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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Walker Crips Group Plc | LSE:WCW | London | Ordinary Share | GB00B1YMRV88 | ORD 6 2/3P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 18.00 | 17.00 | 19.00 | 18.00 | 18.00 | 18.00 | 3,078 | 07:41:26 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Security Brokers & Dealers | 31.57M | 368k | 0.0086 | 20.93 | 7.66M |
From Dec 2022 to Dec 2024
TIDMWCW
RNS Number : 8089H
Walker Crips Group plc
31 July 2023
31 July 2023
Walker Crips Group plc
("Walker Crips", the "Company" or the "Group")
Final results for the year ended 31 March 2023
Walker Crips Group plc, the investment management and wealth management services, pensions administration and regulation technology Group, announces audited results for the year ended 31 March 2023.
Financial highlights
A challenging year in the face of headwinds but we maintain our focus on the key drivers of revenue generation, cost management, cash conversion, and operational and financial resilience, including making important investments in our people and technology.
-- Total revenues decreased 3.7% to GBP31.6 million (2022: GBP32.8 million).
-- Operating profit increased 200.5% to GBP625,000 (2022: GBP208,000 - restated****), albeit fell 36.8% to GBP1,179,000 (2022: GBP1,866,000) when adjusted for operational exceptional items*.
-- Profit before tax increased 206.8% to GBP632,000 (2022: GBP206,000 - restated), though fell 32.7% to GBP1,186,000 (2022: GBP1,761,000) when adjusted for total exceptional items*.
-- Adjusted EBITDA decreased 16.7% to GBP3.25 million (2022: GBP3.90 million)**.
-- Underlying cash generated from operations improved 174.4% to GBP3.36 million (2022: GBP1.23 million - restated)***.
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-- Cash and cash equivalents of GBP13.14 million (2022: GBP11.11 million).
-- Assets Under Management ("AUM") decreased by 13.9% to GBP3.1 billion (2022: GBP3.6 billion)
-- Proposed final dividend of 0.25 pence per share (2022: 1.20 pence per share), bringing the total dividends for the year to 0.50 pence per share (2022: 1.50 pence per share).
* Exceptional items are disclosed in note 10 to the accounts and a full reconciliation to IFRS results is presented in the Finance Director's review.
** Adjusted EBITDA represents earnings before interest, taxation, depreciation and amortisation, and exceptional items. The Directors present this result as it is a metric widely used by stakeholders when considering an entity's financial performance. A full reconciliation to IFRS results is provided in the Finance Director's review.
*** Underlying cash generated from operations represents the cash generated from operations adjusted for lease liability payments under IFRS 16, non-cyclical working capital movements and operational exceptional items. The Directors consider that this metric helps readers understand the cash generating performance of the Group. A full reconciliation to the IFRS results is provided in the Finance Director's review.
**** As explained in the Finance Director's review and note 38 of the accounts, the prior year results have been restated to correct an error regarding the recording of an obligation to HMRC in respect of stamp duty reserve tax.
For further information, please contact:
Walker Crips Group plc Tel: +44 (0)20 3100 8000 Craig Harrison, Media Relations Four Agency Jonathan Atkins Tel: +44 (0)20 3920 0555 walkercrips@four.agency Singer Capital Markets Tel: +44 (0)20 7496 3000 Justin McKeegan / Jalini Kalaravy
Further information on Walker Crips Group is available on the Company's website: www.walkercrips.co.uk
Chairman's statement
"Although pleasing to report a year-on-year improvement in IFRS profitability, the underlying business has experienced reduced trading commissions, lower management fees, and increased costs in the challenging and uncertain economic conditions we faced during the year. We continue to focus on investing in our people and technology to drive the key initiatives that improve our working environment, customer service and ultimately operating margins and profitability, including fully embracing regulatory change and preparations for the new Consumer Duty regulation."
Martin Wright
Chairman
The Group continues to be profitable despite challenging economic conditions in the UK and across the world. The aftermath of the pandemic, the unprovoked war in Ukraine and the uncertain UK political arena have contributed to supply shortages and heightened demand leading to substantial inflation and the consequent increased cost of living. In response, the BoE has raised UK base rates 13 times since December 2021 when the base rate stood at 0.1% to its current level of 5%. We have benefited from the continued strong performance of our structured investments business and a substantial increase in the Group's revenues from managing clients' trading cash in the higher interest rate environment. However, these positive contributions have not fully offset the decline in commissions and management fees experienced by our investment management business in the last financial year, with Average Assets under Management and Administration having fallen by 6.4% to GBP5.1 billion. A more detailed explanation of our results is set out in the Finance Director's review.
Notwithstanding the pressures reflected in our financial results, I am pleased to report that the Group has made good operational progress towards completing previously noted strategic initiatives, particularly improvements in our regulatory and compliance framework. We have also concluded the material redress exercise affecting a small number of customers where financial harm was caused by the inappropriate actions of one of our former self-employed investment managers, with settlements made post year end and fully provided for in the results.
It is therefore disappointing once again to report exceptional charges, this time relating to an historic oversight in failing to account for stamp duty on trades (Stamp Duty Reserve Tax or SDRT), for which voluntary disclosure has been made to HMRC and the final quantification exercise remains ongoing, and intangible asset write downs following the departure of several self-employed investment manager associates occurring towards our reporting year end. Some reduction in our investment manager headcount was expected given the tighter regulatory operating environment (and our determination to ensure we stay within it) and our deliberate curtailing of certain higher risk investment services. Nevertheless, we are disappointed to part company with certain of our long-standing colleagues and we wish them well in their future pursuits.
The SDRT obligation has arisen over a number of years due to a failure in our procedures and controls. The Board is determined to minimise the risk of such events recurring. The strengthening of our second and third lines of defence in recent years is an important step in this aim, and this will now be complemented by a critical review of key transaction reporting controls, risk indicators, use of systems and exception reporting. This will be completed over the coming months. In addition, we have concluded that strengthening our senior management team to address these important issues is a priority and a search will begin soon. As this issue is material and has arisen over several years, we have presented restated comparative financial results and statements of financial position as explained in note 38 and throughout the report and accounts where applicable.
What does this mean for our future? The higher interest rate environment provides some economic hedge during the present economic uncertainty and the strength of our finances means we can and will continue to invest in growth and further integration of our core businesses, in customer service, and in margin improvement initiatives that strengthen our customer propositions and our operating and financial resilience. This also means continued investment in our people, particularly salary rises and benefits reflective of their significant and valued contributions to our business and the present upward cost of living pressures, and as always in technology. We also continue to strengthen our regulatory and compliance infrastructure, to ensure compliance with regulation and the consequent reduction in future exposure to expensive compliance failings like those that have plagued us in recent years.
We also continue, of course, to embrace regulatory change. In that context, we have made good progress responding to the FCA's new regulatory initiative, "the Consumer Duty" which places increased emphasis on delivering good outcomes for retail customers, a principle close to our heart and our mission. In his report, our CEO sets out further detail on the initiatives we are pursuing and importantly our commitment to the environment. I remain optimistic about the future outlook for the business and its long-term prospects.
Dividend
Our aim is always to reward our shareholders for their continued support. In that light, having taken into account the current economic environment and reported results, the Board will recommend for shareholders' approval at the forthcoming AGM a reduced final dividend of 0.25 pence per share (2022: 1.20 pence) payable on 6 October 2023 to those shareholders on the register at the close of business on 22 September 2023, with an ex-dividend date of 21 September 2023.
Directors, Account Executives and staff
I would like to thank my fellow directors, our investment managers and advisers and all members of staff for their efforts, resilience and continued commitment to the highest levels of client service, support and diligence.
As noted above we have made significant pay improvements following a comprehensive benchmarking review. Nevertheless, the business does face challenges and we will continue to make the necessary changes and investments that make Walker Crips an attractive place to work and improves the quality, competencies and bench-strength across our workforce.
Outlook
The Board accepts there are administrative and operational challenges to be addressed. However, the results continue to demonstrate underlying operational and financial resilience and your Board's commitment to invest in the Group's people, technology, growth initiatives and importantly customer services. As noted above, I remain confident in the outlook for the business and its longer-term prospects.
Martin Wright
Chairman
31 July 2023
CEO's statement
Innovating, Digitising and Focussing on Customer Outcomes
Sean Lam
Chief Executive Officer
Innovating, Digitising and Focussing on Customer Outcomes
It is a privilege to be working alongside a great group of investment managers, financial planners, advisers, and staff, who diligently serve our customers and who value good customer outcomes. The past year has been dominated by Russia's invasion of Ukraine and the cost-of-living crisis, to name but two major events that have had far-reaching consequences, affecting industries and economies worldwide. We witnessed supply chain disruptions, market volatility, and shifts in consumer behaviour. But our people dug deep, stayed the course, and continued to support our customers and our Group through it all.
An important focus over the past year was on the new Consumer Duty regulations which serves to set higher and clearer standards of consumer protection across the financial services industry, and requires firms to put customers' needs first. We must take all reasonable steps to avoid causing foreseeable harm to customers, enabling them to pursue their financial objectives, and always act in good faith towards them. As principles, these have of course always been at the heart of our services, but the detailed application of the new regulations has required a raft of changes to the way in which we do business. We have sought, and continue to seek, to put customers first in everything we do and, if there are any shortfalls in this goal, to learn from those and deliver ever-improving outcomes for our customers.
It is important to build revenue, manage costs, and improve margins, but as a regulated firm it is also crucial to have in place a control environment that oversees our regulatory, operational and governance obligations. Our Non-Executive Directors provide the Board members with a high level of challenge and scrutiny, and the firm has in place departments that manage risk, regulatory and anti-financial crime oversight. The regulatory and anti-financial crime oversight departments have seen a large increase in full-time staff headcount, to help us remain updated and compliant with regulations. We have also created a Self-Initiated Regulatory Review Regime (SIR) where we select certain topics that are a priority to the FCA and engage regulatory consultants to independently review our control processes for the area(s) selected.
In recent years, we have been de-risking our business, ending products or services where the rewards received does not sufficiently outweigh the risks taken, like private placings and broker-to-broker transactions. Our strict approach to regulatory compliance and the embedding of a good regulatory culture where, "Compliance is Everyone's Responsibility", is very important to the firm. We strive for Walker Crips to be an attractive workplace where top quality individuals want to conduct business and embrace our customer centric, entrepreneurial, technology focused and compliant culture.
We continue to leverage on our own technology, creating bespoke systems that are appropriate for the business, and we shall drive forward with our programme of digitisation and enhancements, from onboarding to risk management, from efficiency initiatives to regulatory compliance.
Group's Performance
Our Investment Management division has had a challenging year, as described in the Chairman's statement, and we also up-resourced our regulatory teams especially within compliance, financial crime, and operations with more specialists to tackle the deluge of regulations, upgrade systems, enhance change processes and also pay significantly higher salary rises than we ever did before, to try to counter the cost-of-living crisis that our staff has had to endure. However, the firm's core investment management business remains sound and therefore we have invested in business development, to help grow our customer base and increase assets under management, increasing contribution to our top line, while managing our costs from here on out. For more information, please see the section under Business Model and also under Strategy.
Our Structured Investment division continues to grow from strength to strength, and is a core competency of the firm, providing well-crafted structured products to customers through financial advisers. We look forward to adding structured deposits into our suite of products, expanding our breadth of offering and providing another investment avenue to financial advisers and our customers. We are pushing on with our plans to simplify and digitise this business further, making ourselves more efficient and putting ourselves on a footing where we can achieve greater scale.
Our Financial Planning division has been growing by bringing on highly experienced Financial Planners, to serve our existing customers, and to take on new customers. Our Barker Poland Asset Management division continues to generate steady revenues for the Group. The Financial Planning and the Pensions divisions are working together to expand our service offerings to ensure we are anticipating and responding to our customers' needs.
Our teams continue to provide excellent service and support to our customers, and I thank our people and customers for their commitment to Walker Crips.
Corporate responsibility
If we want our children to see tomorrow, like we saw yesterday, then let's not destroy today. We must safeguard our planet for our children, and for our children's children. I wish to reiterate my message from last year, that we can all do our part in reducing our carbon footprint:
REFUSE - Avoid buying harmful, wasteful or non-recyclable products, e.g. unnecessary product packaging and single-use plastics. Don't need, don't buy. Less painful on the pocket too.
REDUCE - Reduce the use of harmful, wasteful, and non-recyclable products so that fewer of them end up in landfill. Use the minimum required to avoid unnecessary waste. For example, don't need, don't print. Reduce single-use plastics, plastic packaging, and Styrofoam cups.
REUSE - Get rid of the "buy and throw-away" mindset. Use what you have as often, and for as long, as you can.
REPAIR - Try to repair things before tossing them out.
REPURPOSE - If something is no longer useful for its original purpose, think creatively of ways it can be broken down and reconstituted as something else. I am a big fan of upcycling!
ROT - Compost if you can, try not to let your trash end up in landfill.
RECYCLE - Make recycling your last step, after going through all the R's above.
We must purposefully and actively practise the seven "R"s at home and in the office, so that they become automatic and habitual.
We are committed to sustainability and environmental responsibility because we recognise the urgent need to address climate change and mitigate our environmental impact. We also believe that our commitment to sustainable practices will also present us with opportunities for innovation and cost efficiencies.
Mental health charity
As a Group, we continue to support twiningenterprise.org.uk, the mental health charity. In addition to financial support, we also try to use our technology for good, through technology philanthropy. If you wish to find out more, or want to support Twining financially, please visit walkercrips.co.uk/community.
Conclusion
We shall continue to make investment rewarding for our customers, our shareholders and our staff, and to give our customers a fair deal. And we support our investment advisers and our staff by being a technology-driven financial services company and providing a safe and enjoyable place to work and be part of. We are optimistic about the future because we believe that we have the right strategies, the right talent, and the right mindset to overcome the challenges and create opportunities. We remain committed to delivering sustainable growth, creating value for our stakeholders, and making a positive impact on society.
Sean Lam
Chief Executive Officer
31 July 2023
Finance Director's review
"A challenging year but we maintain our focus on the key drivers of revenue generation, cost management, cash conversion, and operational and financial resilience, including important investments in our people and technology."
Sanath Dandeniya
Finance Director
Financial performance
The year to March 2023 was challenging, with the post-pandemic market recovery dampened by uncertain UK political and other world events, including the impact of higher inflation and interest rates, and the continuing war in Ukraine. These are reflected in our results. Market pressures depressed trading commissions and management fees, and inflationary pressures together with continued investment in strengthening our regulatory and compliance functions are increasing our cost base. These impacts were partially mitigated by significantly improved margins on administering clients trading cash balances in the rising interest rate environment, and the continued strong performance of our structured products business leading to an overall improvement in the reported gross margin.
As referenced in the Chairman's statement, we have also incurred material exceptional charges, one of which has led to us present restated comparative results, and I comment on these in more detail later in this report.
The outcome is that although reporting an improved Group profit before tax of GBP632,000 (2022: GBP206,000 - as restated), when adjusted for exceptional items, there has been a marked year on year reduction in reported pre-tax, pre-exceptional profits of GBP1,186,000 (2022: GBP1,761,000). Further explanation of these headline results is provided below.
Against this background, Management continues to focus on revenue generation, cost management, cash conversion, and operational and financial resilience. However, like others, we continue to face significant upward cost pressures, particularly regarding workforce remuneration. In a tight and competitive labour market we are seeing increased mobility and naturally must compete in retaining and attracting key talent and supporting our most value-adding people in response to the cost-of-living challenges they face. Investment in our people is therefore a positive and important step in ensuring Walker Crips remains an attractive place to be. Further, our focus on strengthened regulatory compliance, including implementation of the MIFIDPRU remuneration requirements, together with the Board's conscious de-risking decision that has led to a cessation of certain services, has meant we have recently parted company with a number of our associates, with its consequent impact on future revenues. We remain positive and committed to our strategy with a number of key initiatives expected to bear fruit in the coming year.
