-Oct-22 | 50,000 | 5p | 14,925 |
| 25-Nov-22 | 50,000 | 5p | 14,000 |
| 07-Dec-22 | 50,000 | 5p | 14,500 |
| 17-Jan-23 | 50,000 | 5p | 12,000 |
| 09-Feb-23 | 50,000 | 5p | 11,000 |
| 13-Mar-23 | 50,000 | 5p | 10,500 |
29. Employee Benefit Trusts (EBT)
The WH Ireland EBT was established in October 1998 and the WH Ireland Group plc Employee Share Ownership Trust (ESOT) was established in October 2011, both for the purpose of holding and distributing shares in the Company for the benefit of the employees. All costs of the EBT and ESOT are borne by the Company or its subsidiary WH Ireland Limited.
Joint Ownership Arrangements (the 'JOE Agreements') are in place in relation to 400,000 shares between the trustees of the ESOT and a number of employees (the 'Employees'). Under the JOE Agreements, the option for the Employees to acquire the interest that the trustees of the ESOT has in the jointly owned shares, lapses when an employee is deemed to be a Bad Leaver. If an Employee ceases to be an employee of the Group, other than in the event of critical illness or death, the Employee is deemed to be a Bad Leaver.
The shares carry dividend and voting rights though these have been waived by all parties to the JOE Agreements. Due to the consolidation of the ESOT into the Group accounts, these shares are shown in Treasury (note 28). Due to the nature of these arrangements, the options contained in the JOE Agreements are accounted for as share-based payments (note 30).
30. Share-based payments
The Group had two schemes for the granting of non-transferable options to employees during the reporting period; the approved Company Share Ownership Plan (CSOP) and a Save as You Earn Schemes (SAYE). In addition, options are held in the ESOT (note 29). SAYE matures in July 2025.
Company Share Ownership Plan (CSOP)
Under the terms of the Unapproved Options, options over the Company's shares may be granted on a discretionary basis to employees and consultants of the Group (including Directors) at a price to be agreed between the Company and the relevant option holder. Under the terms of the options granted, such options vest on the third anniversary of the award dates; are exercisable at the market price at the time the option was issued and are exercisable for ten years after the vesting date.
Movements in the number of share options outstanding that were issued post 7 November 2002 and their related weighted average exercise prices (WAEP) are as follows:
| |
| 31 March 2023 | ||||||||||||||
|
| CSOP | ESOT | ESOT | 2019 LTIP | 2020 EMI Option Plan | 2022 EMI Option Plan |
| |||||||||
| | Options | WAEP | Options | WAEP | Options | WAEP | Options | WAEP | Options | WAEP | Options | WAEP |
| |||
| Outstanding at beginning of year | 35,502 | 84.50p | 350,000 | 74.50p | 50,000 | 92.5p | 1,800,000 | 45.00p | 3,644,170 | 37.34p | - | - |
| |||
| Granted | - | - | - | - | - | - | - | - | - | - | 2,678,568 | 46.00p |
| |||
| Expired / forfeited | (35,502) | 84.50p | (100,000) | 74.50p | - | - | (150,000) | 45.00p | (260,416) | 48.00p | | - |
| |||
| Exercised | - | - | - | - | - | - | - | - | (447,393) | 48.00p | - | - |
| |||
| Outstanding at end of year | - | 0.00p | 250,000 | 74.50p | 50,000 | 92.50p | 1,650,000 | 45.00p | 2,936,361 | 44.45p | 2,678,568 | 46.00p |
| |||
| Exercisable at end of year | - | 0.00p | 250,000 | 74.50p | 50,000 | 92.50p | 1,650,000 | 45.00p | 2,936,361 | 44.45p | 2,678,568 | 46.00p |
| |||
| WA Life* | - | 0.50 yrs | 3.01 yrs | 7.10 yrs | 10.68 yrs | 9.32 yrs |
| |||||||||
* WA Life represents the weighted average contractual life in years to the expiry date for options outstanding at the end of the year.
| |
| 31 March 2022 | |||||||||
|
| | CSOP | ESOT | ESOT | Unapproved Options | 2020 EMI Option Plan | |||||
| | | Options | WAEP | Options | WAEP | Options | WAEP | Options | WAEP | Options | WAEP |
| Outstanding at beginning of year | | 127,002 | 64.69p | 350,000 | 74.50p | 50,000 | 92.50p | 1,800,000 | 45.00p | 4,330,719 | 40.43p |
| Granted | | - | - | - | - | - | - | - | - | 387,929 | 25.78p |
| Expired / forfeited | | (91,500) | 57.00p | - | - | - | - | - | - | (1,074,478) | 45.60p |
| Exercised | | - | - | - | - | - | - | - | - | - | - |
| Outstanding at end of year | | 35,502 | 84.50p | 350,000 | 74.50p | 50,000 | 92.50p | 1,800,000 | 45.00p | 3,644,170 | 37.34p |
| Exercisable at end of year | | 35,502 | 84.50p | 350,000 | 74.50p | 50,000 | 92.50p | - | - | - | - |
| WA Life* | | 0.08 yrs | 1.50 yrs | 4.01 yrs | 8.03 yrs | 10.26 yrs | |||||
* WA Life represents the weighted average contractual life in years to the expiry date for options outstanding at the end of the year.
