Final Results

RNS Number : 2351F

Walker Crips Group plc

13 June 2012

 



13 June 2012

Walker Crips Group plc

Preliminary results for the year ended 31 March 2012

Walker Crips Group plc (the "Company" or the "Group"), the integrated financial services group, today announces its unaudited preliminary results for the year ended 31 March 2012 (the "period").

Highlights

·     Total revenue up 1% to £20.31 million  (2011: £20.12 million)

·     Net revenue (gross profit) down 2.8% to £14.57 million (2011: £14.99 million)

·     Pre-exceptional profit before tax down 39.9% to £1.06 million (2011: £1.76 million)

·     Basic earnings per share down 64% to 1.21 pence (2011: 3.35 pence)

·     Non-broking income as a proportion of total income increased to 60.3% (2011: 52.3%)

·     Disposal of asset management subsidiary ("WCAM") shortly after period end for £12.7 million

·     Gain on disposal in excess of £10 million adding to net assets of £13.8 million at period end

Commenting on the results, David Gelber, Chairman, said:

"Whilst WCAM increased its core funds under management over the period, total funds under management declined. Trading conditions over the period were generally difficult and relatively low equity market volumes were reflected in our trading performance.

The disposal of WCAM was completed successfully on 12 April 2012 with the approval of shareholders. The Board believes that the Group's core investment, wealth and pension management businesses have significant growth opportunities over the longer term and is now fully focused on accelerating the expansion of these businesses.  The significant additional resources made available to the Group from the WCAM disposal will allow us to grow by acquisition as well as organically, as evidenced by the recently announced recruitment of six experienced investment managers, who join us together with their clients.

Whilst our expansion plans have been progressed in the current year, our markets have remained uncertain, not least due to the continuing troubles in the Eurozone, which is undermining investor confidence and impacting trading. In the medium to long term, your Board is confident that the Group's strong financial position and range of products, allied with access to the financial resources resulting from the WCAM disposal, will enable the implementation of a strategy to effectively grow our core business and deliver competitive returns for shareholders."

For further information, please contact:

Walker Crips Group plc Rodney FitzGerald, Chief Executive	Tel: [phone]
Altium Tim Richardson Katie Hobbs	Tel: [phone]

Further information on Walker Crips Group plc is available on the Group's website: www.wcgplc.co.uk

CHAIRMAN'S STATEMENT

Against the backdrop of the most difficult market conditions for stockbroking in decades, I am pleased to report another profitable year for the Group, albeit below the level of the previous period.

Despite an increase in gross revenue, the combination of higher shared commission paid and increased overhead costs (although both relatively moderate in size) resulted in pre-exceptional profit before tax falling 39.9% to £1.06 million (2011: £1.76 million).

The Group incurred significant legal and other professional costs during the period, mostly relating to the disposal of WCAM. Although this transaction (see below for more detail) was completed post the period end, accounting standards require the expensing of such costs as they are incurred. The Board has accordingly treated these expenses as exceptional.

Post exceptional profit before tax fell to £0.77 million (2011: £1.76 million) and basic earnings per share (after exceptional items) decreased by 64% to 1.21p (2011: 3.35p).

Despite the difficult market conditions, the Group's financial position at the period end remained healthy with net assets of £13.8 million (31 March 2011: £14.7 million). Cash balances at the period end of £0.93 million (2011: £4.3 million), reflect a temporary sharp fall relating to the settlement of unusually high-value client trading just prior to the period end, but have since returned to more normal levels. Overall working capital at the period end remained steady at £6.9 million (31 March 2011: £7.1 million).

Business Performance Overview

The fund management division performed well and experienced an increase in revenues and profits over the year, although investment funds under management at the period end fell to £628 million (2011: £787 million) due to the transfer of non-core offshore fund administration back to the fund managers.

Transaction volumes in the investment management division fell by 13% over the period, contributing significantly to its disappointing performance. A strategy for growth is being implemented by our recently appointed Chief Investment Officer, Mark Rushton, encompassing the recruitment of a number of revenue generators and the marketing of a fuller service proposition which, combined with continuing cost control, should result in a much improved performance going forward. 

As microcap investors reduced their risk exposures in the face of continuing uncertainties, raising finance at this end of the market became increasingly difficult. As a result, the corporate finance division saw revenues fall 11% over the period and segment losses increase to £94,000 (2011: £64,000). Opportunities for further cost reductions have been taken.

The wealth and pension management division performed admirably over the period, with revenues up 2% to £2.06 million (2011: £2.02 million) and segment profits up 8% to £0.2 million.