Total revenue
Total revenue decreased by 3.7% to GBP31.6 million (2022: GBP32.8 million). Revenue generation, whilst one of our key objectives, has been stifled by the political and macro-economic environment and its impact on market confidence. In terms of how this affects our business, there are two key impacts. One is that our management fees are based upon market values therefore the reduction in the overall value of the market will have a proportionate effect on our asset-based fee income. And secondly, the market uncertainty leading to lower trading volumes and proportionally reducing our commission income. A segmented analysis of revenues is provided in notes 5 and 6
Assets under management and administration fell by 8.2% to GBP5 billion and, in turn, management fee income saw a fall of 8.3% to GBP17.7 million, down GBP1.6 million from last year. Overall commission income saw a decrease of 25.9% to GBP6 million, down GBP2.1 million from last year. The shortfall in fee and commission income was partly offset by our Structured Investment business, which continues to perform well with income increasing by 11.4% from the previous year to GBP3.9m and, on the back of increased interest rates, higher revenues on managing clients' trading cash funds which contributed an additional GBP2.5m. Our arbitrage dealing desk also made a positive but lower contribution of GBP97,000 (2022: GBP419,000) as profitability was impacted by mark to market unrealised losses on certain positions, within risk limits, spanning the year-end. Our Tier1 business, which is now closed for new investors, recorded a 20% fall in income to GBP778,000 (2022: GBP979,000) and this trend is expected to continue as the business line is wound down.
Barker Poland Asset Management continued to be a valuable contributor, having a relatively stable year although fee income still fell by 4.6% to GBP2.2 million (2022: GBP2.3 million) compared to last year. Our Financial Planning division continued to grow revenues and its client base from the continued recruitment drive reported last year. This division saw overall income up by 5.1% from last year to GBP1.9 million (2022: GBP1.8 million) and income growth has continued post year end.
As a result of changes in revenue lines, and more specifically the drop in transaction volumes impacting trading commission, coupled with higher revenues on managing clients' trading cash balances, broking income fell to 18.9% of revenues, from 24.5% in 2022. Our gross operating margin also increased to 76.6% from 72.5% in 2022, demonstrating the benefits of the continued trend away from self-employed to employed investment professionals which is key, albeit longer term, transition as part of Management's plans to improve margins. Consistent with these trends and initiatives, the commission and fees 'paid away' decreased by 20.3% from last year, but partially offset by higher salaries and staff related costs. Adjusting for the positive impact of increased revenues on managing clients' trading cash balances, our reported gross margin has improved to 74.2% (2022: 71.6%).
As noted above, we recently parted company with five self-employed investment managers. The impact on the reported results for the year was to record an exceptional charge of GBP423,000 reflecting the write down of attributable intangible asset balances (see note 10), and the estimated reduction the projected reported gross margin for the coming year is GBP0.9 million. The full impact of this is factored into our going concern and cash forecasting models.
Expenses
Administrative expenses, excluding exceptional items, salaries, depreciation and amortisation, increased by 3.5% in the year, with a general increase in a number of areas offset by favourable spend variances on trade settlement, irrecoverable VAT, and FCA fees and levies. Salary costs, owing to a combination of investment in advisors, upskilling and pay rises, saw an increase of 7.8%, and the current cost of living crisis triggered by the rising inflation will see this increase further next year. The Board is fully committed to retaining and supporting our loyal and committed workforce and this is reflected in salary increases awarded for the coming year.
Given trends in workforce mobility, Management reviewed the useful economic life of intangible assets linked to self-employed investment managers. Based upon updated experience and review of the contractual arrangements in place the estimated useful lives were shortened which resulted in GBP133,000 of additional amortisation expensed in the year, which is not treated as an exceptional item. Management will keep trends in workforce mobility and its impact on the amortisation of intangible assets under review.
The Group is again reporting operating exceptional costs this year totalling GBP554,000 (2022: GBP1,658,000 - as restated), noting they relate to two matters quite distinct to those reported in the prior year (see note 10). First, as explained in the Chairman's Report, a system and monitoring issue relating to stamp duty reserve tax ("SDRT") was recently discovered which, following initial investigation, was voluntarily disclosed to HMRC. Communications with HMRC and our work to quantify the obligation continue, but we presently estimate the cost of repayment, potential penalties, and related costs to be GBP878,000. The second exceptional item is the write down of the remaining unamortised intangible asset in respect of departing self-employed associates which amounted to GBP423,000. Due to the materiality of the SDRT obligation and the fact that it arose over a number of years, we have concluded that prior-year reported results should be restated to correct this fundamental error and more accurately reflect associated costs. Accordingly, charges of GBP131,000 and GBP118,000 have now been recorded as exceptional items in the current and prior year respectively, with the balance of the provision reflected as a reduction in the previously reported 31 March 2021 reserves. The matter has only recently been identified and so the provision remains our current best estimate, to be adjusted as the matter, including discussions with HMRC, is finalised. As work to quantify the cost remains ongoing, we have addressed our present understanding of the estimation uncertainty by including an allowance for an 80% deterioration in the estimated cost in our going concern and viability stress testing. The actions we are taking to address the weaknesses in the control environment are explained in the Chairman's Statement.
Regarding exceptional items, we have now settled the material redress obligation we reported last year.
Cash management
The Group remains cash generative and recorded a cash inflow from operations of GBP3.5 million (2022: GBP4.2 million), generally reflecting the poorer trading conditions experienced this year. However, the underlying cash generated from operations, principally reflecting the impact of lease liability payments, non-cyclical working capital movements and cash flows from exceptional items (see adjacent reconciliation) showed a significant year-on-year improvement to GBP3.4 million (2022: GBP1.2 million - as restated) Underlying cash generation was greatly helped by the renegotiation of our London office lease, which included a new rent-free period that reduced lease payments by GBP561,000 compared to the previous year, and GBP922,000 in cash generated from our proprietary trading activity, which saw our investments on the statement of financial position also reduce to GBP1,276,000 (2022: GBP1,647,000).
After deducting cash deployed in investing activities and dividends paid, cash and cash equivalents increased to GBP13.1 million at year-end (2022: GBP11.1 million) As noted previously, since year end we have settled the redress obligations reported in the previous year, at a net of insurance cash outlay of GBP0.7 million.
Financial result and alternative performance measures
The Group reported operating profit and profit before tax for the year of GBP625,000 and GBP632,000, respectively (2022: GBP208,000 and GBP206,000 - as restated, respectively).
Adjusting for exceptional items (see adjacent reconciliations and further detail in note 10), the Group's operating profit and profit before tax for the year are GBP1.18 million and GBP1.19 million respectively (2022: GBP1.87 million and GBP1.76 million, respectively). The Group's adjusted EBITDA (being EBITDA adjusted for exceptional items - see adjacent reconciliation) is GBP3.3 million (2022: GBP3.9 million), a decrease of 16.7%.
Explanations for the reported results have been provided earlier and, notwithstanding the lower reported pre-exceptional operating profitability consistent with market and inflationary pressures, and the SDRT obligation, Management are pleased with the Group's financial resilience which allows it to remain focused on the Group's strategic priorities as further explained in the Chairman's and CEO's respective reports.
Total Assets Under Management and Administration ("AUMA") averaged GBP5.1 billion during the year (2022: GBP5.6 billion). The drop in AUMA values is caused by a combination of stagnant market, clients withdrawing funds for alternative deployment, and some attrition in the client base. Discretionary and Advisory Assets Under Management fell by 13.9% year on year to GBP3.1 billion (2022: GBP3.6 billion).
2022
2023 (restated)
Reconciliation of operating profit/(loss)
to operating profit before exceptional
items GBP'000 GBP'000
Operating profit/(loss) 625 208 *
---------- -------------
1,658
Operating exceptional items (note 10) 554 *
---------- -------------
Operating profit before exceptional
items 1,179 1,866
---------- -------------
2022
2023 (restated)
Reconciliation of profit/(loss) before
tax to profit before tax and total exceptional
items GBP'000 GBP'000
Profit/(loss) before tax 632 206 *
---------- -------------
1,555
Total exceptional items (note 10) 554 *
---------- -------------
Profit before tax and exceptional items 1,186 1,761
---------- -------------
2022
2023 (restated)
Adjusted EBITDA GBP'000 GBP'000
Operating profit/(loss) 625 208 *
---------- -------------
1,658
Operating exceptional items (note 10) 554 *
---------- -------------
Amortisation/depreciation (note 31) 1,299 1,165
---------- -------------
Right-of-use assets depreciation charge
(note 31) 771 873
---------- -------------
Adjusted EBITDA 3,249 3,904
---------- -------------
2022
2023 (restated)
Underlying cash generated from operations GBP'000 GBP'000
Net cash inflow from operations 4,285 4,217
---------- -------------
(2,374)
Working capital (note 31) (590) *
---------- -------------
Lease liability payments under IFRS 16
(note 31) (332) (1,052)
---------- -------------
Cash outflow on operating exceptional
items (note 10) - 435
---------- -------------
Underlying cash generated in the period 3,363 1,226
---------- -------------
* The restatement of the 2022 figures are explained in note 38
Divisional performance
The Investment Management division, including exceptional costs, delivered an operating profit of GBP1.55 million for the year, compared to GBP1.04 million (as restated) in the previous year. Adjusting for exceptional items, the division reported an operating profit of GBP2.12 million (2022: GBP2.7 million - as restated). The division was adversely affected by the lower fee and commission income generated in the year, partially offset by higher retained margin on the administration of clients' trading cash balances, and inflationary cost pressures. On a positive note, notwithstanding the impact of parting company with certain self-employed associates, the division continues to focus on growing its client and income base and since year end has made two new key business development hires with benefits expected to emerge in the next financial year. The Structured Investments business, having delivered two very successful years, is expected to continue to grow and generate income and margins for the division. The impact of the Consumer Duty regulation, with the Group standardising its charges across all similar client groups, on a standalone basis, is expected to be an overall net positive.
On 1 April, the Investment Management division transferred internally generated intellectual property in relation to a proprietary web-based software system to its subsidiary EnOC Technologies Limited ("EnOC"). The transfer allows EnOC staff to take on the costs and obligations of developing and maintaining the system and package it to be marketed both within the Group for its continued use, as well as marketing it externally. The move does not impact the Investment Management division's functionality as EnOC will continue to support the division and its growth plans. Reflecting the change, there will be an impact on future internal recharges between EnOC and the division.
The Financial Planning division continued to increase its adviser base with several key hires in the year and more in the pipeline. The division saw a 5.1% increase in total revenue, but presently reports a loss reflecting the continued investment in the new financial planners and advisers and time for the client base to build up.
Our tech arm, EnOC, reported an operating loss of GBP128,000 (2022: GBP102,000). EnOC's tech capabilities are integral to the Group's operational efficiencies, deploying cloud solutions to the business and we continue to invest in its capabilities and prospects.
Capital resources, liquidity and regulatory capital
The Group's capital structure, consisting solely of equity capital, provides a stable platform to support the Group's strategic plan and initiatives. At year end, net assets are GBP21.2 million (2022: GBP21.4 million - as restated; 2021: GBP21.7 million - as restated), reflecting a net decrease of GBP0.2 million (2022: reduction of GBP0.3 million - as restated, due to the reported profit after tax, less dividends paid. Liquidity remains strong with cash and cash equivalents increasing over the year to GBP13.1 million (2022: GBP11.1 million). Regulatory capital at year end, including audited reserves for the year, is GBP12.4 million (2022: GBP11.5 million - as restated), comfortably in excess of the Group's capital requirements for both Pillar 1 and Pillar 2, as shown in the tables below.
2022
2023 (restated)
Regulatory own funds and own funds requirements GBP'000 GBP'000
Own funds
---------- -------------
Share capital 2,888 2,888
---------- -------------
Share premium 3,763 3,763
---------- -------------
Retained earnings 10,104 * 10,303
---------- -------------
Other reserves 4,723 4,723
---------- -------------
Less:
---------- -------------
Own shares held (312) (312)
---------- -------------
Regulatory adjustments (8,678) (9,804)
---------- -------------
Total own funds 12,488 11,561
---------- -------------
Total own funds requirement (4,854) (4,676)
---------- -------------
Regulatory capital surplus 7,634 6,885
---------- -------------
Cover on own funds as a % 257.3% 247.3%
---------- -------------
Pillar 2 requirement (7,227) (7,014)
---------- -------------
Regulatory capital surplus 5,261 4,547
---------- -------------
Cover on own funds as a % 172.8% 164.8%
---------- -------------
* The restatement of the 2022 figures is explained in note 38
Dividends
In view of the Group's financial performance, capital and liquidity position, the Board recommends a final dividend of 0.25 pence per share to be paid on 6 October 2023 for those members on the shareholders' register on 22 September 2023, the ex-dividend date being 21 September 2023. Including the interim dividend of 0.25 pence per share (2022: 0.30 pence per share), the total dividend paid and proposed in respect of the year is 0.50 pence per share (2022: 1.50 pence per share).
Sanath Dandeniya
Finance Director
31 July 2023
Consolidated income statement
year ended 31 March 2023
Note 2023 As restated
GBP'000 2022
GBP'000
Revenue 5 31,612 32,820
----- --------- ------------
Commissions and fees paid 7 (7,264) (9,110)
----- --------- ------------
Share of associate after tax profit 8 - 57
----- --------- ------------
Gross profit 24,348 23,767
----- --------- ------------
Administrative expenses 9 (23,169) (21,901)
----- --------- ------------
(1,658)
Exceptional items 10 (554) *
----- --------- ------------
Operating profit 625 208
----- --------- ------------
Investment revenue 11 95 9
----- --------- ------------
Finance costs 12 (88) (114)
----- --------- ------------
Exceptional item - Profit on disposal
of associate investment 10 - 103
----- --------- ------------
Profit before tax 632 206
----- --------- ------------
Taxation 14 (214) (151)
----- --------- ------------
Profit for the year attributable to
equity holders of the Parent Company 418 55
----- --------- ------------
Earnings per share
----- --------- ------------
Basic and diluted 16 0.98p 0.13p *
----- --------- ------------
* The restatement of the 2022 figures is explained in note 38
The following Accounting Policies and Notes form part of these financial statements.
Consolidated statement of comprehensive income
year ended 31 March 2023
2023 As restated
GBP'000 2022
GBP'000
Profit for the year 418 55 *
---------- ------------
Total comprehensive income for the year attributable
to equity holders of the Parent Company 418 55 *
---------- ------------
* The restatement of the 2022 figures are explained in note 38.
The following Accounting Policies and Notes form part of these financial statements.
