Interim Results for the Six Months end 31 May 2017

RNS Number : 8084L

W.H. Ireland Group PLC

24 July 2017

 

The information contained within this announcement is deemed to constitute inside information as stipulated under the Market Abuse Regulation (EU) No. 596/2014. Upon the publication of this announcement, this inside information is now considered to be in the public domain.

WH Ireland Group Plc

("WH Ireland" or the "Company" or the "Group")

Interim Results for the Six Months ended 31 May 2017

·      Group revenue increased by 24% to £14.9m.

·      Operating profit before exceptional items: £0.4m.

·      Private Wealth Management AUMA increased to £3.1billion.

·      Corporate and Institutional Broking transaction revenue increased by 239% to £2.8m.

·      Private Wealth Management fee income rose by 23% to £5.4m; and

·      Total Group recurring revenue increased to £6.5m (45% of total revenue).

Chairman's statement

It is encouraging to be able to report a substantial rebound in operating performance at WHIreland for the first six months of the current financial year, compared with a difficult period for the first half of 2016.

The recovery in profitability has been driven by revenue growth in both divisions (Private Wealth Management and Corporate and Institutional Broking), the detail of which is outlined in the Chief Executive's statement. In addition to restoring profitability, we have bolstered our balance sheet through the previously announced sale of our Manchester office which has increased our cash balance substantially.

We have announced our intention to change our accounting reference date from November to March, effective as of March 2018. This brings us into line with many of our competitors and will also reduce the duplication of reporting requirements in regard to our wider regulatory responsibilities.

Recurring revenues are now at 45% of total revenues. With a strong pipeline of business in our Corporate and Institutional Broking division and continued growth in our discretionary assets under management in our Private Wealth division, I am optimistic about the outlook for the second half of 2017 and the foundations for future growth into 2018.

Finally, I would like to acknowledge on behalf of the Board and Senior Management team the continued hard work and focus of all of our employees during the past six months.

Tim Steel
21 July 2017

Chief Executive Officer's report

The past eighteen months has witnessed a period of significant change across every aspect of the Company, helping to establish the foundations of a leading advice driven and client focussed business.

We welcomed Adam Pollock as Head of the Corporate and Institutional Broking division in March and he, along with the senior team in the division has not only maintained the momentum of the second half of last year but has accelerated it. Our pipeline of new business continues to grow and this bodes well for the current reporting period.

The Private Wealth Management division has undergone significant change as a result of the transfer of our custody and operational functions to SEI (Europe) Limited. This new platform will provide us with the capabilities that we require in order to continue to grow our discretionary offering both in the UK and internationally.

The interim figures to 31 May 2017 are being compared against a difficult period last year but this should not detract from the excellent progress which has been reported. Contributing to the total WH Ireland Group revenue increase of 24% to £14.9million has been the following:

Private Wealth Management fees  (including Wealth Planning)	+ 23 %    to £5.4million
Corporate and Institutional Broking transaction revenue	+ 239 % to £2.8 million
Commission	+   5 %    to £4.5 million
Market Making and principal turn	+ 62 %    to £0.5million

When our corporate retainer fees are aggregated with the management fees shown above, our recurring revenue across the Group is approaching the target of 50% which I communicated three years ago. This helps create the confidence within the Company to continue the investment in change which remains a key focus of the recent progression of WHIreland. Due to the nature of our business revenue lines,  I believe that a recurring fee target approaching 65% should be achievable within the next three years, with the majority of this change being driven by the continued shift to management fees in the Private Wealth Management division.

It should also be noted that whilst we continue to expense a number of items in relation to the changes in the Private Wealth Management division we have and we will continue to maintain a tight control of overall costs (this is despite a number of specific cost lines overlapping during a short transitional period this year). Our single largest line of expense is fixed employment costs and I am pleased to be able to report that compared with last year direct employment costs have fallen by 0.5% and I expect to report a further decline for the period as a whole despite our investment in new people to help achieve our growth ambitions.

Private Wealth Management

The division continues to focus upon its core strategic objective of increasing recurring fee income from the growth in clients and their advisers selecting our discretionary or advisory Wealth Management offering, and/or our Wealth Planning advice. This focus will accelerate over the next eighteen months as we look to supplement the internal momentum with a stronger profile externally. Total AUMA have grown to £3.1 billion as at 31 May 2017, of which discretionary fee paying and advisory represents over 60%. Our growth ambitions and targets for this division are high and will only be achieved in the medium term by a combination of organic and acquisitive growth.