Walker Crips' Structured Investments team continued to perform strongly, building and strengthening IFA relationships during the period. Even in these adverse economic conditions, revenues and profits increased significantly over the previous year.

Subsequent Event

On the 12 April 2012, the Board completed the disposal of the major portion of the Group's asset management business, WCAM, for a consideration of approximately £12.7 million, £6.5 million of which was in cash, £2.2 million in ordinary shares in Liontrust Asset Management plc, the UKLA listed purchaser ("Liontrust") and £4.0 million in unsecured loan stock units convertible into ordinary shares in Liontrust. Shareholders approved this disposal at a general meeting on 5 April 2012.

The Circular, dated 12 March 2012, convening this general meeting, highlighted the Board's reasons for the disposal and possible options for the optimal use of the sale proceeds.

Dividends

The Board is pleased to announce a final dividend for the period of 0.9 pence per ordinary share (2011: 1.8 pence per ordinary share) which, when combined with the interim dividend of 0.94 pence per ordinary share (2011: 0.94 pence per ordinary share) makes a total dividend for the year of 1.84 pence per ordinary share (2011: 2.74 pence per ordinary share). This reduced dividend reflects the lower profitability of the period and recognises the current trading environment for the continuing Group.

The dividend will be paid on 27 July 2012 to those shareholders on the register at the close of business on 22 June 2012.

Following the receipt of the proceeds from the disposal of WCAM, the Board is also considering a special dividend for shareholders. It is the Board's intention to put a resolution to shareholders in this regard either at the Annual General Meeting or at a specially convened meeting shortly thereafter. A further announcement will be issued in due course.

AGM

This year's annual general meeting will be held at Armourers' Hall, 81 Coleman Street, London EC2R 5BJ on 20 July 2012 at 11.00 am. Coffee and biscuits will be served for a short time before and after the meeting.

Outlook

Whilst WCAM increased its core funds under management over the period, total funds under management declined. Trading conditions over the period were generally difficult and relatively low equity market volumes were reflected in our trading performance.

The disposal of WCAM was completed successfully on 12 April 2012 with the approval of shareholders. The Board believes that the Group's core investment, wealth and pension management businesses have significant growth opportunities over the longer term and is now fully focused on accelerating the expansion of these businesses.  The significant additional resources made available to the Group from the WCAM disposal will allow us to grow by acquisition as well as organically, as evidenced by the recently announced recruitment of six experienced investment managers, who join us together with their clients.

Whilst our expansion plans have been progressed in the current year, our markets have remained uncertain, not least due to the continuing troubles in the Eurozone, which is undermining investor confidence and impacting trading. In the medium to long term, your Board is confident that the Group's strong financial position and range of products, allied with access to the financial resources resulting from the WCAM disposal, will enable the implementation of a strategy to effectively grow our core business and deliver competitive returns for shareholders.

D M Gelber

Chairman

13 June 2012

CHIEF EXECUTIVE'S REPORT

Results overview

After reporting a resilient performance in the first half of the year, the second half proved to be far more difficult as the continuing effects of the global financial crisis translated into reduced volumes and lower levels of commission income. Although there was a small increase in revenue the proportion of income subject to commission sharing arrangements also increased, resulting in higher commissions payable and lower gross profits.

The spread of profitability across divisions has grown wider, with the asset management division contributing the majority of profits before un-attributable overheads. Our wealth management division in York increased its net contribution for the year as did the growing Structured Investments team. The severe change in market conditions since the middle of last year had a negative impact on private client investor sentiment which led to further falls in transaction volumes, broking income and overall profitability.

Administrative expenses were closely monitored and increased only slightly. The majority of the 2% increase over the prior year related directly to increased property expenses of the leased head office. Due to the very low level of global interest rates, investment revenues continued at levels well below those of recent years.

Fund Management (WCAM)

WCAM, our in-house fund management division, continued to make good progress during the year with increased revenues and profits. Since 31 March 2011, the unit trust and other mandated UK based funds managed by Stephen Bailey and Jan Luthman increased from £562 million to £615 million at the period end. However, the Group's total funds under management declined by 20% to £628 million at the period end after the wind-down of all non-core open-ended offshore funds, managed by a separate team within WCAM.  After completion of the disposal of WCAM in April 2012, the Group will continue to manage three in-house unit trust funds totalling £35 million.

Investment Management

The Private Client Portfolio Management business experienced significant falls in commission revenue, but was buoyed by growth in fee based income resulting from impressively higher than expected new client take on. In line with clients' demand, the division's services now include more complex derivative instruments as well as traditional bonds and equities and alternative asset classes. With offices in both York and London, funds under management increased by 6% to £192 million (2011: £181 million).