Consolidated statement of financial position
as at 31 March 2023
Note 2023 As restated As restated
GBP'000 2022 2021
GBP'000 GBP'000
Non-current assets
----- ---------- ------------ ------------
Goodwill 17 4,388 4,388 4,388
----- ---------- ------------ ------------
Other intangible assets 18 4,648 5,752 6,566
----- ---------- ------------ ------------
Property, plant and equipment 19 989 1,169 1,477
----- ---------- ------------ ------------
Right-of-use asset 20 2,340 2,597 3,612
----- ---------- ------------ ------------
Investment in associate - - 2
----- ---------- ------------ ------------
Investments - fair value through profit
or loss - - 37
----- ---------- ------------ ------------
Total non-current assets 12,365 13,906 16,082
----- ---------- ------------ ------------
Current assets
----- ---------- ------------ ------------
Trade and other receivables 22 36,301 50,003 49,098
----- ---------- ------------ ------------
Investments - fair value through profit
or loss 21 1,276 1,647 920
----- ---------- ------------ ------------
Cash and cash equivalents 23 13,138 11,113 8,855
----- ---------- ------------ ------------
Total current assets 50,715 62,763 58,873
----- ---------- ------------ ------------
Total assets 63,080 76,669 74,955
----- ---------- ------------ ------------
Current liabilities
----- ---------- ------------ ------------
Trade and other payables 26 (36,849) (49,625) (47,395)
----- ---------- ------------ ------------
Current tax liabilities (269) (132) (123)
----- ---------- ------------ ------------
Deferred tax liabilities 24 (371) (414) (400)
----- ---------- ------------ ------------
(1,884)
Provisions 27 (878) * (834)*
----- ---------- ------------ ------------
Lease liabilities 28 (341) (245) (946)
----- ---------- ------------ ------------
Deferred cash consideration 36 (94) (89) -
----- ---------- ------------ ------------
Total current liabilities (38,802) (52,389) (49,698)
----- ---------- ------------ ------------
Net current assets 11,913 10,437 9,175
----- ---------- ------------ ------------
Long-term liabilities
----- ---------- ------------ ------------
Deferred cash consideration 36 (71) (29) (33)
----- ---------- ------------ ------------
Lease liabilities 28 (2,389) (2,300) (2,856)
----- ---------- ------------ ------------
Provision 27 (652) (586) (675)
----- ---------- ------------ ------------
Total non-current liabilities (3,112) (2,915) (3,564)
----- ---------- ------------ ------------
Net assets 21,166 21,365 21,693
----- ---------- ------------ ------------
Equity
----- ---------- ------------ ------------
Share capital 29 2,888 2,888 2,888
----- ---------- ------------ ------------
Share premium account 29 3,763 3,763 3,763
----- ---------- ------------ ------------
Own shares 30 (312) (312) (312)
----- ---------- ------------ ------------
Retained earnings 30 10,104 10,303* 10,631*
----- ---------- ------------ ------------
Other reserves 30 4,723 4,723 4,723
----- ---------- ------------ ------------
Equity attributable to equity holders
of the Parent Company 21,166 21,365 21,693
----- ---------- ------------ ------------
* The restatement of the 2022 figures is explained in note 38
The following Accounting Policies and Notes form part of these financial statements.
The financial statements of Walker Crips Group plc (Company registration no. 01432059) were approved by the Board of Directors and authorised for issue on 31 July 2023.
Signed on behalf of the Board of Directors
Sanath Dandeniya FCCA
Director
31 July 2023
Consolidated statement of cash flows
year ended 31 March 2023
Note 2023 2022
GBP'000 GBP'000
Operating activities
----- --------- ---------
Cash generated from operations 31 3,539 4,217
----- --------- ---------
Tax paid (120 ) (120)
----- --------- ---------
Net cash generated from operating
activities 3,419 4,097
----- --------- ---------
Investing activities
----- --------- ---------
Purchase of property, plant and equipment (150) (119)
----- --------- ---------
Purchase of investments held for trading (205) (342)
----- --------- ---------
Consideration paid on acquisition
of intangibles (183) (93)
----- --------- ---------
Consideration paid on acquisition - -
of client lists
----- --------- ---------
Consideration received on sale of
associate - 105
----- --------- ---------
Dividends received 11 47 9
----- --------- ---------
Dividends received from associate
investment 8 - 57
----- --------- ---------
Interest received 11 48 -
----- --------- ---------
Net cash used in investing activities (443) (383)
----- --------- ---------
Financing activities
----- --------- ---------
Dividends paid 15 (617) (383)
----- --------- ---------
Interest paid 12 (2) (21)
----- --------- ---------
Repayment of lease liabilities ** (246) (959)
----- --------- ---------
Repayment of lease interest ** (86) (93)
----- --------- ---------
Net cash used in financing activities (951) (1,456)
----- --------- ---------
Net increase in cash and cash equivalents 2,025 2,258
----- --------- ---------
Net cash and cash equivalents at
beginning of period 11,113 8,855
----- --------- ---------
Net cash and cash equivalents at
end of period 13,138 11,113
----- --------- ---------
** Total repayment of lease liabilities under IFRS 16 in the period was GBP332,000 (2022: GBP1,052,000)
The following Accounting Policies and Notes form part of these financial statements.
Consolidated statement of changes in equity
year ended 31 March 2023
Share Share Own Capital Other Retained Total
capital premium shares redemption GBP'000 earnings equity
GBP'000 account held GBP'000 GBP'000 GBP'000
GBP'000 GBP'000
Equity as at 31 March 11,110
2020 2,888 3,763 (312) 111 4,612 * 22,172
---------- --------- --------- ------------ --------- ---------- ---------
Comprehensive loss
for the year - as (415)
restated * (415)
---------- --------- --------- ------------ --------- ---------- ---------
Total comprehensive
loss for the year (415)
- as restated * (415)
---------- --------- --------- ------------ --------- ---------- ---------
Contributions by
and distributions
to owners
---------- --------- --------- ------------ --------- ---------- ---------
Dividends paid (64) (64)
---------- --------- --------- ------------ --------- ---------- ---------
Total contributions
by and distributions
to owners (64) (64)
---------- --------- --------- ------------ --------- ---------- ---------
Equity as at 31 March
2021 2,888 3,763 (312) 111 4,612 10,631 21,693
---------- --------- --------- ------------ --------- ---------- ---------
Comprehensive income
for the year - as
restated - - - - - 55 * 55
---------- --------- --------- ------------ --------- ---------- ---------
Total comprehensive
income for the year
- as restated - - - - - 55 * 55
---------- --------- --------- ------------ --------- ---------- ---------
Contributions by
and distributions
to owners
---------- --------- --------- ------------ --------- ---------- ---------
Dividends paid - - - - - (383) (383)
---------- --------- --------- ------------ --------- ---------- ---------
Total contributions
by and distributions
to owners - - - - - (383) (383)
---------- --------- --------- ------------ --------- ---------- ---------
Equity as at 31 March
2022 2,888 3,763 (312) 111 4,612 10,303 21,365
---------- --------- --------- ------------ --------- ---------- ---------
Comprehensive income
for the year - - - - - 418 418
---------- --------- --------- ------------ --------- ---------- ---------
Total comprehensive
income for the year - - - - - 418 418
---------- --------- --------- ------------ --------- ---------- ---------
Contributions by
and distributions
to owners
---------- --------- --------- ------------ --------- ---------- ---------
Dividends paid - - - - - (617) (617)
---------- --------- --------- ------------ --------- ---------- ---------
Total contributions
by and distributions
to owners - - - - - (617) (617)
---------- --------- --------- ------------ --------- ---------- ---------
Equity as at 31 March
2023 2,888 3,763 (312) 111 4,612 10,104 21,166
---------- --------- --------- ------------ --------- ---------- ---------
* The restatement of the 2022 and 2021 figures are explained in note 38
The following Accounting Policies and Notes form part of these financial statements.
Notes to the accounts
year ended 31 March 2023
1. General information
Walker Crips Group plc ("the Company") is the Parent Company of the Walker Crips group of companies ("the Company"). The Company is a public limited company incorporated in the United Kingdom under the Companies Act 2006 and listed on the London Stock Exchange. The Group is registered in England and Wales. The address of the registered office is Old Change House, 128 Queen Victoria Street, London EC4V 4BJ.
The significant accounting policies have been disclosed below. The accounting policies for the Group and the Company are consistent unless otherwise stated.
2. Basis of preparation
The consolidated financial statements have been prepared in accordance with UK-adopted international accounting standards in conformity with the requirements of the Companies Act 2006.
The principal accounting policies adopted in the preparation of the consolidated financial statements are set out in note 3. The policies have been consistently applied to all the years presented, unless otherwise stated.
The Group financial statements are presented earlier in this announcement.
The consolidated financial statements are presented in GBP Sterling (GBP). Amounts shown are rounded to the nearest thousand, unless stated otherwise.
The consolidated financial statements have been prepared on the historical cost basis, except for certain financial instruments that are measured at fair value, and are presented in Pounds Sterling, which is the currency of the primary economic environment in which the Group operates. The principal accounting policies adopted are set out below and have been applied consistently to all periods presented in the consolidated financial statements.
The preparation of financial statements requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group's accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements, are disclosed in note 4.
As explained in note 38, the Group has identified an obligation in respect of stamp duty reserve tax which has arisen over a number of years and was not identified due to a procedures and controls failure. In view of the significance of this amount, prior year results have been restated to correct this error.
There are a number of standards, amendments to standards, and interpretations which have been issued by the IASB that are effective in future accounting periods that the Group has decided not to adopt early.
The following amendments are effective for the period beginning on or after 1 January 2023:
-- Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice Statement 2);
-- Definition of Accounting Estimates (Amendments to IAS 8); and
-- Deferred Tax Related to Assets and Liabilities arising from a Single Transaction (Amendments to IAS 12).
The following amendments are effective for the period beginning on or after 1 January 2024:
-- IFRS 16 Leases (Amendment - Liability in a Sale and Leaseback)
-- IAS 1 Presentation of Financial Statements (Amendment - Classification of Liabilities as Current or Non-current)
-- IAS 1 Presentation of Financial Statements (Amendment - Non-current Liabilities with Covenants)
The Group is currently assessing the impact of these new accounting standards and amendments. The Group does not believe that the amendments to IAS 1 will have a significant impact on the classification of its liabilities, as it does not have convertible debt instruments.
The Group does not expect any other standards issued by the IASB, but not yet effective, to have a material impact on the Group.
Going concern
The financial statements of the Group have been prepared on a going concern basis. At 31 March 2023, the Group had net assets of GBP21.2 million (2022: GBP21.4 million - as restated), net current assets of GBP11.9 million (2022: GBP10.4 million - as restated) and cash and cash equivalents of GBP13.1 million (2022: GBP11.1 million). The Group reported an operating profit of GBP625,000 for the year ended 31 March 2023 (2022: GBP208,000 - as restated), inclusive of operating exceptional expense of GBP554,000 (2022: GBP1,658,000 - as restated), and net cash inflows from operating activities of GBP3.4 million (2022: GBP4.1 million).
The Directors consider the going concern basis to be appropriate following their assessment of the Group's financial position and its ability to meet its obligations as and when they fall due. In making the going concern assessment the Directors have considered:
-- The Group's three-year base case projections based on current strategy, trading performance, expected future profitability, liquidity, capital solvency and dividend policy.
-- The outcome of stress scenarios applied to the Group's base case projections prior to deployment of management actions.
-- The principal risks facing the Group and its systems of risk management and internal control.
-- The Group's ability to generate positive operating cash flow during the year to 31 March 2023 and projected future cash flows.
Key assumptions that the Directors have made in preparing the base case projections are:
-- Management fees and trading commissions growth of 2% having adjusted for expected client attrition in respect of the recent self-employed investment manager departures (see Finance Director's review)
-- UK base rates increasing to 6% over the remainder of 2023 and then reducing over the next 24 months to 3%.
-- Inflation embedded into the first year based on known salary awards and latest experience, then running at 5% thereafter.
Key stress scenarios that the Directors have then considered include:
-- A "bear stress scenario": representing a 10% reduction in management fees and trading commissions, with the consequent reduction in revenue sharing based costs, compared to the base case in the reporting periods ending 31 March 2025 and 31 March 2026.
-- A "severe stress scenario": representing a 15% fall in management fees and trading commissions and UK base rates 1% (absolute) lower compared to the base case in the reporting periods ending 31 March 2025 and 31 March 2026, together with an 80% deterioration in the SDRT obligation provision with an estimated expectation to settled in December 2023.
Liquidity and regulatory capital resource requirements exceed the minimum thresholds in both the base case and bear scenarios. In the severe stress scenario, although the Group has positive liquidity throughout the period, the negative impact on our prudential capital ratio is such that it is projected to fall below the regulatory requirement in June 2025. Were the interest rate stress also to be applied to the bear scenario a regulatory capital shortfall is projected to occur in September 2025. The Directors consider these scenarios to be remote in view of the prudence built into the base case projections and that further mitigations available to the Directors are not reflected therein. Such mitigating actions within Management's control include reduction in proprietary risk positions, delayed capital expenditure, further reductions in discretionary spend, not paying planned dividends and reductions in employee headcount. Other mitigating actions may include disposal of businesses, stronger cost reductions and potential to seek shareholder support.
Based on the assessment of the Group's financial position and its ability to meet its obligations as and when they fall due, the Directors do not consider there are material uncertainties that cast significant doubt on the Group's ability to continue as a going concern in the twelve-month period from the date of approval of the Annual Report and Accounts. However, set out in note 38 are the uncertainties related to the provision made to settle unpaid stamp duty.
Standards and interpretations affecting the reported results or the financial position
The accounting standards adopted are consistent with those of the previous financial year. Amendments to existing IFRS standards did not have a material impact on the Group's Consolidated Income Statement or the Statement of Financial Position.
The Group does not expect standards yet to be adopted by the UK endorsement body ("UKEB") to have a material impact in future years.
3. Significant accounting policies
Basis of consolidation
The Group financial statements consolidate the financial statements of the Group and companies controlled by the Group (its subsidiaries) made up to 31 March each year. The Group controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its powers to direct relevant activities of the entity. Subsidiaries are fully consolidated from the date on which control is obtained and no longer consolidated from the date that control ceases; their results are in the consolidated financial statements up to the date that control ceases.
Entities where the interest is 49% or less are assessed for potential treatment as a Group company against the control tests outlined in IFRS 10, being power over the investee, exposure or rights to variable returns and power over the investee to affect the amount of investors' returns. At the reporting date there were no entities where the Group had an interest below 49%.
All intercompany balances, income and expenses are eliminated on consolidation.
Business combinations
The acquisition of subsidiaries is accounted for using the acquisition method. The cost of the acquisition is measured at the aggregate of the fair values, at the date of exchange, of assets given, liabilities incurred or assumed, and equity instruments issued by the Group in exchange for control of the acquiree. The acquiree's identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under IFRS 3 Business Combinations are recognised at their fair value at the acquisition date.
Acquisition-related costs are expensed as incurred.
If the business combination is achieved in stages, the acquisition date carrying value of the acquirer's previously held equity interest in the acquiree is re-measured to fair value at the acquisition date; any gains or losses arising from such remeasurement are recognised in profit or loss.
Contingent consideration is classified either as equity or as a financial liability. Amounts classified as a financial liability are subsequently remeasured to fair value, with changes in fair value recognised in profit or loss.
Interests in associate
An associate is an entity in which the Group has significant influence, but not control or joint control. The Group uses the equity method of accounting by which the equity investment is initially recorded at cost and subsequently adjusted to reflect the investor's share of the net assets of the associate.
The Group has no associate investments. The Group's 33% associate investment in Walker Crips Property Income Limited ("WCPIL") was disposed of in the previous year (see note 8).
Intangible assets
(a) Goodwill
Goodwill arises on the acquisition of subsidiaries and represents the excess of the consideration transferred, the amount of any non-controlling interest in the acquiree and the acquisition-date fair value of any previous equity interest in the acquiree over the fair value of the identifiable net assets acquired. If the total of consideration transferred, non-controlling interest recognised and previously held interest measured at fair value is less than the fair value of the net assets of the subsidiary acquired, in the case of a bargain purchase, the difference is recognised directly in the income statement.
Goodwill is initially recognised as an asset at cost and is subsequently measured at cost less any accumulated impairment losses. Goodwill is not amortised but is reviewed for impairment at least annually. Any impairment is recognised immediately in profit or loss and is not subsequently reversed in future periods.
For the purpose of impairment testing, goodwill acquired in a business combination is allocated to each of the cash generating units ("CGUs"), or groups of CGUs, that is expected to benefit from the synergies of the combination. Each unit or group of units to which the goodwill is allocated represents the lowest level within the entity at which the goodwill is monitored for internal management purposes. Goodwill is monitored at the operating segment level.