Corporate and Institutional Broking

The division has regained significant positive momentum during the period under review. The emphasis remains upon providing leading advice to all of our clients, enhancing our corporate client list, and building a greater presence in the private company arena. To this end, we have recently launched an Investor Forum aimed at the ultra-high net worth/family office market in the UK and Internationally, whereby we introduce interesting private investment opportunities to this market.

Outlook

There is still much to do in order to achieve the goal of being recognised as a leading advice driven financial service company but significant progress has been made. With continued support from better financial market sentiment we believe WHIreland is well placed to grow both divisions and to achieve recognition for the successful development of the advice driven business model. I view the future of our Company with increasing confidence and optimism.

Richard Killingbeck
21 July 2017

For further information please contact:

WH Ireland Group plc	www.whirelandplc.com
Richard Killingbeck, Chief Executive Officer	[phone]
SPARK Advisory Partners Limited
Mark Brady/Miriam Greenwood	[phone]/3550
Montfort Communications	www.montfortcom.com
Nick Miles	[phone]/ [phone] [e-mail]

Consolidate Statements

COMPREHENSIVE INCOME -  UNAUDITED FOR  THE  HALF-YEAR ENDED 31  MAY  2017

		Half-year ended	Half-year ended	Year ended 30 November 2016
		31 May 2017	31 May 2016	(audited)
	Note	£'000	£'000	£'000
Revenue	2	14,869	11,960	25,421
Administrative expenses		(14,945)	(13,626)	(28,454)
Operating loss		(76)	(1,666)	(3,033)

Operating profit/(loss) before exceptional items	374	(1,098)	(1,253)
Exceptional items     - regulatory fine related costs	-	(384)	(193)
- restructuring costs	(148)	(184)	(994)
- Project Discovery	(302)	-	(593)
Operating loss after exceptional items	(76)	(1,666)	(3,033)

Realised investment gains (gain/losses)	2	9	7	21
Fair value gains/(losses) on investments		72	(38)	(155)
Gain on sale of property, plant and equipment		343	-	-
Finance income		19	7	10
Finance expense	2	(7)	(96)	(47)
Profit/(loss) before tax		360	(1,786)	(3,204)
Tax (expense)/credit		(36)	269	460
Profit/(loss) for the period		324	(1,517)	(2,744)

Earnings per share

Basic	6	1.17p	(5.95)p	(10.72)p
Diluted	6	1.12p	(5.95)p	(10.72)p

Consolidated Statements

 

 

FINANCIAL POSITION -  UNAUDITED FOR  THE  HALF-YEAR ENDED 31  MAY  2017

	Note	Half-year ended 31 May 2017 £'000	Half-year ended 31 May 2016 £'000	Year ended 30 November 2016 (audited) £'000
ASSETS Non-current assets
Property, plant and equipment	8	1,065	1,314	1,207
Goodwill		258	258	258
Intangible assets		3,486	3,586	3,582
Investments	3	187	227	118
Deferred tax asset		787	567	807
		5,783	5,952	5,972
Current assets
Trade and other receivables		14,204	26,466	18,985
Assets held for sale	8	-	4,750	4,750
Trading investments	3	416	286	530
Cash and cash equivalents	4	9,852	6,890	6,657
		24,472	38,392	30,922
Total assets		30,255	44,344	36,894

LIABILITIES

Current liabilities

Trade and other payables	(12,340)	(26,141)                      (19,848)
Corporation Tax payable	(15)	(24)                              (52)
Obligations under finance leases	(282)	(331)                            (282)
Deferred consideration	(1,158)	(242)                         (1,130)
Borrowings	-	(174)                            (187)
Provisions for liabilities and charges	(23)	(50)                              (28)
	(13,818)	(26,962)                      (21,527)

Non-current liabilities

Deferred tax liability	(92)	(126)                              (92)
Obligations under finance leases	(207)	(493)                            (352)
Accruals and deferred income	(270)	(285)                            (282)
Borrowings	-	(905)                            (807)
Deferred consideration	(2,153)	(2,968)                         (2,101)
Provisions for liabilities and charges	(21)	(35)                              (21)
	(2,743)	(4,812)                         (3,655)
Total liabilities	(16,561)	(31,774)                      (25,182)
Total net assets	13,694	12,570                         11,712