Our strategy and approach to investment management has recently been re-energised with the introduction in February 2012 of our new Chief Investment Officer, Mark Rushton. In just three months he has already made progress in redefining the investment processes, proposition and offering to attract more investment advisers, asset gatherers and customers. This renewed and more structured focus on revenue growth will complement, and make optimal use of, our existing very efficient administration and settlement teams. Mark is also spearheading the impending launch of discretionary investment portfolio models aimed at building the IFA client access channels and extending the traditional private client base.

The division is well prepared to meet the industry-wide Retail Distribution Review (RDR) Level 4 qualification requirement for broker/portfolio managers.  The majority of the team have now exceeded this minimum by achieving the Level 6 exams well before the requirements come into place. New products and service offerings specifically designed to capitalise on the opportunities arising from the RDR are expected to be launched later this year.

Our structured investments business, Walker Crips Structured Investments, has continued to grow market share with an expanding range of innovative products and continues to contribute an increasing proportion of group profitability.

Our traditional advisory and execution-only business bore the brunt of the turbulent markets, registering a significant decrease in commission income of £1.53 million over the prior year.

Subscriptions into our ISA product increased by 17% year on year, justifying once again our policy of incubating products for several years until more lucrative returns can be enjoyed.

Wealth Management 

Our innovative Financial Services and Pensions Management division continues to be driven by focused management and a very competent team of advisers, who provide a committed, premium service to a predominantly regional client base.

Once again, the RDR implementation process is well in hand with 90% of advisers already qualified to the RDR standard.

The SIPP (Self Invested Personal Pension) product showed pleasing growth. In addition, the SSAS (Small Self Administered Scheme) is being marketed to small corporate and family controlled companies in need of dedicated pension services. SIPP plans at year end numbered 300 (2011: 279) and funds under administration at the period end were up 6% at just over £87 million (2011: £82 million). SSAS plans under administration amounted to £204 million (2011: £204 million).

The joint venture with a provincial firm of accountants providing Wealth Management services to their client base continued to increase its profitability.

Corporate Finance

The Corporate Finance division suffered a further loss during another challenging year, with the number of retained clients decreasing to 12. The division had a better second half after further overhead reductions.

Staff

I would like to thank all our personnel for their efforts this year, in particular the account executives, many of whom are faced with the difficult task of studying and re-qualifying under the RDR. Our back and middle office staff unwaveringly demonstrated loyalty and commitment despite the seemingly unending commercial and regulatory pressures of the past five years.

Liquidity

The current level of cash resources within the business remains more than sufficient for working capital purposes, particularly after the sale of WCAM, and provides adequate headroom even when faced with volatile business flows. Great emphasis is placed on the credit risk of the banking institutions with whom we place funds, with financial stability taking priority over rates of return.

Going Concern

The Group continues to maintain a robust financial position, particularly following receipt of the proceeds of the WCAM sale soon after the period end. Having conducted detailed cash flow and working capital forecasts and appropriate stress-testing on liquidity, profitability and regulatory capital, taking account of possible adverse changes in trading performance, the Board has sufficient grounds to believe the Group is well placed to manage its business risks adequately and that it will be able to operate within the level of its current financing arrangements and regulatory capital limits.  Accordingly, the Board continues to adopt the going concern basis for the preparation of the financial statements.

Outlook

We are encouraged by the growing number of revenue generators who bring their own client bases and who consider our organisation an attractive firm to join with its compelling offering in this exciting phase of expansion of our core businesses.

Alongside additional revenue generators based in London, Bristol and Ulverston, we have attracted six investment managers who will bring with them both significant client bases and substantial funds under management.

Overall trading activity in the opening weeks of the new financial year has been quiet, reflecting the ongoing global economic uncertainty. Whilst this may impact short term performance, your Board believes that the Group is well positioned to capitalise on improvements in its markets over the longer term and deliver its strategy for growth in profitability with the additional resources now available for the next phase of business.