Goodwill impairment reviews are undertaken annually or more frequently if events or changes in circumstances indicate a potential impairment. The carrying value of the CGU containing the goodwill is compared to the recoverable amount, which is the higher of value-in-use and the fair value less costs of disposal. Any impairment is recognised immediately as an expense and is not subsequently reversed.
(b) Client lists
Client lists are recognised when it is probable that future economic benefits will flow to the Group and the cost of the asset can be measured reliably whilst the risk and rewards have also transferred into the Group's ownership.
Intangible assets classified as client lists are recognised when acquired as part of a business combination, when separate payments are made to acquire clients' assets by adding teams of investment managers, or when acquiring the ownership of client relationships from retiring in-house self-employed investment managers.
Some client list acquisitions are linked to business combination acquisitions such as those related to the historical acquisition of Barker Poland Asset Management LLP and others are related to the purchase of client lists related to individual investment manager or investment management team recruitment-related costs.
The cost of acquired client lists and businesses generating revenue from clients and investment managers are capitalised. These costs are amortised on a straight-line basis over their expected useful lives of three to twenty years at inception. The amortisation period and amortisation method for intangible assets are reviewed at least each financial year end. All intangible assets have a finite useful life.
In the current financial year, the estimated useful economic lives of all client lists associated with self-employed investment managers were revised so that no client list was amortised for periods longer than six years from 1 April 2022.
Amortisation of intangible fixed assets is included within administrative expenses in the consolidated income statement.
At each statement of financial position date, the Group reviews the carrying amounts of its intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where the asset does not generate cash flows that are independent from other assets, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs.
(c) Software licences
Computer software which is not an integral part of the related hardware is recognised as an intangible asset when the Group is expected to benefit from future use of the software and the costs are reliably measured and amortised using the straight-line method over a useful life of up to five years.
Impairment of non-financial assets
Intangible assets that have an indefinite useful life or intangible assets not ready to use are not subject to amortisation and are tested annually for impairment. Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset's fair value less costs of disposal and value-in-use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are largely independent cash inflows (cash-generating units). Prior impairments of non-financial assets (other than goodwill) are reviewed for possible reversal at each reporting date.
Own shares held
Own shares consist of treasury shares which are recognised at cost as a deduction from equity shareholders' funds. Subsequent consideration received for the sale of treasury shares is also recognised in equity with any difference being taken to retained earnings. No gain or loss is recognised on sale of treasury shares.
Revenues recognised under IFRS 15
Revenue from contracts with customers:
-- Gross commissions on stockbroking activities are recognised on those transactions whose trade date falls within the financial year, with the execution of the trade being the performance obligation at that point in time.
-- In Walker Crips Investment Management fees earned from managing various types of client portfolios are accrued daily over the period to which they relate with the performance obligation fulfilled over the same period.
-- Fees in respect of financial services activities of Walker Crips Financial Planning are accrued evenly over the period to which they relate with the performance obligation fulfilled over the same period.
-- Fees earned from structured investments are recognised on the date the underlying security of the structured investment is traded and settled, with the execution of the trade being the performance obligation at that point in time.
-- Fees earned from software offering, Software as a Service ("SaaS"), are accrued evenly over the period to which they relate with the performance obligation fulfilled over the same period.
Other incomes:
-- Interest is recognised as it accrues in respect of the financial year. -- Dividend income is recognised when:
o The Group's right to receive payment of dividends is established;
o When it is probable that economic benefits associated with the dividend will flow to the Group;
o The amount of the dividend can be reliably measured; and
-- Gains or losses arising on disposal of trading book instruments and changes in fair value of securities held for trading purposes are both recognised in profit and loss.
The Group does not have any long-term contract assets in relation to customers of any fixed and/or considerable lengths of time which require the recognition of financing costs or incomes in relation to them.
Operating expenses
Operating expenses and other charges are provided for in full up to the statement of financial position date on an accruals basis.
Exceptional items
To assist in understanding its underlying performance, the Group identifies certain items of pre-tax income and expenditure and discloses them separately in the Consolidated income statement.
Such items include:
1. profits or losses on disposal or closure of businesses; 2. corporate transaction and restructuring costs; 3. changes in the fair value of contingent non-cash consideration; and
4. non-recurring items considered individually for classification as exceptional by virtue of their nature or size.
The separate disclosure of these items allows a clearer understanding of the Group's trading performance on a consistent and comparable basis, together with an understanding of the effect of non-recurring or large individual transactions upon the overall profitability of the Group. The exceptional items arising in the current period are explained in note 10.
Deferred income
Income received from clients in respect of future periods to the transaction or reporting date are classified as deferred income within creditors until such time as value has been received by the client.
Foreign currencies
The individual financial statements of each of the Group's companies are presented in Pounds Sterling, which is the functional currency of the Group and the presentation currency of the consolidated financial statements.
In preparing the financial statements of the individual companies, transactions in currencies other than the entity's functional currency (foreign currencies) are recorded at the rates of exchange prevailing on the dates of the transactions. At each statement of financial position date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the balance sheet date. Exchange differences arising on the settlement of monetary items, and on the retranslation of monetary items, are included in the consolidated income statement for the period.
Where consideration is received in advance of revenue being recognised, the date of the transaction reflects the date the consideration is received.
Property, plant and equipment
Fixtures and equipment are stated at historical cost less accumulated depreciation and provision for any impairment. Depreciation is charged so as to write-off the cost or valuation of assets over their estimated useful lives using the straight-line method on the following bases:
Computer hardware 33 (1) /(3) % per annum on cost Computer software between 20% and 33 (1) /(3) % per annum on cost Leasehold improvements over the term of the lease Furniture and equipment 33 (1) /(3) % per annum on cost
Right-of-use assets held under contractual arrangements are depreciated over the lengths of their respective contractual terms, as prescribed under IFRS 16.
The gain or loss on the disposal or retirement of an asset is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in income. The residual values and estimated useful life of items within property, plant and equipment are reviewed at least at each financial year end. Any shortfalls in carrying value are impaired immediately through profit or loss.
Taxation
The tax expense for the period comprises current and deferred tax.
Tax is recognised in the income statement, except to the extent that it relates to items recognised directly in equity. In this case the tax is also recognised directly in other comprehensive income or directly in equity, respectively.
The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end of the reporting period in the countries where the Company's subsidiaries and associates operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.
Deferred income tax is recognised, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, the deferred tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that, at the time of the transaction, affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted, or substantially enacted, by the end of the reporting period and are expected to apply when the related deferred income tax asset is realised, or the deferred income tax liability is settled.
Deferred income tax assets are recognised only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised.
Deferred income tax liabilities are provided on taxable temporary differences arising from investments in subsidiaries, associates and joint arrangements, except for deferred income tax liability where the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future. Generally, the Group is unable to control the reversal of the temporary difference for associates, unless there is an agreement in place that gives the Group the ability to control the reversal of the temporary difference not recognised.
Deferred income tax assets are recognised on deductible temporary differences arising from investments in subsidiaries, associates and joint arrangements only to the extent that it is probable the temporary difference will reverse in the future and there is sufficient taxable profit available against which the temporary difference can be utilised.
Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities, and when the deferred income tax assets and liabilities relate to income taxes levied by the same taxation authority on either the taxable entity or different taxable entities where there is an intention to settle the balances on a net basis.
Financial assets and liabilities
Financial assets and liabilities are recognised in the Consolidated Statement of Financial Position when the Group becomes a party to the contractual provisions of the instrument.
At initial recognition, the Group measures a financial asset or financial liability at its fair value plus or minus transaction costs. Transaction costs of financial assets and financial liabilities carried at fair value through profit or loss ("FVTPL") are expensed in the income statement. Immediately after initial recognition, an expected credit loss allowance ("ECL") is recognised for financial assets measured at amortised cost, which results in an accounting loss being recognised in profit or loss when an asset is newly originated.
The Group does not use hedge accounting.
a) Financial assets
Classification and subsequent measurement
The Group classifies its financial assets in the following measurement categories:
-- Fair value through profit or loss ("FVTPL");
-- Fair value through other comprehensive income ("FVTOCI"); or
-- Amortised cost.
Financial assets are classified as current or non-current depending on the contractual timing for recovery of the asset. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of its financial assets at initial recognition.
(i) Debt instruments
Classification and subsequent measurement of debt instruments depend on:
-- the Group's business model for managing the asset; and -- the cash flow characteristics of the asset.
Business model: The business model reflects how the Group manages the assets in order to generate cash flows. That is, whether the Group's objective is solely to collect the contractual cash flows from the assets, to collect both the contractual cash flows and cash flows arising from the sale of assets, or solely or mainly to collect cash flows arising from the sale of assets. Factors considered by the Group include past experience on how the contractual cash flows for these assets were collected, how the assets' performance is evaluated, and how risks are assessed and managed.
Cash flow characteristics of the asset: Where the business model is to hold assets to collect contractual cash flows, the Group assesses whether the financial instruments' contractual cash flows represent solely payments of principal and interest ("the SPPI test"). In making this assessment, the Group considers whether the contractual cash flows are consistent with a basic lending instrument.
Based on these factors, the Group classifies its debt instruments into one of two measurement categories:
Amortised cost: Assets that are held for collection of contractual cash flows where those cash flows represent solely payments of principal and interest ("SPPI"), and that are not designated at FVTPL, are measured at amortised cost. Amortised cost is the amount at which the financial asset is measured at initial recognition minus the principal repayments, plus or minus the cumulative amortisation, using the effective interest rate method, of any difference between that initial amount and the maturity amount, adjusted by any ECL recognised. The effective interest rate is the rate that discounts estimated future cash payments or receipts through the expected life of the financial asset to the gross carrying amount. Interest income from these financial assets is included within investment revenues using the effective interest rate method.
Fair value through profit or loss ("FVTPL"): Assets that do not meet the criteria for amortised cost or fair value through other comprehensive income ("FVTOCI") are measured at fair value through profit or loss.
Reclassification
The Group reclassifies debt instruments when and only when its business model for managing those assets changes. The reclassification takes place from the start of the first reporting period following the change.
Impairment
The Group assesses on a forward-looking basis the expected credit loss ("ECL") associated with its debt instruments held at amortised cost. The Group recognises a loss allowance for such losses at each reporting date. On initial recognition, the Group recognises a 12-month ECL. At the reporting date, if there has been a significant increase in credit risk, the loss allowance is revised to the lifetime expected credit loss.
The measurement of ECL reflects:
-- an unbiased and probability weighted amount that is determined by evaluating a range of possible outcomes;
-- the time value of money; and
-- reasonable and supportable information that is available without undue cost or effort at the reporting date about past events, current conditions and forecasts of future economic conditions.
The Group adopts the simplified approach to trade receivables and contract assets, which allows entities to recognise lifetime expected losses on all assets, without the need to identify significant increases in credit risk (i.e. no distinction is needed between 12-month and lifetime expected credit losses).
(ii) Equity instruments
Investments are recognised and derecognised on a trade date basis where a purchase or sale of an investment is under a contract whose terms require delivery of the instrument within the timeframe established by the market concerned, and are initially measured at fair value.
The Group subsequently measures all equity investments at fair value through profit and loss. Changes in the fair value of financial assets at FVTPL are recognised in revenue within the Consolidated Income Statement.
(iii) Cash and cash equivalents
Cash and cash equivalents include cash in hand, deposits held at call with financial institutions, other short-term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. Bank overdrafts are shown within current liabilities in the statement of financial position.
Derecognition
Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have been transferred and the Group has transferred substantially all the risks and rewards of ownership.
b) Financial liabilities
Classification and subsequent measurement
Financial liabilities are classified and subsequently measured at amortised cost.
Financial liabilities are derecognised when they are extinguished.
Financial liabilities and equity
Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities.
Trade payables
Trade payables are classified at amortised cost. Due to their short-term nature, their carrying amount is considered to be the same as their fair value.
Bank overdrafts
Interest-bearing bank overdrafts are initially measured at fair value and shown within current liabilities. Finance charges are accounted for on an accrual basis in profit or loss using the effective interest rate method and are added to the carrying amount of the instrument to the extent that they are not settled in the period in which they arise.
Equity instruments
Ordinary shares are classified as equity.
Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds.
Where any Group company purchases the Company's equity share capital (treasury shares), the consideration paid, including any directly attributable incremental costs (net of income taxes) is deducted from equity attributable to the Company's equity holders, until the shares are cancelled or reissued. Where such shares are subsequently reissued, any consideration received, net of any directly attributable incremental transaction costs and the related income tax effects, is included in equity attributable to the Company's equity holders.
Share Incentive Plan ("SIP")
The Group has an incentive policy to encourage all members of staff to participate in the ownership and future prosperity of the Group. All employees can participate in the SIP following three months of service. Employees may contribute a maximum of 10% of their gross salary in regular monthly payments (being not less than GBP10 and not greater than GBP150) to acquire Ordinary Shares in the Parent Company (Partnership Shares). Partnership Shares are acquired monthly.
The matching option was reinstated to one-to-one from 1 April 2023 from the previous one-half for every Partnership Share purchased. All shares awarded under this scheme have been purchased in the market by the Trustees of the SIP.
Provisions
Provisions for environmental restoration, restructuring costs and legal claims are recognised when the Group has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation, and the amount has been reliably estimated. Restructuring provisions comprise lease termination penalties and employee termination payments. Provisions are not recognised for future operating losses.
Provisions are measured at the present value of the expenditures expected to be required to settle the obligation, using a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the obligation. The increase in the provision due to the passage of time is recognised as an interest expense.
Long-term liabilities - deferred cash and shares consideration
Amounts payable to personnel under recruitment contracts in respect of the client relationships, which transfer to the Group, are treated as long-term liabilities if the due date for payment of cash consideration is beyond the period of one year after the year-end date. The value of shares in all cases is derived by a formula based on the value of client assets received in conjunction with the prevailing share price at the date of issue which in turn determines the number of shares issuable.
Pension costs
The Group contributes to defined contribution personal pension schemes for selected employees. For defined contribution schemes, the Group pays contributions to publicly or privately administered pension insurance plans on a mandatory, contractual or voluntary basis. The Group has no further payment obligations once the contributions have been paid. The contributions are recognised as employee benefit expenses when they are due. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in the future payments is available. The contribution rate is based on annual salary and the amount is charged to the income statement on an accrual basis.
Dividends paid
Equity dividends are recognised when they become legally payable. Dividend distribution to the Company's shareholders is recognised as a liability in the Group's financial statements in the period in which the dividends are approved by the Company's shareholders. There is no requirement to pay dividends unless approved by the shareholders by way of written resolution where there is sufficient cash to meet current liabilities, and without detriment of any financial covenants, if applicable.
Leases
The Group leases various offices, software and equipment that are recognised under IFRS 16. The Group's lease contracts are typically made for fixed periods of 2 to 10 years and extension and termination options enabling maximise operational flexibility are included in a number of property and software leases across the Group.
All leases are accounted for by recognising a right-of-use asset and a lease liability except for:
-- Leases of low value assets; and -- Leases with a duration of 12 months or less.
Payments associated with short-term leases and leases of low-value assets are recognised on a straight-line basis as an expense in profit or loss. Short-term leases are leases with a lease term of 12 months or less. Low-value assets comprise IT equipment and small items of office furniture.
Leases are recognised as a right-of-use asset and a corresponding liability at the date at which the leased asset is available for use by the Group. Each lease payment is allocated between the liability and finance cost. The finance cost is charged to profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The right-of-use assets are depreciated over the shorter of the asset's useful life and the lease term on a straight-line basis.
Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of the following lease payments:
-- fixed payments (including in-substance fixed payments), less any lease incentives receivable;
-- variable lease payments that are based on an index or a rate; -- amounts expected to be payable by the lessee under residual value guarantees;
-- the exercise price of a purchase option if the lessee is reasonably certain to exercise that option; and
-- payments of penalties for terminating the lease, if the lease term reflects the lessee exercising that option.
The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be readily determined, which is generally the case for leases held by the Group, the lessee's incremental borrowing rate is used.
To determine the incremental borrowing rate, the Group:
-- where possible, uses recent third-party financing received by the individual lessee as a starting point, adjust to reflect changes in financing conditions since third-party financing was received;
-- uses a build-up approach that starts with a risk-free interest rate adjusted for credit risk for leases held by the Group, which does not have recent third-party financing; and
-- make adjustments specific to the lease, for example term, country, currency and security.
Lease payments are allocated between principal and finance cost. The finance cost is charged to profit and loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period.
Right-of-use assets are measured at cost comprising the following:
-- the amount of the initial measurement of lease liability;
-- any lease payments made at or before the commencement date less any lease incentives received;
-- any initial direct costs; and -- restoration costs.
Right-of-use assets are depreciated over the shorter of the lease term and the useful economic life of the underlying asset on a straight-line basis.
The Group does not have any leasing activities acting as a lessor.
Earnings per share
Basic earnings per share is calculated by dividing:
-- the profit attributable to owners of the Company, excluding any costs of servicing equity other than ordinary shares;
-- by the weighted average number of ordinary shares outstanding during the financial year, adjusted for bonus elements in ordinary shares issued during the year and excluding treasury shares (note 16).
There are currently no obligations present that could have a dilutive effect on ordinary shares.
Share-based payments
Share-based payments are remuneration payments to selected employees that take the form of an award of shares in Walker Crips Group plc. Employees are not able to exercise such awards in full until a period of two to five years, based on the terms of each individual award (the vesting period).
Equity-settled share-based payments to employees are measured at fair value of the equity instruments at the date of grant. The fair value excludes the effect of non-market-based vesting conditions. Details regarding the determination of the fair value of equity-settled share-based transactions are set out in note 37.
As the share-based payment awards are for fully paid free shares, fair value is measured as the market value of the shares at each grant date.
The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over the vesting period, based on the Group's estimate of the number of shares that will eventually vest. At each reporting date, the Group revises its estimate of the shares expected to vest as a result of the effect of non-market based vesting conditions. The impact of the revision of the original estimates, if any, is recognised in the Income Statement such that the cumulative expense reflects the revised estimate.
4. Key sources of estimation uncertainty and judgements
The Group makes certain estimates and assumptions regarding the future. Estimates and judgements are continually evaluated based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. In the future, actual experience may differ from these estimates and assumptions. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.
Impairment of goodwill - estimation and judgement
Determining whether goodwill is impaired requires an estimation of the fair value less costs to sell and the value-in-use of the cash-generating units to which goodwill has been allocated. The fair value less costs to sell involves estimation of values based on the application of earnings multiples and comparison to similar transactions. The value-in-use calculation requires the entity to estimate the future cash flows expected to arise from the cash-generating unit and apply a discount rate in order to calculate present value. The assumptions used and inputs involve judgements and create estimation uncertainty. These assumptions have been stress-tested as described in note 17. The carrying amount of goodwill at the balance sheet date was GBP4.4 million (2022: GBP4.4 million) as shown in note 17.
Other intangible assets - judgement
Acquired client lists are capitalised based on current fair values. During the year, two intangible asset client lists were purchased by subsidiary Walker Crips Investment Management Limited. When the Group purchases client relationships from other corporate entities, a judgement is made as to whether the transaction should be accounted for as a business combination, or a separate purchase of intangible assets. In making this judgement, the Group assesses the acquiree against the definition of a business combination in IFRS 3. Payments to newly recruited investment managers are capitalised when they are judged to be made for the acquisition of client relationship intangibles. The useful lives are estimated by assessing the historic rates of client retention, the ages and succession plans of the investment managers who manage the clients and the contractual incentives of the investment managers.
Key assumptions in this regard consist of the following:
1. The continuing going concern of the Company;
2. Life expectancy of clients based on the Office for National Statistics;
3. Succession plans in place for staff and investment managers;
4. Amounts of AUMA are consistent on average;
5. A growth rate of client list AUMA of a conservative 2%; and
6. A discount rate of 12%.
Provisions - estimation and judgement
Provisions are recognised when the Group has a present obligation as a result of a past event, and it is probable that the Group will be required to settle that obligation. Provisions are measured at the Directors' best estimate of the expenditure required to settle the obligation at the statement of financial position date, and are discounted to present value where the effect is material.
IFRS 16 "Leases" - estimation and judgement
IFRS 16 requires certain judgements and estimates to be made and those significant judgements are explained below.
The Group has opted to use single discount rates for leases with reasonably similar characteristics. The discount rates used have had an impact on the right-of-use assets' values, lease liabilities on initial recognition and lease finance costs included within the income statement.
Where a lease includes the option for the Group to extend the lease term, the Group has exercised the judgement, based on current information, that such leases will be extended to the full length available, and this is included in the calculation of the value of the right-of-use assets and lease liabilities on initial recognition and valuation at the reporting date.
Provision for dilapidations - estimation and judgement
The Group has made provisions for dilapidations under six leases for its offices. The Group did not enter into any new property leases in the period but allowed the lapse of two existing lease agreements. The amounts of the provisions are, where possible, estimated using quotes from professional building contractors. The property, plant and equipment elements of the dilapidations are depreciated over the terms of their respective leases. The obligations in relation to dilapidations are inflated using an estimated rate of inflation and discounted using appropriate gilt rates to present value. The change in liability attributable to inflation and discounting is recognised in interest expense.
Provision for stamp duty liability - estimation and judgement
The Group has identified an obligation in respect of stamp duty reserve tax which has arisen over a number of years and was not identified due to a procedures and controls failure. In view of the significance of this amount, prior year results have been restated (see note 10, 27 and 38).
5. Revenue
An analysis of the Group's revenue is as follows:
2023 2022
Broking Non- Total Broking Non- Total
income broking GBP'000 income broking GBP'000
GBP'000 income GBP'000 income
GBP'000 GBP'000
--------- --------- --------- --------- --------- ---------
Stockbroking commission 6,008 - 6,008 8,044 - 8,044
--------- --------- --------- --------- --------- ---------
Fees and other revenue
* - 23,665 23,665 - 22,931 22,931
--------- --------- --------- --------- --------- ---------
Investment Management 6,008 23,665 29,673 8,044 22,931 30,975
--------- --------- --------- --------- --------- ---------
Wealth Management,
Financial Planning &
Pensions - 1,939 1,939 15 1,830 1,845
--------- --------- --------- --------- --------- ---------
Revenue 6,008 25,604 31,612 8,059 24,761 32,820
--------- --------- --------- --------- --------- ---------
Investment revenue (see
note 11) - 95 95 - 9 9
--------- --------- --------- --------- --------- ---------
Total income 6,008 25,699 31,707 8,059 24,770 32,829
--------- --------- --------- --------- --------- ---------
% of total income 18.9% 81.1% 100.0% 24.5% 75.5% 100.0%
--------- --------- --------- --------- --------- ---------
* Includes GBP3.2 million (2022: 0.8 million) of interest income from managing client trading cash funds.
Timing of revenue recognition
The following table presents operating income analysed by the timing of revenue recognition of the operating segment providing the service:
2023 Investment Financial SaaS Consolidated
Management Planning GBP'000 year ended
GBP'000 & Wealth 31 March
Management 2023
GBP'000 GBP'000
Revenue from contracts with
customers
------------ ------------ --------- -------------
Products and services transferred
at a point in time 10,104 272 16 10,392
------------ ------------ --------- -------------
Products and services transferred
over time 16,295 1,666 - 17,961
------------ ------------ --------- -------------
Other revenue
------------ ------------ --------- -------------
Products and services transferred
at a point in time 75 1 - 76
------------ ------------ --------- -------------
Products and services transferred
over time 3,183 - - 3,183
------------ ------------ --------- -------------
29,657 1,939 16 31,612
------------ ------------ --------- -------------
2022 Investment Financial Consolidated
Management Planning year ended
GBP'000 & Wealth SaaS 31 March
Management GBP'000 2022
GBP'000 GBP'000
Revenue from contracts with
customers
------------ ------------ ---------- -------------
Products and services transferred
at a point in time 11,894 260 38 12,192
------------ ------------ ---------- -------------
Products and services transferred
over time 17,917 1,585 - 19,502
------------ ------------ ---------- -------------
Other revenue
------------ ------------ ---------- -------------
Products and services transferred
at a point in time 404 - - 404
------------ ------------ ---------- -------------
Products and services transferred
over time 722 - - 722
------------ ------------ ---------- -------------
30,937 1,845 38 32,820
------------ ------------ ---------- -------------
6. Segmental analysis
For segmental reporting purposes, the Group currently has three operating segments; Investment Management, being portfolio-based transaction execution and investment advice; Financial Planning, being financial planning, wealth management and pensions administration; and Software as a Service ("SaaS") comprising provision of regulatory and admin software and bespoke cloud software to companies. Unallocated corporate expenses, assets and liabilities are not considered to be allocatable accurately, or fairly, under any known basis of allocation and are therefore disclosed separately.
Walker Crips Investment Management's activities focus predominantly on investment management of various types of portfolios and asset classes.
Walker Crips Financial Planning provides advisory and administrative services to clients in relation to their wealth management, financial planning, life insurance, inheritance tax and pension arrangements.
EnOC Technologies Limited ("EnOC") provides the regulatory and admin software, Software as a Service ("SaaS"), to their business partners, including all WCG's regulated entities. Fees payable by subsidiary companies to EnOC have been eliminated on consolidation and are excluded from segmental analysis.
Revenues between Group entities, and in turn reportable segments, are excluded from the segmental analysis presented below.
The Group does not derive any revenue from geographical regions outside of the United Kingdom.
Investment Financial SaaS Consolidated
2023 Management Planning GBP'000 year ended
GBP'000 & Wealth 31 March
Management 2023
GBP'000 GBP'000
Revenue
------------ ------------ --------- -------------
Revenue from contracts with
customers 26,399 1,938 16 28,353
------------ ------------ --------- -------------
Other revenue 3,258 1 - 3,259
------------ ------------ --------- -------------
Total revenue 29,657 1,939 16 31,612
------------ ------------ --------- -------------
Results
------------ ------------ --------- -------------
Segment result 1,553 (310) (128) 1,115
------------ ------------ --------- -------------
Unallocated corporate expenses (490)
------------ ------------ --------- -------------
625
------------ ------------ --------- -------------
Investment revenue 95
------------ ------------ --------- -------------
Finance costs (88)
------------ ------------ --------- -------------
Profit before tax 632
------------ ------------ --------- -------------
Tax (214)
------------ ------------ --------- -------------
Profit after tax 418
------------ ------------ --------- -------------
Investment Financial SaaS Consolidated
2023 Management Planning GBP'000 year ended
GBP'000 & Wealth 31 March
Management 2023
GBP'000 GBP'000
Other information
------------ ------------ --------- -------------
Capital additions 368 10 - 378
------------ ------------ --------- -------------
Depreciation 273 58 - 331
------------ ------------ --------- -------------
Statement of financial positions
------------ ------------ --------- -------------
Assets
------------ ------------ --------- -------------
Segment assets 57,255 1,163 406 58,824
------------ ------------ --------- -------------
Unallocated corporate assets 4,256
------------ ------------ --------- -------------
Consolidated total assets 63,080
------------ ------------ --------- -------------
Liabilities
------------ ------------ --------- -------------
Segment liabilities 39,546 247 329 40,122
------------ ------------ --------- -------------
Unallocated corporate liabilities 1,792
------------ ------------ --------- -------------
Consolidated total liabilities 41,914
------------ ------------ --------- -------------
Investment Financial SaaS Consolidated
2022 - as restated Management Planning GBP'000 year ended
GBP'000 & Wealth 31 March
Management 2022
GBP'000 GBP'000
Revenue
------------ ------------ --------- -------------
Revenue from contracts with
customers 29,811 1,845 38 31,694
------------ ------------ --------- -------------
Other revenue 1,126 - - 1,126
------------ ------------ --------- -------------
Total revenue 30,937 1,845 38 32,820
------------ ------------ --------- -------------
Results
------------ ------------ --------- -------------
Segment result 1,042 * (258) (102) 682
------------ ------------ --------- -------------
Unallocated corporate expenses (474)
------------ ------------ --------- -------------
208
------------ ------------ --------- -------------
Investment revenue 9
------------ ------------ --------- -------------
Finance costs (114)
------------ ------------ --------- -------------
Profit on disposal of associate
investment 103
------------ ------------ --------- -------------
Profit before tax 206
------------ ------------ --------- -------------
Tax (151)
------------ ------------ --------- -------------
Profit after tax 55
------------ ------------ --------- -------------
Investment Financial SaaS Consolidated
2022 - as restated Management Planning GBP'000 year ended
GBP'000 & Wealth 31 March
Management 2022
GBP'000 GBP'000
Other information
------------ ------------ --------- -------------
Capital additions 466 5 - 471
------------ ------------ --------- -------------
Depreciation 260 43 - 303
------------ ------------ --------- -------------
Statement of financial positions
------------ ------------ --------- -------------
Assets
------------ ------------ --------- -------------
Segment assets 71,823 1,180 ** 393 ** 73,397
------------ ------------ --------- -------------
Unallocated corporate assets 3,272
------------ ------------ --------- -------------
Consolidated total assets 76,669
------------ ------------ --------- -------------
Liabilities
------------ ------------ --------- -------------
Segment liabilities 52,936 * 248 ** 240 ** 53,424
------------ ------------ --------- -------------
Unallocated corporate liabilities 1,880
------------ ------------ --------- -------------
Consolidated total liabilities 55,304
------------ ------------ --------- -------------
* The restatement of the 2022 figures is explained in note 38
** The prior year disclosed amounts for these segments have been corrected. The correction is a disclosure matter only, and is not an adjustment that relates to an accounting error affecting the income statement or balance sheet in the prior year of the Group or any of its subsidiaries.
7. Commissions and fees paid
Commissions and fees paid comprises:
2023 2022
GBP'000 GBP'000
To authorised external agents 3 61
--------- ---------
To self-employed certified persons 7,261 9,049
--------- ---------
7,264 9,110
--------- ---------
8. Investment in associate
2023 2022
GBP'000 GBP'000
Brought forward - 2
---------- ---------
Share of after-tax profit - 57
---------- ---------
Dividends - (57)
---------- ---------
Disposals - (2)
---------- ---------
Carried forward - -
---------- ---------
The Group disposed of its 33.33% interest in its associate, Walker Crips Property Income Limited ("WCPIL"), in the prior year.
9. Profit for the year
Profit for the year on continuing operations has been arrived at after charging:
2023 2022
GBP'000 GBP'000
Depreciation of property, plant and equipment (see
note 19) 331 303
--------- ---------
Depreciation of right-of-use assets (see note 20) 771 873
--------- ---------
Amortisation of intangibles (see note 18) 970 862
--------- ---------
Staff costs (see note 13) 14,475 13,862
--------- ---------
Recharge of staff costs (248 ) (725)
--------- ---------
Settlement costs 994 1,143
--------- ---------
Communications 1,387 1,260
--------- ---------
Computer expenses 831 790
--------- ---------
Other expenses 3,442 3,305
--------- ---------
Auditor's remuneration 216 223
--------- ---------
23,169 21,901
--------- ---------
A more detailed analysis of auditor's remuneration is provided below:
2023 2023 2022 2022
GBP'000 % GBP'000 %
Audit services
---------- ------ --------- -----
Fees payable to the Company's
auditor for the audit of its
annual accounts 84 39 51 23
---------- ------ --------- -----
The audit of the Company's subsidiaries
pursuant to legislation - current
year 119 55 119 53
---------- ------ --------- -----
Non-audit services
---------- ------ --------- -----
FCA client assets reporting 13 6 13 6
---------- ------ --------- -----
AAF Review - - 40 18
---------- ------ --------- -----
216 100 223 100
---------- ------ --------- -----
10. Exceptional items
Certain amounts are disclosed separately in order to present results which are not distorted by significant items of income and expenditure due to their nature and materiality.