EQUITY

Share capital                                                                                         5	1,390	1,290	1,309
Share premium	3,157	1,443	1,621
Available-for-sale reserve	7	7	7
Other reserves	982	982	982
Retained earnings	8,904	9,579	8,524
Treasury shares	(746)	(731)	(731)
Total equity	13,694	12,570	11,712

Consolidated Statements

CASH FLOWS  -  UNAUDITED FOR  THE  HALF-YEAR ENDED 31 MAY 2017

	Half-year ended 31 May 2017 £'000	Half-year ended 31 May 2016 £'000	Year ended 30 November 2016 (audited) £'000
OPERATING ACTIVITIES
Profit/(loss) for the period	324	(1,517)	(2,744)
Adjustments for
Depreciation, amortisation and impairment	290	147	475
Finance income	(19)	(7)	(10)
Finance expense	7	96	47
Taxation	35	(269)	(517)
Gain on sale of property, plant and equipment	(343)	-	-
Fair value (gain)/losses in investments	(71)	126	187
Non-cash adjustment for share based payments	56	90	262
Decrease/(increase) in trade and other receivables	4,781	(3,154)	4,327
(Decrease)/increase in trade and other payables	(7,520)	2,037	(4,259)
Decrease in provisions	(5)	(1,012)	(1,172)
Decrease in trading investments	114	1,646	1,402
Net cash used in operations	(2,351)	(1,817)	(2,002)
Income taxes paid	(52)	(238)	(236)
Net cash used in operating activities	(2,403)	(2,055)	(2,238)
INVESTING ACTIVITIES
Proceeds from the sale of property, plant and equipment	5,093	-	-
Proceeds from the sale of investments	30	397	581
Interest received	19	7	10
Acquisition of investments	(28)	(390)	(526)
Payment of deferred consideration	-	(39)	-
Increase in intangible fixed asset	-	-	(189)
Acquisition of property, plant and equipment	(52)	(5)	(878)
Net cash generated from/(used in) investing activities	5,062	(30)	(1,002)

FINANCING ACTIVITIES

Proceeds from issue of shares	1,602	1,129	1,326
Repayment of borrowings	(994)	(94)	(179)
Repayment of obligations under finance leases	(145)	(140)                               515
Increase in deferred consideration	80	-	106
Interest paid	(7)	(96)	(47)
Net cash generated from/(used in) financing activities	536	799	1,721
Net increase/(decrease) in cash and cash equivalents	3,195	(1,286)	(1,519)
Cash and cash equivalents at beginning of period	6,657	8,176	8,176
Cash and cash equivalents at end of period	9,852	6,890	6,657

Consolidated Statements

 

 

CHANGES IN  EQUITY -  UNAUDITED FOR  THE  HALF-YEAR ENDED 31  MAY  2017

Available

Share capital	Share premium	for sale reserve	Other reserves	Retained earnings	Treasury shares	Total equity
AS  AT  1 DECEMBER 2015                                    £'000	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 1 December 2015                                                   1,225	379	7	982	11,006	(731)	12,868
Loss and total comprehensive income for the period                        -	-	-	-	(1,517)	-	(1,517)

CONTRIBUTIONS BY  AND DISTRIBUTIONS

  TO OWNERS                                                                                                                                                           

Recognition of share-based payments	-	-	-                   -                90			-                90
Share options exercised	5	50	-                   -                   -			-                55
Capital raise (note 5)	60	1,014	-                   -                   -			-            1,074
Total contributions by and distributions to owners	65	1,064	-	-	90	-	1,219
AS  AT  1  JUNE 2016
Balance at 1 June 2016	1,290	1,443	7	982	9,579	(731)	12,570
Loss and total comprehensive income for the period	-	-	-	-	(1,227)	-	(1,227)

CONTRIBUTIONS BY  AND DISTRIBUTIONS

  TO OWNERS                                                                                                                                                           

Recognition of share-based payments	-	-	-                   -              115			-              115
Share options exercised	19	178	-                   -                   -			-              197
Deferred tax on employee share options	-	-	-                   -                 57			-                57
Capital raise (note 5)	-	-	-                   -                   -			-                   -
Total contributions by and distributions to owners	19	178	-	-	172	-	369
AS  AT  1  DECEMBER 2016
Balance at 1 December 2016	1,309	1,621	7	982	8,524	(731)	11,712
Profit and total comprehensive income for the period	-	-	-	-	324	-	324