R A FitzGerald FCA

13 June 2012

Walker Crips Group plc

Consolidated Income Statement

Year ended 31 March 2012

	Notes			2012 £'000	2011 £'000
Continuing operations
Revenue	5			20,306	20,122
Commission payable				(5,735)	(5,132)
Gross profit				14,571	14,990
Share of after-tax profits of joint ventures				12	11
Administrative expenses - other				(13,569)	(13,295)
Administrative expenses - exceptional item	4			(286)	-
Total Administrative expenses				(13,855)	(13,295)
Operating profit				728	1,706
Investment revenues				46	50
Finance costs				(5)	(1)
Profit before tax				769	1,755
Analysed as:
Profit before tax and exceptional item				1,055	1,755
Administrative expenses - exceptional item	4			(286)	-
Taxation				(328)	(539)
Profit for the year attributable to equity holders of the company				441	1,216
Earnings per share
Basic	3			1.21p	3.35p
Diluted	3			1.19p	3.27p

Walker Crips Group plc

Consolidated Statement of Comprehensive Income

Year ended 31 March 2012

		2012 £'000	2011 £'000
Loss on revaluation of available-for-sale investments taken to equity		(484)	(137)
Deferred tax on loss on available-for-sale investments		138	61
Deferred tax on share options		(4)	(4)
Net loss recognised directly in equity		(350)	(80)
Profit for the year		441	1,216
Total comprehensive income for the year attributable to equity holders of the company		91	1,136

Walker Crips Group plc

Consolidated Statement of Financial Position

31 March 2012

			Group 2012 £'000	Group 2011 £'000
Non-current assets
Goodwill			5,121	5,121
Other intangible assets			346	461
Property, plant and equipment			660	767
Investment in joint ventures			35	34
Available-for-sale investments			699	1,183
			6,861	7,566
Current assets
Trade and other receivables			57,316	35,847
Trading investments Deferred tax asset			384 254	720 26
Cash and cash equivalents			1,335	4,281
			59,289	40,874
Total assets			66,150	48,440
Current liabilities
Trade and other payables Current tax liabilities Bank overdrafts			(51,591) (391) (407)	(33,207) (568) -
			(52,389)	(33,775)
Net current assets			6,900	7,099
Net assets			13,761	14,665
Equity
Share capital			2,470	2,470
Share premium account			1,626	1,626
Own shares			(312)	(312)
Retained earnings			4,833	5,387
Revaluation reserve			474	820
Other reserves			4,670	4,674
Equity attributable to equity holders of the company			13,761	14,665

Walker Crips Group plc

Consolidated Statement of Cash Flows

Year ended 31 March 2012

			2012 £'000	2011 £'000
Operating activities
Cash (used in)/generated by operations			(1,959)	777
Interest received			26	33
Interest paid			(5)	(1)
Tax paid			(592)	(539)
Net cash (used in)/generated by operating activities			(2,530)	270
Investing activities
Purchase of property, plant and equipment			(195)	(218)
Net sale/(purchase) of investments held for trading			336	(269)
Dividends received			31	17
Net cash generated by/(used in) investing activities			172	(470)
Financing activities
Purchase of treasury shares			-	(139)
Dividends paid			(995)	(963)
Net cash used in financing activities			(995)	(1,102)
Net decrease in cash and cash equivalents			(3,353)	(1,302)
Net cash and cash equivalents at beginning of year			4,281	5,583
Net cash and cash equivalents at end of year			928	4,281
Cash and cash equivalents			1,335	4,281
Bank overdrafts			(407)	-
			928	4,281

Walker Crips Group plc

Consolidated Statement of Changes in Equity

Year ended 31 March 2012

	Called up share capital		Share premium		Own shares held	Capital Redemption		Other	Revaluation	Retained earnings		Total Equity
	£'000		£'000		£'000	£'000		£'000	£'000	£'000		£'000
Equity as at 31 March 2010	2,470		1,626		(173)	111		4,567	896	5,134		14,631
Revaluation of investment at fair value	-		-		-	-		-	(137)	-		(137)
Deferred tax credit to equity	-		-		-	-		-	61	-		61
Movement on deferred tax on share options	-		-		-	-		(4)	-	-		(4)
Profit for the year	-		-		-	-		-	-	1,216		1,216
Dividends paid	-		-		-	-		-	-	(963)		(963)
Purchase of treasury shares	-		-		(139)	-		-	-	-		(139)
Equity as at 31 March 2011	2,470		1,626		(312)	111		4,563	820	5,387		14,665
Revaluation of investment at fair value	-		-		-	-		-	(484)	-		(484)
Deferred tax credit to equity	-		-		-	-		-	138	-		138
Movement on deferred tax on share options	-		-		-	-		(4)	-	-		(4)
Profit for the year	-		-		-	-		-	-	441		441
Dividends paid	-		-		-	-		-	-	(995)		(995)
Equity as at 31 March 2012	2,470		1,626		(312)	111		4,559	474	4,833		13,761

Walker Crips Group plc

Notes to the accounts

Year ended 31 March 2012

1.         The financial information set out in the announcement does not constitute the company's statutory accounts for the years ended 31 March 2012 or 2011.  The financial information for the year ended 31 March 2011 is derived from the statutory accounts for that year which have been delivered to the Registrar of Companies. The auditor reported on those accounts which were unqualified and did not contain a statement under s. 498(2) or (3) Companies Act 2006.  The audit of the statutory accounts for the year ended 31 March 2012 is not yet complete. The statutory accounts for the year ended 31 March 2012 are yet to be signed but will be finalised on the basis of the financial information presented by the directors in this preliminary announcement and will be delivered to the Registrar of Companies following the Company's annual general meeting.