2023 As restated
GBP'000 2022
GBP'000
Exceptional items included within operating
profit
--------- ------------
Restructuring, redundancy and other costs - 516
--------- ------------
Net compensation income - (221)
--------- ------------
Financial crime control framework review
and remediation - 595
--------- ------------
Client redress and associated costs - 650
--------- ------------
Change in fair value of deferred consideration - -
--------- ------------
SDRT liability to HMRC 131 118 *
--------- ------------
Accelerated amortisation 423 -
--------- ------------
Operating exceptional items 554 1,658
--------- ------------
Other
--------- ------------
Profit on disposal of associate investment - (103)
--------- ------------
Total exceptional items 554 1,555
--------- ------------
In the current year, the following items have been classified as exceptional items due to their materiality and non-recurring nature. These are:
a) SDRT liability to HMRC resulting from a system monitoring error where stamp duty was omitted from client contracts. A voluntary disclosure to HMRC will be made and we presently estimate the cost of repayment, potential penalties, and related costs, net of tax, to be GBP878,000. This has been allocated to the years ending 31 March 2023, 31 March 2022 and prior period. As the error spans several and is regarded as fundamental, prior reported results have been restated. Further details of the provision and estimation uncertainty are included further in note 27. Customers were not adversely impacted by this error.
b) As explained in the Chairman's Statement and the Finance Director's Report, during the year, a number of self-employed investment managers with intangible assets linked to client lists advised their intention to leave the Group which resulted in the Group changing the useful economic life of each asset to align with the revised expected timeline of future benefits. This resulted in an additional GBP423,000 of amortisation expensed in the current year.
In the prior year, the Group classified costs relating to restructuring, redundancy, enhancing the Group's financial crime framework, customer redress and related costs as exceptional items. Compensation income received under a confidential settlement agreement and the proceeds from the disposal of the Group's 33.33% interest in its former associate, Walker Crips Property Income Limited, were also classified as exceptional items.
* The restatement of the 2022 figures are explained in note 38
11. Investment revenue
Investment revenue comprises:
2023 2022
GBP'000 GBP'000
Interest on bank deposits 48 -
--------- ---------
Dividends from equity investment 47 9
--------- ---------
95 9
--------- ---------
12. Finance costs
Finance costs comprises:
2023 2022
GBP'000 GBP'000
Interest on lease liabilities (86) (93)
--------- ---------
Interest on dilapidation provisions 3 (11)
--------- ---------
Interest on overdue liabilities (5) (10)
--------- ---------
(88) (114)
--------- ---------
13. Staff costs
Particulars of employee costs (including Directors) are as shown below:
2023 2022
GBP'000 GBP'000
Wages and salaries 11,943 11,561
--------- ---------
Social security costs 1,262 1,197
--------- ---------
Share incentive plan 60 57
--------- ---------
Other employment costs 1,210 1,047
--------- ---------
14,475 13,862
--------- ---------
Staff costs do not include commissions payable mainly to self-employed account executives, as these costs are included in total commissions payable to self-employed certified persons disclosed in note 7. At the end of the year there were 32 certified self-employed account executives (2022: 39).
The average number of staff employed during the year was:
2023 2022
Number Number
Executive Directors 2 2
-------- --------
Certification and approved staff 49 54
-------- --------
Other staff 155 152
-------- --------
206 208
-------- --------
The table incorporates the new staff classification under Senior Managers and Certification Regime ("SM&CR").
14. Taxation
The tax charge is based on the profit for the year of continuing operations and comprises:
2023 2022
GBP'000 GBP'000
UK corporation tax at 19% (2022: 19%) 228 131
--------- ---------
Prior year adjustments (7) (66)
--------- ---------
Origination and reversal of timing differences
during the current period (46) 86
--------- ---------
175 151
--------- ---------
Corporation tax is calculated at 19% (2022: 19%) of the estimated assessable profit for the year.
The charge for the year can be reconciled to the profit per the income statement as follows:
2023 As restated
GBP'000 2022
GBP'000
Profit before tax 632 206 *
--------- ------------
Tax on profit on ordinary activities at the
standard rate UK corporation tax rate of 19%
(2022: 19%) 120 39 *
--------- ------------
Effects of:
--------- ------------
Tax rate changes for deferred tax (8) 108
--------- ------------
Expenses not deductible for tax purposes 64 21
--------- ------------
Prior year adjustment (14) (66)
--------- ------------
Fixed asset differences 65 26
--------- ------------
Other (13) 23 *
--------- ------------
214 151
--------- ------------
Current tax has been provided at the rate of 19%. Deferred tax has been provided at 25% (2022: 25%).
The exceptional charge of GBP554,000 (2022: GBP1,555,000 - as restated), disclosed separately on the consolidated income statement, is tax deductible to the value of GBP105,000 (2022: GBP296,000 - as restated) of corporation tax. Classifying these credits/costs as exceptional has no effect on the tax liability.
In the Spring Budget 2021, the Government announced that from 1 April 2023 the UK corporation tax rate will increase from 19% to 25%. This will have a consequential effect on the Group's future tax charge.
* The restatement of the 2022 figures is explained in note 38. The above reconciliation has been updated to present the reconciling items between 19% of profit before tax to the actual tax charge, based on the prior year adjustment.
15. Dividends
When determining the level of proposed dividend in any year a number of factors are taken into account including levels of profitability, future cash commitments, investment needs, shareholder expectations and prudent buffers for maintaining an adequate regulatory capital surplus. Amounts recognised as distributions to equity holders in the period:
2023 2022
GBP'000 GBP'000
Final dividend for the year ended 31 March 2022
of 1.20p (2021: 0.60p) per share 511 255
--------- ---------
Interim dividend for the year ended 31 March 2023
of 0.25p (2021: 0.30p) per share 106 128
--------- ---------
617 383
--------- ---------
Proposed final dividend for the year ended 31 March
2023 of 0.25p (2022: 1.20p) per share 106 511
--------- ---------
The proposed final dividends are subject to approval by shareholders at the Annual General Meeting and have not been included as liabilities in these financial statements.
16. 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 GBP418,000 (2022: GBP55,000 - as restated) and divided by 42,577,328 (2022: 42,577,328) Ordinary Shares of 6(2) /(3) pence, being the weighted average number of Ordinary Shares in issue during the year.
No dilution to earnings per share in the current year or in the prior year.
The calculation of the basic earnings per share is based on the following data:
As restated
2023 2022
GBP'000 GBP'000
Earnings for the purpose of basic earnings
per share
---------- ------------
being net profit attributable to equity holders
of the Parent Company 418 55 *
---------- ------------
* The restatement of the 2022 figures are explained in note 38
Number of shares
2023 2022
Number Number
Weighted average number of Ordinary Shares for
the purposes of basic earnings per share 42,577,328 42,577,328
----------- -----------
This produced basic earnings per share of 0.98 pence (2022: 0.13 pence - as restated).
17. Goodwill
GBP'000
Cost
--------
At 1 April 2021 7,056
--------
At 1 April 2022 7,056
--------
At 31 March 2023 7,056
--------
Accumulated impairment
--------
At 1 April 2021 2,668
--------
At 1 April 2022 2,668
--------
Impaired during the year -
--------
At 31 March 2023 2,668
--------
Carrying amount
--------
At 31 March 2023 4,388
--------
At 31 March 2022 4,388
--------
Goodwill acquired in a business combination is allocated, at acquisition, to the cash-generating units ("CGUs") that are expected to benefit from that business combination or intangible asset. The carrying amount of goodwill has been allocated as follows:
2023 2022
GBP'000 GBP'000
London York Fund Managers Limited CGU ("London
York") 2,901 2,901
--------- ---------
Barker Poland Asset Management LLP CGU ("BPAM") 1,487 1,487
--------- ---------
4,388 4,388
--------- ---------
The recoverable amounts of the CGUs have been determined based upon value-in-use calculations for the London York CGU and fair value, less costs of disposal for the BPAM CGU.
The London York computation was based on discounted five-year cash flow projections and terminal values. The key assumptions for these calculations are a pre-tax discount rate of 12%, terminal growth rates of 2% and the expected changes to revenues and costs during the five-year projection period based on discussions with senior management, past experience, future expectations in light of anticipated market and economic conditions, comparisons with our peers and widely available economic and market forecasts. The pre-tax discount rate is determined by management based on current market assessments of the time value of money and risks specific to the London York CGU. The base value-in-use cash flows were stress tested for an increase in discount rates to 16% and a 20% fall in net inflows resulting in no impairment.
The discount rate would need to increase above 17% for the London York CGU value-in-use to equal the respective carrying values. Revenues would need to fall by 37.4% per annum in present value terms for the London York CGU value-in-use to equal the respective carrying values.
The BPAM CGU recoverable amount was assessed, in accordance with IAS 36, by adopting the higher method of the fair value less cost of disposal to determine the recoverable amount (as opposed to the lower value-in-use). The recoverable amount at the year-end calculated for the BPAM CGU, determined by the fair value less cost of disposal, exceeded that produced by the value-in-use calculation. The fair value less cost of disposal amounted to GBP10 million (2022: GBP7.8 million) with headroom, after selling costs, of GBP6.7 million (2022: GBP4.2 million) after applying price earnings multiples based on the average of the Group's and its peers' published results. Accordingly, this measurement is classified as fair value hierarchy Level 3 having used valuation techniques not based on directly observable market data. A 27% decrease in BPAM's profit after tax across five years would result in reducing the headroom to a negligible value.
18. Other intangible assets
Software Client Total
licences lists GBP'000
GBP'000 GBP'000
Cost
---------- --------- ---------
At 1 April 2021 2,883 10,665 13,548
---------- --------- ---------
Reclassification of assets relating to
IFRS 16 (45) - (45)
---------- --------- ---------
Additions in the year 61 32 93
---------- --------- ---------
At 1 April 2022 2,899 10,697 13,596
---------- --------- ---------
Reclassification of assets relating to
IFRS 16 (22) - (22)
---------- --------- ---------
Additions in the year 45 266 311
---------- --------- ---------
At 31 March 2023 2,922 10,963 13,885
---------- --------- ---------
Amortisation
---------- --------- ---------
At 1 April 2021 2,459 4,523 6,982
---------- --------- ---------
Charge for the year 185 677 862
---------- --------- ---------
At 1 April 2022 2,644 5,200 7,844
---------- --------- ---------
Charge for the year 137 833 970
---------- --------- ---------
Charge for the year - exceptional cost
(note 10) - 423 423
---------- --------- ---------
At 31 March 2023 2,781 6,456 9,237
---------- --------- ---------
Carrying amount
---------- --------- ---------
At 31 March 2023 141 4,507 4,648
---------- --------- ---------
At 31 March 2022 255 5,497 5,752
---------- --------- ---------
The intangible assets are amortised over their estimated useful lives in order to determine amortisation rates. "Client lists" are assessed on an asset-by-asset basis and are amortised over periods of three to twenty years and "Software licences" are amortised over five years. During the year an exercise was undertaken which resulted in modifications to the estimated useful lives of certain client assets associated with self-employed investment managers. The result of this exercise is an increased amortisation charge of GBP423,000 compared to the prior year.
There are no indications that the value attributable to client lists or software licences should be further impaired.
19. Property, plant and equipment
Owned fixed assets Leasehold Computer Computer Total
improvement, software hardware GBP'000
furniture GBP'000 GBP'000
and
equipment
GBP'000
Cost
-------------- ---------- ---------- ---------
1 April 2021 2,766 - 1,582 4,348
-------------- ---------- ---------- ---------
Reclassification of assets * (73) - - (73)
-------------- ---------- ---------- ---------
Dilapidation asset reassessment (50) - - (50)
-------------- ---------- ---------- ---------
Additions in the year 110 - 8 118
-------------- ---------- ---------- ---------
At 1 April 2022 2,753 - 1,590 4,343
-------------- ---------- ---------- ---------
Additions in the year 99 - 52 151
-------------- ---------- ---------- ---------
At 31 March 2023 2,852 - 1,642 4,494
-------------- ---------- ---------- ---------
Accumulated depreciation
-------------- ---------- ---------- ---------
1 April 2021 1,380 - 1,491 2,871
-------------- ---------- ---------- ---------
Charge for the year 253 - 50 303
-------------- ---------- ---------- ---------
1 April 2022 1,633 - 1,541 3,174
-------------- ---------- ---------- ---------
Charge for the year 297 - 34 331
-------------- ---------- ---------- ---------
At 31 March 2023 1,930 - 1,575 3,505
-------------- ---------- ---------- ---------
Carrying amount
-------------- ---------- ---------- ---------
At 31 March 2023 922 - 67 989
-------------- ---------- ---------- ---------
At 31 March 2022 1,120 - 49 1,169
-------------- ---------- ---------- ---------
* Adjustments were made in the prior year to reclassify assets more appropriately between asset classes. The net impact of these adjustments in asset costs and accumulated depreciation was nil and did not require changes or corrections to depreciation policy.
20. Right-of-use assets
Computer Computer
Offices software hardware Total
-------- --------- --------- --------
GBP'000 GBP'000 GBP'000 GBP'000
-------- --------- --------- --------
Cost
-------- --------- --------- --------
1 April 2022 4,304 899 95 5,298
-------- --------- --------- --------
Additions 346 168 - 514
-------- --------- --------- --------
At 31 March 2023 4,650 1,067 95 5,812
-------- --------- --------- --------
Accumulated depreciation
-------- --------- --------- --------
1 April 2022 1,968 673 60 2,701
-------- --------- --------- --------
Charge for the year 518 233 20 771
-------- --------- --------- --------
At 31 March 2023 2,486 906 80 3,472
-------- --------- --------- --------
Carrying amount
-------- --------- --------- --------
At 31 March 2023 2,164 161 15 2,340
-------- --------- --------- --------
At 31 March 2022 2,336 226 35 2,597
-------- --------- --------- --------
21. Investments - fair value through profit or loss
Non-current asset investments
The Group did not hold any non-current asset investments at the reporting date.
Current asset investments
As at As at
31 March 31 March
2023 2022
GBP'000 GBP'000
Trading investments
---------- ----------
Investments - fair value through profit or loss 1,276 1,647
---------- ----------
Financial assets at fair value through profit or loss represent investments in equity securities and collectives that present the Group with opportunity for return through dividend income, interest and trading gains. The fair values of these securities are based on quoted market prices and the Group is able to liquidate these assets at short notice.
The following 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 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities. The Group's financial assets held at fair value through profit and loss under current assets fall within this category;
Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices). The Group does not hold financial instruments in this category; and
Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs). The Group's financial assets held at fair value through profit and loss under non-current assets fall within this category.
Level Level 2 Level 3 Total
1 GBP'000 GBP'000 GBP'000
GBP'000
At 31 March 2023
--------- --------- --------- ---------
Financial assets held at fair
value through profit and loss 1,276 - - 1,276
--------- --------- --------- ---------
At 31 March 2022
--------- --------- --------- ---------
Financial assets held at fair
value through profit and loss 1,647 - - 1,647
--------- --------- --------- ---------
Further IFRS 13 disclosures have not been presented here as the balance represents 2.022% (2022: 2.148%) of total assets. There were no transfers of investments between any of the levels of hierarchy during the year.