The pricing models used to value these options and their inputs are as follows:
| |
| Pricing Models | ||||
|
| CSOP | ESOT | ESOT | 2019 LTIP | 2020 EMI Option Plan | 2022 EMI Option Plan |
| Pricing model | Black Scholes | Monte Carlo | N/A | N/A | N/A | N/A |
| Date of grant | 02/11/11-24/05/12 | 28/10/13-13/4/16 | 30/05/17 | 28/06/19 & 28/12/19 | 01/11/20 - 01/09/21 | 01/04/22 - 01/11/22 |
| Share price at grant (p) | 56.5-83.0 | 74.5-114.5 | 125 | 45.0 & 49.0 | 42.0-56.5 | 30.0-45.00 |
| Exercise price (p) | 57.0-84.5 | 0.0-114.5 | - | 45.0 & 49.0 | 0.0-58.0 | 42.0-48.0 |
| Expected volatility (%) | 32.6332-33.2130 | 43.0000-37.0000 | N/A | 50 | 50 | 21-22 |
| Expected life (years) | 5 | 5 | 3 | 3 | 1-3 | 3 |
| Risk-free rate (%) | 1.2993-.0.7999 | 0.8000-1.9300 | N/A | 2 | 5 | 1.38-3.22 |
| Expected dividend yield (%) | - | 0.67-2.19 | N/A | N/A | N/A | N/A |
31. Capital commitments
There were no capital commitments for the Group or the Company as at 31 March 2023 (FY22: £nil).
32. Related party transactions
Services rendered to related parties were on the Group's normal trading terms in an arms' length transaction. Amounts outstanding are unsecured and will be settled in accordance with normal credit terms. No guarantees have been given or received. No provision (FY22: £nil) has been made for impaired receivables in respect of the amounts owed by related parties.
Key management personnel include Executive and Non-Executive Directors of WH Ireland Group plc and all its subsidiaries. They can undertake transactions in stocks and shares in the ordinary course of the Group's business, for their own account and are charged for this service, as with any other client. The transactions are not material to the Group in the context of its operations, but may result in cash balances on the Directors' client accounts owing to or from the Group at any one point in time. The charges made to these individuals and the cash balances owing from/due to them are disclosed in the table below. There are no other material contracts between the Group and the Directors.
No transactions occurred with key management personnel and other relates parties during the year ended 31 March 2023 or 31 March 2022.
The total compensation of key management personnel is shown below:
| | Year ended 31 March 2023 | Year ended 31 March 2022 |
|
| £'000 | £'000 |
| Short-term employee benefits | 2,528 | 3,784 |
| Post-employment benefits | - | 15 |
| Termination benefits | - | 443 |
| Share-based payment | - | - |
| | 2,528 | 4,242 |
The highest paid Director for 2023 was P Wale receiving emoluments of £470,868 (FY22: £468,325).
The Parent Company receives interest from subsidiaries in the normal course of business. Total interest received during the year was £nil (FY22: £nil). In addition, the Parent Company received a management charge of £879k (FY22: £651k) from its subsidiary WH Ireland Limited. WH Ireland Limited also charged the Parent Company £nil (FY22: £nil) for broker services.
Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation. The captions in the primary statements of the Parent Company include amounts attributable to subsidiaries. These amounts have been disclosed in aggregate in the notes 16, 20 and 23 and in detail in the following table:
| | Amounts owed by related parties | Amounts owed to related parties | ||
| | 2023 | 2022 | 2023 | 2022 |
| | £'000 | £'000 | £'000 | £'000 |
| Readycount Limited | - | - | - | - |
| Stockholm Investments Limited | - | - | - | - |
| WH Ireland Limited | - | - | 478 | 1,882 |
| Harpsden Wealth Management Limited | - | - | 295 | 295 |
| WH Ireland Trustee Limited | - | - | 17 | 17 |
| | - | - | 790 | 2,194 |
The net amount owed to related parties is £790k (FY22: £2,194k owed by related parties) (see note 20 and 23).
33. Events after the reporting date
Following the year-end, as a result of the widely reported multi-year low level of transactional activity in the financial capital markets the Directors assessed it was unlikely there would be an improvement in CM transactions activity or an uplift in AUM within the WM division during the summer of 2023.
Discussions were held with the FCA and to ensure that, in the absence of the injection of further capital pursuant to the placing, the Company could deliver a solvent wind down for the Group, if required, in line with the Group's solvent wind down plan (SWDP). A solvent wind down plan is a plan drawn up in accordance with regulatory requirements to facilitate an orderly wind down of a regulated firm, as further described below. Due to adverse current and forecast trading and resultant losses, without further funding pursuant to the placing, the SWDP would have been required to be implemented on 31 July 2023. In total the placing raised gross proceeds of £5m by way of 166,666,667 ordinary shares at a price of 3p. The placing took place on 28 July 2023 and funds were received in August 2023.
To reduce costs, the Group has also commenced a collective consultation regarding headcount reduction. In addition, it is proposed that certain senior management team members would sacrifice a proportion of their salary in consideration of being awarded with options to subscribe, at nil cost, for such number of new ordinary shares at the placing price, as is equal to the amount of salary sacrificed. This programme is anticipated to reduce annual costs in the range of £3.75m to £4m. The full extent of the savings is anticipated to be realised during calendar year Q4 2023.
The Directors believe that the combination of the placing and the cost reduction exercise gives the Group an improved chance of returning to a break-even position and securing the future of the Group. Accordingly, the placing was undertaken to provide working capital, secure the current regulatory capital position and achieve a more stable financial position for the Group against the current market backdrop. Prior to the placing, the Board had actively explored asset sales. The Directors will assess the benefit of asset sales to shareholders should any future market opportunities arise.
Given the financial position of the Group and the timeframe within which funds needed to be raised (including for regulatory reasons), the placing shares were issued at a deep discount to the closing price on 27 July 2023. Since the placing price was lower than the current nominal value of the ordinary shares, the Group also proposed to carry out a sub-division of shares.
After the year-end further settlement to the former shareholders of Harpsden of £654k was made pursuant to the original agreement. The part settlement was made by way of share issue of 2,841,538 ordinary shares of 5p at an issue price of 23p per share on 19 April 2023.
RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our Privacy Policy.