            Going Concern

The Group's business activities, together with the factors likely to affect its future development, performance and position are set out in the Chairman's Statement and Chief Executive's report.

             The Group has healthy financial resources together with a long established, well proven and tested business model. As a consequence, the directors believe that the Group is well placed to manage its business risks successfully despite the current climate.

             After conducting enquiries, the directors believe that the Group have adequate resources to continue in existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the financial statements.

2.         Whilst the information as set out in this preliminary announcement is prepared in accordance with International Financial Reporting Standards ('IFRS') the announcement itself does not contain sufficient information to comply with IFRS.

            The accounting policies are consistent with those applied in the full financial statements and are consistent with those of the prior year.

3.         Earnings per share

            The calculation of basic earnings per share for continuing operations is based on the post-tax profit for the financial year of £441,000 (2011:£1,216,000) and on 36,301,187 (2011:36,301,187) ordinary shares of 6²/₃p, being the weighted average number of ordinary shares in issue during the year.

            The effect of options granted would be to reduce the reported earnings per share. The calculation of diluted earnings per share is based on 37,101,553 (2011:37,147,771) ordinary shares, being the weighted average number of ordinary shares in issue during the Period adjusted for dilutive potential ordinary shares.

            Excluding exceptional costs basic earnings per share has fallen to 2.00p from 3.35p last year. This adjusted EPS figure is based on post-tax profits of £727,000, with the non-taxable exceptional costs of £286,000 being excluded. Management believe this to be a more relevant measure of performance.

4.         Administrative expenses - exceptional item

             Up to the 31 March 2012, the Company had incurred substantial non-success based legal & professional fees and other costs as part of the disposal of a subsidiary, Walker Crips Asset Managers Limited. At the 31 March 2012, the disposal had not completed and was still awaiting shareholder & regulatory approval.  Accounting standards require such costs to be expensed as incurred in the period. The costs incurred to 31 March totalled £286,000. As a result of its materiality the directors decided to disclose this amount separately in order to present results which are not distorted by this non-recurring event.

 5.       Segmental analysis 

            For management purposes the Group is currently organised into four operating divisions - Investment Management, Corporate Finance, Financial Services and Fund Management. These divisions, all of which conduct business in the United Kingdom only, are the basis on which the Group reports its primary segment information.

2012	Investment Management £'000	Corporate Finance £'000	Financial Services £'000	Fund Management £'000	Consolidated Year ended 31 March 2012 £'000
Revenue
External sales	14,005	274	2,062	3,965	20,306
Result
Segment result	(511)	(94)	213	2,359	1,967
Unallocated corporate expenses					(1,239)
Operating profit					728
Investment revenues					46
Finance costs					(5)
Profit before tax					769
Tax					(328)
Profit after tax					441
Other information
Capital additions	172	8	10	5	195
Depreciation	272	12	10	8	302
Balance sheet
Assets
Segment assets	56,929	355	1,168	1,154	59,606
Unallocated corporate assets					6,544
Consolidated total assets					66,150
Liabilities
Segment liabilities	51,037	55	402	549	52,043
Unallocated corporate liabilities					346
Consolidated total liabilities					52,389

Segmental analysis (continued)

2011	Investment Management £'000	Corporate  Finance £'000	Financial Services £'000	Fund Management £'000	Consolidated Year ended 31 March 2011 £'000
Revenue
External sales	13,959	308	2,021	3,834	20,122
Result
Segment result	606	(64)	197	2,148	2,887
Unallocated corporate expenses					(1,181)
Operating profit					1,706
Investment revenues					50
Finance costs					(1)
Profit before tax					1,755
Tax					(539)
Profit after tax					1,216
Other information
Capital additions	195	9	1	13	218
Depreciation	270	12	19	18	319
Balance sheet
Assets
Segment assets	38,556	358	886	1,378	41,178
Unallocated corporate assets					7,262
Consolidated total assets					48,440
Liabilities
Segment liabilities	32,385	37	295	742	33,459
Unallocated corporate liabilities					316
Consolidated total liabilities					33,775

 

END

 

 

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