22. Trade and other receivables
2023 2022
GBP'000 GBP'000
Amounts falling due within one year:
--------- ---------
Due from clients, brokers and recognised stock
exchanges at amortised cost 28,554 42,898
--------- ---------
Other debtors at amortised cost 2,148 1,522
--------- ---------
Prepayments and accrued income 5,599 5,583
--------- ---------
36,301 50,003
--------- ---------
23. Cash and cash equivalents
2023 2022
GBP'000 GBP'000
Cash deposits held at bank, repayable on demand
without penalty 13,138 11,113
--------- ---------
13,138 11,113
--------- ---------
Cash and cash equivalents do not include deposits of client monies placed by the Group with banks and building societies in segregated client bank accounts (free money and settlement accounts). All such deposits are designated by the banks and building societies as clients' funds and are not available to satisfy any liabilities of the Group.
The amount of such net deposits which are not included in the consolidated statement of financial position at 31 March 2023 was GBP267,258,000 (2022: GBP314,424,000).
The credit quality of banks holding the Group's cash at 31 March 2023 is analysed below with reference to credit ratings awarded by Fitch.
2023 2022
GBP'000 GBP'000
A+ 5,400 7,837
--------- ---------
AA- 7,738 2,959
--------- ---------
A- - 45
--------- ---------
Unrated or held in cash - 272
--------- ---------
13,138 11,113
--------- ---------
24. Deferred tax liability
Capital Short-term Total
allowances temporary GBP'000
GBP'000 differences
and other
GBP'000
At 1 April 2021 (124) (276) (400)
------------ ------------- ---------
Use of loss brought forward 119 (170) (51)
------------ ------------- ---------
Debit to the income statement - 37 37
------------ ------------- ---------
At 1 April 2022 (5) (409) (414)
------------ ------------- ---------
Use of loss brought forward - 2 2
------------ ------------- ---------
Debit to the income statement - 41 41
------------ ------------- ---------
At 31 March 2023 (5) (366) (371)
------------ ------------- ---------
Deferred income tax assets are recognised for tax loss carried forward to the extent that the realisation of the related tax benefit through future taxable profits is probable. The Group did not recognise deferred income tax assets of GBP12,362 (2022: GBP152) in respect of losses amounting to GBP65,063 (2022: GBP800) that can be carried forward against future taxable income. Losses amounting to GBPnil (2022: GBPnil) and GBPnil (2022: GBPnil) expire in 2023 and 2024, respectively.
25. Financial instruments and risk profile
Financial risk management
The Board has overall responsibility for the determination of the Group's risk management objectives and policies and, whilst retaining ultimate responsibility for them, it has delegated the authority for designing and operating processes that ensure the effective implementation of the objectives and policies to the Group's Risk function. The Board receives period reports from the Group Risk Team through which it reviews the effectiveness of the processes put in place and the appropriateness of the objectives and policies it sets. The Group's internal auditors also review the risk management policies and processes and report their findings to the Audit Committee.
Procedures and controls are in place to identify, assess and ultimately control the financial risks faced by the Group arising from its use of financial instruments. Steps are taken to mitigate identified risks with established and effective procedures and controls, operating systems, management information and training of staff.
The Group's risk appetite, along with the procedures and controls mentioned above, are laid out in the Group's Internal capital adequacy and risk assessment (ICARA).
The overall risk appetite for the Group is considered by Management to be low, despite operating in a marketplace where financial risk is inherent in investment management and financial services.
The overall objective of the Board is to set policies that seek to reduce risk as far as possible without unduly affecting the Group's competitiveness and flexibility. The Group considers its financial risks arising from its use of financial instruments to fall into three main categories:
(i) credit risk;
(ii) liquidity risk; and
(iii) market risk.
Financial risk management is a central part of the Group's strategic management which recognises that an effective risk management programme can increase a business's chances of success and reduce the possibility of failure. Continual assessment, monitoring and updating of procedures and benchmarks are all essential parts of the Group's risk management strategy.
(i) Credit risk management practices
The Group's credit risk is the risk of loss through default by a counterparty and, accordingly, the Group's definition of default is primarily attributable to its trade receivables or pledged collateral which is the risk that a client, market counterparty or recognised stock exchange will be unable to pay amounts to settle a trade in full when due. Other credit risks, such as free delivery of securities or cash, are not deemed to be significant. Significant changes in the economy or a particular sector could result in losses that are different from those that the Group has provided for at the year-end date.
All financial assets at the year-end were assessed for credit impairment and no material amounts have arisen having evaluated the age of overdue debtors, the quality of recourse to third parties and the availability of mitigation through the disposal of liquid collateral in the form of marketable securities. The Group's write-off policy is driven by the historic dearth of instances where material irrecoverable losses have been incurred. Where the avenues of recourse and mitigation outlined above have not been successful, the outstanding balance, or residual balance if sale proceeds do not fully cover an exposure, will be written off.
The Board is responsible for oversight of the Group's credit risk. The Group accepts a limited exposure to credit risk but aims to mitigate and minimise the risk through various methods. There is no material concentrated credit risk as the exposures are spread across a substantial number of clients and counterparties.
Trade receivables (includes settlement balances)
Settlement risk arises in any situation where a payment of cash or transfer of a security is made in the expectation of a corresponding delivery of a security or receipt of cash. Settlement balances arise with clients, market counterparties and recognised stock exchanges.
In the vast majority of cases, control of the stock purchased will remain with the Group until client monetary balances are fully settled.
Where there is an absence of securities collateral, clients are usually required to hold sufficient funds in their managed deposit account prior to the trade being conducted. Holding significant amounts of client money helps the Group to manage credit risks arising with clients. Many of our clients also hold significant amounts of stock and other securities in our nominee subsidiary company, providing additional security should a specific transaction fail to be settled and the proceeds of such securities disposed of can be used to settle all outstanding obligations.
In addition, the client side of settlement balances are normally fully guaranteed by our commission-sharing certified persons who conduct transactions and manage the relationships with our mutual clients.
Exposures to market counterparties also arise in the settlement of trades or when collateral is placed with them to cover open trading positions. Market counterparties are usually other FCA-regulated firms and are considered creditworthy, some reliance being placed on the fact that other regulated firms would be required to meet the stringent capital adequacy requirements of the FCA.
Maximum exposure to credit risk:
2023 2022
GBP'000 GBP'000
Cash 13,138 11,113
--------- ---------
Trade receivables 28,554 42,898
--------- ---------
Other debtors 2,148 1,522
--------- ---------
Accrued interest income 591 108
--------- ---------
44,431 55,641
--------- ---------
An ageing analysis of the Group's financial assets is presented in the following table:
Current 0-1 2-3 Over Carrying
At 31 March 2023 GBP'000 month months 3 value
GBP'000 GBP'000 months GBP'000
GBP'000
Trade receivables 27,910 555 58 31 28,554
--------- --------- --------- --------- ---------
Cash and cash equivalent 13,138 - - - 13,138
--------- --------- --------- --------- ---------
Other debtors 2,141 2 - 5 2,148
--------- --------- --------- --------- ---------
Accrued interest income 591 - - - 591
--------- --------- --------- --------- ---------
43,780 557 58 36 44,431
--------- --------- --------- --------- ---------
Expected credit loss
The Group applies the IFRS 9 simplified approach to measuring expected credit losses using a lifetime expected credit loss provision for trade receivables and contract assets. To measure expected credit losses on a collective basis, trade receivables and contract assets are grouped based on similar credit risk and ageing. The contract assets have similar risk characteristics to the trade receivables for similar types of contracts.
The Group undertakes a daily assessment of credit risk which includes monitoring of client and counterparty exposure and credit limits. New clients are individually assessed for their creditworthiness using external ratings where available and all institutional relationships are monitored at regular intervals.
As at 31 March 2023, the Directors of the Company reviewed and assessed the Group's existing assets for impairment using the IFRS 9 simplified approach to measuring expected credit losses using a lifetime expected credit loss provision for trade receivables and contract assets and no additional impairments have been recognised on application and no material defaults are anticipated within the next 12 months.
Concentration of credit risk
In addition, daily risk management procedures to actively monitor disproportionately large trades by a customer or market counterparty are in place. The financial standing, pattern of trading, type and size of security or instrument traded are amongst the factors taken into consideration.
(ii) Liquidity risk
Liquidity risk arises from the Group's management of working capital and the finance charges and principal repayments on its debt instruments. It is the risk that the Group will encounter difficulty in meeting its financial obligations as they fall due. The Group's policy is to maintain sufficient cash to allow it to meet its liabilities when they become due.
Historically, sufficient underlying cash has been prevalent in the business for many years as the Group is normally cash-generative. The risk of unexpected large cash outflows could arise where significant amounts are being settled daily of which only a fraction forms the commission earned by the Group. This could be due to clients settling late or bad deliveries to the market or CREST, also resulting in a payment delay from the market side. The Group also commits in advance to product providers to purchase future structured product issues at the future market price. The Group then markets such products in advance of the issue, which under normal business conditions means there is limited liquidity and market risk at the time of product launch.
The Group's policy with regard to liquidity risk is to carefully monitor balance sheet structure and borrowing limits, including:
-- monitoring of cash positions on a daily basis; -- exercising strict control over the timely settlement of trade debtors; and -- exercising strict control over the timely settlement of market debtors and creditors.
The Group holds its cash and cash equivalents spread across a number of highly rated financial institutions. All cash and cash equivalents are short-term highly liquid investments that are readily convertible to known amounts of cash without penalty.
The Group and its subsidiaries Walker Crips Investment Management Limited and Barker Poland Asset Management LLP are in scope of the FCA's basic liquid assets requirements and these are monitored by management on a daily basis.
The table below analyses the Group's cash outflow based on the remaining period to the contractual maturity date.
2023 Less than Total
1 year GBP'000
GBP'000
Trade and other payables 36,849 36,849
---------- ---------
36,849 36,849
---------- ---------
2022
---------- ---------
Trade and other payables - as restated 49,625 * 49,625 *
---------- ---------
49,625 * 49,625 *
---------- ---------
* The restatement of the 2022 figures is explained in note 38
As at 31 March 2023 the Group had commitments in respect of future structured product issues of GBP10 million.
(iii) Market risk
Market risk is the risk that changes in market prices such as foreign exchange rates or equity prices, on financial assets and liabilities will affect the Group's results. They relate to price risk on fair value through profit or loss trading investments and are subject to ongoing monitoring.
Fair value of financial instruments
The fair values of the Group's financial assets and liabilities are not materially different from their carrying values as they are valued at their realisable values. The Group's financial assets that are classed as current asset and non-current asset investments (fair value through profit or loss) have been revalued at 31 March 2023 using closing market prices.
A 10% fall in the value of trading financial instruments would, in isolation, result in a pre-tax decrease to net assets of GBP127,600 (2022: GBP164,700). A 10% rise would have an equal and opposite effect.
The impact of foreign exchange and interest rate risk is not material and is therefore not presented.
26. Trade and other payables
2023 2022
GBP'000 GBP'000
Amounts owed to clients, brokers and recognised
stock exchanges 28,012 42,325
--------- ---------
Other creditors 4,028 2,537
--------- ---------
Contract liability 9 14
--------- ---------
Accrued expenses 4,800 4,749
--------- ---------
36,849 49,625
--------- ---------
Trade creditors and accruals comprise amounts outstanding for investment-related transactions, to customers or counterparties, and ongoing costs. The average credit period taken for purchases in relation to costs is 11 days (2022: 15 days). The Directors consider that the carrying amount of trade payables approximates to their fair value.
27. Provisions
Provisions included in other current liabilities and long-term liabilities are made up as follows:
Professional Client Dilapidations Stamp
fees payments GBP'000 Duty liability Total
GBP'000 GBP'000 and related GBP'000
costs
GBP'000
Provisions falling due within
one year
------------- ---------- -------------- ---------------- ----------
At 1 April 2020 - 178 - 472 * 650
------------- ---------- -------------- ---------------- ----------
Additions - 55 - 157 * 212
------------- ---------- -------------- ---------------- ----------
Utilisation of provisions - (28) - - (28)
------------- ---------- -------------- ---------------- ----------
At 1 April 2021 - 205 - 629 834
------------- ---------- -------------- ---------------- ----------
Additions 595 650 16 118 * 1,379
------------- ---------- -------------- ---------------- ----------
Dilapidation provision transferred
from more than one year - - 16 - 16
------------- ---------- -------------- ---------------- ----------
Utilisation of provisions (140) (205) - - (345)
------------- ---------- -------------- ---------------- ----------
At 1 April 2022 455 650 32 747 1,884
------------- ---------- -------------- ---------------- ----------
Additions - 96 - 131 227
------------- ---------- -------------- ---------------- ----------
Reclassification to trade
and other payables (90) (746) - - (836)
------------- ---------- -------------- ---------------- ----------
Release of provisions (20) (20)
------------- ---------- -------------- ---------------- ----------
Utilisation of provisions (345) - (32) - (377)
------------- ---------- -------------- ---------------- ----------
- - - 878 878
------------- ---------- -------------- ---------------- ----------
Provisions falling due after
one year
------------- ---------- -------------- ---------------- ----------
At 1 April 2020 - - 659 - 659
------------- ---------- -------------- ---------------- ----------
Additions - - 16 - 16
------------- ---------- -------------- ---------------- ----------
At 1 April 2021 - - 675 - 675
------------- ---------- -------------- ---------------- ----------
Dilapidation provision transferred
to less than one year - - (16) - (16)
------------- ---------- -------------- ---------------- ----------
Utilisation of provisions - - (77) - (77)
------------- ---------- -------------- ---------------- ----------
Interest - - 4 - 4
------------- ---------- -------------- ---------------- ----------
At 1 April 2022 - - 586 - 586
------------- ---------- -------------- ---------------- ----------
Additions - - 61 - 61
------------- ---------- -------------- ---------------- ----------
Dilapidation provision transferred - - - - -
to less than one year
------------- ---------- -------------- ---------------- ----------
Utilisation of provisions - - - - -
------------- ---------- -------------- ---------------- ----------
Interest - - 5 - 5
------------- ---------- -------------- ---------------- ----------
- - 652 - 652
------------- ---------- -------------- ---------------- ----------
Total as at 31 March 2023 - - 652 878 1530
------------- ---------- -------------- ---------------- ----------
The Group, based on revised estimates, made an additional provision of GBP66,000 (including interest) for dilapidations in connection with acquired leasehold premises (2022: total additional provision of GBP16,000). These costs are expected to arise at the end of each respective lease.
The Group had five leased properties, all of which had contractual dilapidation requirements. The dilapidation provisions in relation to these leases range from net present values as at the year-end of GBP12,000 to GBP557,000 per lease.
As explained in the Chairman's Statement and Finance Director's Report, the Group identified a control failing which has resulted in a liability to HMRC in respect of stamp duty reserve tax. The matter has been voluntarily disclosed to HMRC. The scale of the matter only became apparent subsequent to the year end and the exercise to fully quantify the liability remains ongoing. Management have therefore estimated the liability based upon preliminary review of historic transactions records, categorisation of transactions as subject to stamp duty reserve tax or not and sample checks of transactions within those categories. Assumptions have also been applied regarding potential penalties, interest and costs to complete the exercise. Management has sought independent professional advice in respect of these matters. Estimation uncertainty therefore exists in respect of these assumptions and early stage of the work, and until full sample checks are complete and discussions concluded with HMRC. Whilst it is therefore not possible to conclude on the exact range of estimation uncertainty error, a deterioration in the provision of 80% has been included in the going concern and viability stress tests pending full resolution of the matter
Provisions made at year end 31 March 2022 and adjustments in the current year in relation to customer redress (client payments) and associated costs were transferred to trade and other payables as the outcome of both are nearing completion and there is certainty over the cost outlay. The customer redress obligations were settled in full post year end.