CONTRIBUTIONS BY  AND DISTRIBUTIONS

  TO OWNERS                                                                                                                                                           

Recognition of share-based payments	-	-	-	-	56	-	56
Share options exercised	17	17	-	-	-	(15)	19
Capital raise (note 5)	64	1,519	-	-	-	-	1,583
Total contributions by and distributions to owners	81	1,536	-	-	56	(15)	1,658
Balance at 31 May 2017	1,390	3,157	7	982	8,904	(746)	13,694

Notes to the consolidated statements (unaudited)

1.   BASIS OF  PREPARATION 

STATEMENT OF COMPLIANCE

The financial information in this interim report has been prepared in accordance with the disclosure requirements of the Alternative Investment Market ("AIM") Rules and the recognition and measurements of International Financial Reporting Standards ("IFRS"), as adopted by the European Union ("EU").

The interim report does not include all of the information required for full annual financial statements.

The accounting policies adopted by the Group in the preparation of its 2017 interim report are those which the Group currently expects to adopt in its annual financial statements for the period ending 31 March 2018 and are consistent with those disclosed in the annual financial statements for the year ended 30 November 2016.

The financial information for the period ended 31 May 2017 does not constitute the Company's statutory accounts. The statutory accounts for the year ended 30 November 2016 have been delivered to the Registrar of Companies in England and Wales. The auditor has reported on those accounts. Its report was unqualified, did not draw attention to any matters by way of emphasis, and did not contain a statement under Section 498(2) or 498(3) of the Companies Act 2006. The financial information for the half year ended 31 May 2017 and 31 May 2016 is unaudited.

The AIM Rules for Companies do not require IAS 34 "Interim Financial Reporting" to be applied; therefore it has not been used in the preparation of this interim report.

GOING CONCERN

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 November 2019 which consider the funding and capital position of the Group. 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 Financial Conduct Authority (FCA) which is the statutory regulator for financial services business in the UK and 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 daily basis and they have developed appropriate scenario tests and corrective management plans which they are prepared to implement to address any potential deficit as required. These actions may include cost reductions, regulatory capital optimisation programs or further capital raising. The Directors consider that, taking account of foreseeable downside risks, regulatory capital requirements will continue to be met.

The Directors most recently renewed the Group's banking facilities in February 2015. As an evergreen facility there is no requirement to update the agreement annually, although a formal review of facilities is undertaken at least annually.

2.   SEGMENTAL REPORTING 

THE GROUP HAS TWO OPERATING SEGMENTS

The Private Wealth Management division offers investment management advice and services to individuals and contains the Group's Wealth Planning business, giving advice on and acting as intermediary for a range of financial products. The Corporate & Institutional Broking division provides corporate finance and corporate broking advice and services to companies and acts as Nominated Adviser to clients listed on AIM. It also contains the Group's 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.

The segment "Other Group companies" includes WH Ireland Group plc, WHIreland (IOM) Limited, Readycount Limited and Stockholm Investments Limited.

All segments are located in the UK or the Isle of Man. Each reportable segment has a segment manager, who is directly accountable to and maintains regular contact with, the CEO.

No customer represents more than ten percent of the Group's revenue.

2.   SEGMENTAL  REPORTING CONTINUED 

The following tables represent revenue and profit information for the Group's business segments.

	Private Wealth Management	Corporate & Institutional Broking	Head Office	Other Group companies	Group
AS AT  31 MAY  2017	£'000	£'000	£'000	£'000	£'000
REVENUE	9,178	5,280	-	412	14,869
Segment result	(1,020)	716	-	228	(76)
Executive Board cost	179	179	(436)	78	-
Gain on sale of property, plant and equipment	-	-	-	343	343
Realised investment gains	-	9	-	-	9
Fair value gains/(losses) on investments	-	72	-	-	72
Finance income	-	-	-	19	19
Finance expense	(4)	(2)	-	(1)	(7)
(Loss)/profit before tax	(845)	974	(436)	667	360
Tax income/(expense)	102	(79)	-	(59)	(36)
(Loss)/profit for the period	(743)	895	(436)	608	324
	Private	Corporate &
	Wealth	Institutional		Other Group
Management          Broking      Head Office     companies             Group
AS AT  31 MAY  2016	£'000	£'000	£'000	£'000	£'000
REVENUE	8,530	3,124	-	306	11,960
Segment result	(911)	(1,027)	-	272	(1,666)
Executive Board cost	186	186	(456)	84	-
Realised investment gains	-	7	-	-	7
Fair value gains/(losses) on investments	30	(68)	-	-	(38)
Finance income	6	-	-	1	7
Finance expense	(82)	(4)	-	(10)	(96)
(Loss)/profit before tax	(771)	(906)	(456)	347	(1,786)
Tax income/(expense)	144	165	-	(40)	269
(Loss)/profit for the period	(627)	(741)	(456)	307	(1,517)
	Private	Corporate &
	Wealth	Institutional		Other Group
Management          Broking                Head Office       companies                   Group
AS  AT  30  NOVEMBER 2016 (AUDITED)	£'000	£'000	£'000	£'000	£'000
REVENUE	17,091	7,581	-	749	25,421
Segment result	(1,641)	(744)	(819)	171	(3,204)
Executive Board cost	300	300	(725)	125	-
Realised investment gains/(losses)	29	(8)	-	-	21
Fair value gains/(losses) on investments	-	(155)	-	-	(155)
Finance income	8	-	-	2	10
Finance expense	(21)	(8)	-	(18)	(47)
Profit/(loss) before tax	(1,325)	(615)	(1,544)	280	(3,037)
Tax expense	218	122	109	11	460
(Loss)/profit for the period	(1,107)	(493)	(1,435)	291	(2,744)

3.   INVESTMENTS

	Half-year ended 31 May 2017 £'000	Half-year ended 31 May 2016 £'000	Year ended 30 November 2016 (audited) £'000
AVAILABLE FOR  SALE INVESTMENTS
Fair value: unquoted	40	40	40
Total	40	40	40
OTHER INVESTMENTS
Fair value: quoted	9	102	4
Fair value: warrants	138	85	74
Total	147	187	78
Total investments	187	227	118

Quoted and unquoted investments include equity investments other than those in subsidiary undertakings. Warrants may be received during the ordinary course of business; there is no cash consideration associated with the acquisition.

Fair value, in the case of quoted investments, represents the bid price at the reporting 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.

	Half-year ended 31 May 2017 £'000	Half-year ended 31 May 2016 £'000 Year ended 30 November 2016 (audited) £'000
TRADING INVESTMENTS
Listed investments	416	286                               530
Total	416	286                               530

Investments are measured at fair value, which is determined directly by reference to published prices in an active market where available.

4.   CASH, CASH EQUIVALENTS AND  BANK  OVERDRAFTS

For the purposes of the statement of cash flows, 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 money and money held for settlement of outstanding transactions.

Money held on behalf of clients is not included in the statement of financial position. Client money at 31 May 2017 was £17.0m (31 May 2016: £111.6m; 30 November 2016: £130.6m). This decrease reflects the effect of the transfer of assets to SEI (Europe) Ltd.

5.   SHARE CAPITAL 

The total number of authorised ordinary shares is 34.5 million shares of 5p each (31 May 2016 and 30 November 2016: 34.5 million). The total number of issued ordinary shares is 27.8 million shares of 5p each (31 May 2016: 25.8 million and 30 November 2016: 2.62 million).

On 6 December 2016, WHIreland Group plc placed 1,287,240 ordinary shares from its authorised share capital at an issue price of 123p.

6.    EARNINGS PER  SHARE 

Basic earnings per share (EPS) is calculated by dividing the profit 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 and held as treasury shares.

Diluted EPS is the basic EPS, adjusted for the effect of conversion into fully paid shares of the weighted average number of all dilutive employee share options outstanding during the period. At 31 May 2017: nil (31 May 2016: nil and 30 November 2016: nil) options were excluded from the EPS calculation as they were anti-dilutive. In a period 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.

Reconciliation of the earnings and weighted average number of shares used in the calculations are set out below.

	Half-year ended 31 May 2017 £'000	Half-year ended 31 May 2016 £'000	Year ended 30 November 2016 (audited) £'000
Weighted average number of shares in issue during the period	27,626	25,480	25,590
Effect of dilutive share options	1,341	764	1,042
	28,967	26,244	26,632

	£'000	£'000	£'000
Earnings attributable to ordinary shareholders	324	(1,517)	(2,744)
BASIC EPS
Continuing operations	1.17p	(5.95)p	(10.72)p
DILUTED EPS
Continuing operations	1.12p	(5.95)p	(10.72)p

7.    DIVIDENDS 

No interim dividend has been paid or proposed in respect of the current financial year (2016: nil).

8.    AVAILABILITY OF  INTERIM REPORT

Copies of this Report can be downloaded from the Company's website at www.whirelandplc.com

 

END

 

 

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