* The restatement of the 2022 figures are explained in note 38
28. Lease liabilities
Lease liabilities Offices Computer Computer Total
GBP'000 software hardware GBP'000
GBP'000 GBP'000
At 1 April 2022 2,337 173 35 2,545
--------- ---------- ---------- ---------
Additions 345 168 - 513
--------- ---------- ---------- ---------
Lease reassessments - - - -
--------- ---------- ---------- ---------
Interest 80 5 1 86
--------- ---------- ---------- ---------
Lease payments (200) (198) (16) (414)
--------- ---------- ---------- ---------
At 31 March 2023 2,562 148 20 2,730
--------- ---------- ---------- ---------
Lease liabilities profile (statement of financial 2023 2022
position) GBP'000 GBP'000
Amounts due within one year 341 245
--------- ---------
Amounts due after more than one year 2,389 2,300
--------- ---------
2,730 2,545
--------- ---------
Undiscounted lease maturity analysis 2023 2022
GBP'000 GBP'000
Within one year 426 340
--------- ---------
Between one and two years 958 491
--------- ---------
Between two and five years 1,549 2,058
--------- ---------
Over five years - 54
--------- ---------
Total undiscounted lease liabilities 2,933 2,943
--------- ---------
29. Called-up share capital
2023 2022
GBP'000 GBP'000
Called-up, allotted and fully paid
--------- ---------
43,327,328 (2021: 43,327,328) Ordinary Shares of
6(2) /(3) p each 2,888 2,888
--------- ---------
The Group's Articles were amended in 2010 since when there has been no authorised share capital. Shareholders have no restrictions on their holdings except for certain investment managers who were awarded shares in the Group soon after joining as part of the consideration for their client relationships. These holdings cannot be sold for a period of four to six years from commencement date.
The following movements in share capital occurred during the year:
Number Share Share Total
of capital premium GBP'000
shares GBP'000 GBP'000
At 1 April 2022 43,327,328 2,888 3,763 6,651
----------- --------- --------- ---------
At 31 March 2023 43,327,328 2,888 3,763 6,651
----------- --------- --------- ---------
The Group's capital is defined for accounting purposes as total equity. As at 31 March 2023, this totalled GBP21,166,000 (2022: GBP21,365,000 - as restated; 2021: GBP21,693,000 - as restated).
The Group's objectives when managing capital are to:
-- safeguard the Group's ability to continue as a going concern so that it can continue to provide returns for shareholders and benefits for other stakeholders;
-- maintain a strong capital base to support the development of the business;
-- optimise the distribution of capital across the Group's subsidiaries, reflecting the requirements of each company;
-- strive to make capital freely transferable across the Group where possible; and -- comply with regulatory requirements at all times.
The Group has been assessed as constituting a MIFIDPRU Investment Firm group and has been classified as a non-small non-interconnected (non-SNI) Investment Firm group and performs an Internal Capital Adequacy and Risk Assessment process (ICARA), which is presented to the FCA on request.
The Group's capital, for accounting purposes, is defined as the total of share capital, share premium, retained earnings and other reserves. Total capital at 31 March 2023 was GBP21.2 million (2022: GBP21.4 million - as restated). Regulatory capital is derived from the Group's Internal Capital Adequacy and Risk Assessment ("ICARA"), which is a requirement of the Investment Firm Prudential Regime ('IFPR'). The ICARA draws on the Group's risk management process that is embedded within all areas of the Group. The Group's objectives when managing capital are to comply with the capital requirements set by the Financial Conduct Authority, to safeguard the Group's ability to continue as a going concern.
Capital adequacy and the use of regulatory capital are monitored daily by the Group's management. In addition to a variety of stress tests performed as part of the ICARA process, and daily reporting in respect of treasury activity, capital levels are monitored and forecast to ensure that dividends and investment requirements are managed and appropriate buffers are held against potential adverse business conditions.
Regulatory capital
No breaches were reported to the FCA during the financial years ended 31 March 2023 and 2022.
Treasury shares
The Group holds 750,000 of its own shares, purchased for total cash consideration of GBP312,000. In line with the principles of IAS 32 these treasury shares have been deducted from equity (note 30). No gain or loss has been recognised in the income statement in relation to these shares.
30. Reserves
Apart from share capital and share premium, the Group holds reserves at 31 March 2023 under the following categories:
Own shares held (GBP312,000) (2022:
(GBP312,000)) * the negative balance of the Group's own shares, which
have been bought back and held in treasury.
Retained earnings GBP10,104,000 (2022:
GBP10,303,000 - as * the net cumulative earnings of the Group, which have
restated; 2021: GBP10,631,000 not been paid out as dividends, are retained to be
- as restated) reinvested in our core, or developing, companies.
------------------------------- -----------------------------------------------------------------
Other reserves GBP4,723,000 (2022:
GBP4,723,000) * the cumulative premium on the issue of shares as
deferred consideration for corporate acquisitions
GBP4,612,000 (2022: GBP4,612,000) and
non-distributable reserve into which amounts are
transferred following the redemption or purchase of
the Group's own shares.
------------------------------- -----------------------------------------------------------------
31. Cash generated from operations
2023 Restated
GBP'000 2022
GBP'000
Operating profit for the year 625 208 *
---------- ---------
Adjustments for:
---------- ---------
Amortisation of intangibles 1,393 862
---------- ---------
Changes in the fair value of deferred - -
consideration
---------- ---------
Net change in fair value of financial
instruments at fair value through profit
or loss**** 575 (347)
---------- ---------
Share of associate after tax result - (57)
---------- ---------
Depreciation of property, plant and
equipment 331 303
---------- ---------
Depreciation of right-of-use assets** 771 873
---------- ---------
Decrease / (increase) in debtors*** 13,662 (915)
---------- ---------
(Decrease) / Increase in creditors*** (13,818)* 3,290*
---------- ---------
Net cash inflow 3,539 4,217
---------- ---------
* The restatement of the 2022 figures is explained in note 38
** Lease liability payments associated with RoU assets were GBP332,000 (2022: GBP1,052,000).
*** Cash outflow from working capital movement of GBP156,000 (2022: GBP2,375,000 inflow - as restated)
**** Revaluation loss/(profit) on proprietary positions.
32. Financial commitments
Capital commitments
At the end of the year, there were capital commitments of GBPnil (2022: GBPnil) contracted but not provided for and GBPnil (2022: GBPnil) capital commitments authorised but not contracted for.
33. Related parties
Directors and their close family members have dealt on standard commercial terms with the Group. The commission and fees earned by the Group included in revenue through such dealings is as follows:
2023 2022
GBP'000 GBP'000
Commission and fees received from Directors and
their close family members 20 15
--------- ---------
Other related parties include Charles Russell Speechlys, of which Martin Wright, Chairman, is a Partner. Charles Russell Speechlys provides certain legal services to the Group on normal commercial terms and the amount paid and expensed during the year (including the fees paid to the firm for Mr. Wright's services as Director) was GBP280,000 (2022: GBP268,000).
Fees of GBP9,000 (2022: GBP30,000) were received by EnOC Technologies Ltd from CyberQuote Pte Ltd (a company, where Hua Min Lim is a shareholder) for the service provided on normal commercial terms.
Commission of GBP7,043 (2022: GBP4,245) was earned by the Group from Phillip Securities (HK) Limited (a Phillip Brokerage Pte Limited company, where Hua Min Lim is a shareholder) having dealt on standard commercial terms. Additionally, some custody services are provided by Phillip Securities Pte Ltd (in Singapore, where Hua Min Lim is a Director), again all on standard commercial terms, both these items being included in revenue. Transactions between the Group and its subsidiaries, which are related parties, have been eliminated on consolidation and are accordingly not disclosed. Remuneration of the Directors who are the key Management personnel of the Group is disclosed in the table below.
2023 2022
GBP'000 GBP'000
Key management personnel compensation
--------- ---------
Short-term employee benefits 459 458
--------- ---------
Post-employment benefits 32 33
--------- ---------
Share-based payment - -
--------- ---------
491 491
--------- ---------
34. Contingent liabilities
In 2021 a former associate brought a claim against Walker Crips Investment Management Limited in the Employment Tribunal. A hearing of a preliminary issue took place in 2022 and the Tribunal found in favour of the company. The former associate appealed that decision and in 2023, whilst many of the appeal grounds were not upheld, certain points were referred back to the Employment Tribunal to reconsider. The company does not consider that the claims are justified and intends to continue to defend them robustly.
From time to time, the Group receives complaints or undertakes past business reviews, the outcomes of which remain uncertain and/or cannot be reliably quantified based upon information available and circumstances falling outside the Group's control. Accordingly, contingent liabilities arise, the ultimate impact of which may also depend upon availability of recoveries under the Group's indemnity insurance and other contractual arrangements. Other than any cases where a financial obligation is deemed to be probable and thus provision is made, the Directors presently consider a negative outcome to be remote. As a result, no further disclosure has been made in these financial statements. Provisions made remain subject to estimation uncertainty, which may result in material variations in such estimates as matters are finalised.
35. Subsequent events
There are no material events arising after 31 March 2023, which have an impact on these financial statements.
36. Deferred cash consideration
2023 2022
GBP'000 GBP'000
Due within one year
--------- ---------
Amounts due to personnel under recruitment contracts/acquisition
agreements 94 89
--------- ---------
Due after one year
--------- ---------
Amounts due to personnel under recruitment contracts/acquisition
agreements 71 29
--------- ---------
These amounts are based on fixed contractual terms and the fair value of the liability approximates carrying value, due to the consistency of the prevailing market rate of interest when compared to the inception of liability.
37. Share-based payments
The Group recognised total expenses in the year of GBPnil (2022: GBP19,431) related to equity-settled share-based payment transactions.
No award was made in the financial year and prior year award was forfeited due to termination of employment.
Share Incentive Plan ("SIP")
Employees who have been employed for longer than three months and are subject to PAYE are invited to join the SIP. Employees may use funds from their gross monthly salary (being not less than GBP10 and not greater than GBP150) to purchase ordinary shares in the Group ("Partnership Shares"). In the current year, for every Partnership Share purchased, the employee received matching shares at a rate of 50%. The matching option was increased to 100% on 1 April 2023 and will remain at this rate to 31 March 2024. Employees are offered an annual opportunity to top up contributions to the maximum annual limit of GBP1,800 (or 10% of salary, if lower). All shares to date awarded under this scheme have been purchased in the market at the prevailing share price on a monthly basis.
38. Prior period adjustments
During the year, the Group discovered errors in how it accounted for Stamp Duty Reserve Tax ("SDRT") on certain transactions undertaken on behalf of clients. Following the discovery of this error, the Group undertook an investigation of the various transactions impacted by the error. This investigation is ongoing, but based on the latest available information, management's current estimate of the liability due and payable by the Group is GBP878,000, including professional support costs. This amount also includes an estimate of interest and penalties that HMRC may charge on any amounts due and is net of taxation.
The error has been corrected by restating each of the affected financial statement line items for the prior periods.
As the investigation is ongoing, there remains uncertainty surrounding both the quantum of the liability in respect of the SDRT due, as well as the interest and penalties that HMRC may charge.
The amounts of the error for the current year and the two preceding financial years ending 31 March on the following bases:
Current Prior year Prior year 2020 and
year 2023 2022 2021 prior
GBP GBP GBP GBP
SDRT liability to HMRC (see
notes 10 and 28) 131,000 118,000 157,000 472,000
----------- ----------- ----------- ---------
The provision arising in respect of 2022 has been accounted for as a prior year adjustment and increases the exceptional costs as previously reported in that year by GBP118,000 to GBP1,658,000, with a similar reduction in that year's previously reported profit and total comprehensive income for the year to GBP55,000.
The cumulative provision arising before 1st April 2020 of GBP472,000 has been treated as a prior period reduction in previously reported reserves as at 31 March 2020, and together with GBP157,000 in 2021 and GBP118,000 attributable to 2022, a reduction of the previously reported reserves as at 31 March 2022 is shown in the table below.
In the financial highlights, the restated operating loss for the year ended 31 March 2021 of GBP0.14 million is disclosed. This represents the previously reported operating profit of GBP22,000 reduced by the estimated SDRT provision of GBP157,000 relating specifically to that year.
Consolidated statement 2021 Change Restated 2022 Restated
of financial position GBP'000 GBP'000 2021 GBP'000 Change 2022
extract GBP'000 GBP'000 GBP'000
---------
Provisions (205) (629) (834) (1,137) (747) (1,884)
--------- --------- --------- --------- ---------- ---------
Net assets 22,322 (629) 21,693 22,112 (747) 21,365
--------- --------- --------- --------- ---------- ---------
Retained earnings 11,260 (629) 10,631 11,050 (747) 10,303
--------- --------- --------- --------- ---------- ---------
Total equity 22,322 (629) 21,693 22,112 (747) 21,365
--------- --------- --------- --------- ---------- ---------
Company balance sheet
as at 31 March 2023
Note 2023 2022
GBP'000 GBP'000
Non-current assets
----- --------- ---------
Investments measured at cost less impairment 42 21,907 21,757
----- --------- ---------
21,907 21,757
----- --------- ---------
Current assets
----- --------- ---------
Trade and other receivables 43 801 758
----- --------- ---------
Deferred tax asset 44 1 -
----- --------- ---------
Cash and cash equivalents 95 335
----- --------- ---------
897 1,093
----- --------- ---------
Total assets 22,804 22,850
----- --------- ---------
Current liabilities
----- --------- ---------
Trade and other payables 45 (3,889) (3,407)
----- --------- ---------
(3,889) (3,407)
----- --------- ---------
Net current assets/(liabilities) (2,992) (2,314)
----- --------- ---------
Net assets 18,915 19,443
----- --------- ---------
Equity
----- --------- ---------
Share capital 47 2,888 2,888
----- --------- ---------
Share premium account 47 3,763 3,763
----- --------- ---------
Own shares 47 (312) (312)
----- --------- ---------
Retained earnings 47 7,853 8,381
----- --------- ---------
Other reserves 47 4,723 4,723
----- --------- ---------
Equity attributable to equity holders
of the Company 18,915 19,443
----- --------- ---------
As permitted by section 408 of the Companies Act 2006 the Parent Company has elected not to present its own profit and loss account for the year. Walker Crips Group plc reported an after-tax profit for the financial year of GBP89,000 (2022: after-tax profit of GBP285,000).
The financial statements of Walker Crips Group plc (Company registration no. 01432059) were approved by the Board of Directors and authorised for issue on 31 July 2023.
Signed on behalf of the Board of Directors:
Sanath Dandeniya FCCA
Director
Company statement of changes in equity
year ended 31 March 2023
Called Share Own Other Retained Total
up premium shares GBP'000 earnings equity
share account held GBP'000 GBP'000
capital GBP'000 GBP'000
GBP'000
Equity as at 31 March 2021 2,888 3,763 (312) 4,723 8,479 19,541
--------- --------- --------- --------- ---------- ---------
Total comprehensive income
for the period - - - - 285 285
--------- --------- --------- --------- ---------- ---------
Contributions by and distributions
to owners
--------- --------- --------- --------- ---------- ---------
Dividends paid - - - - (383) (383)
--------- --------- --------- --------- ---------- ---------
Total contributions by and
distributions to owners - - - - (383) (383)
--------- --------- --------- --------- ---------- ---------
Equity as at 31 March 2022 2,888 3,763 (312) 4,723 8,381 19,443
--------- --------- --------- --------- ---------- ---------
Total comprehensive income
for the period - - - - 89 89
--------- --------- --------- --------- ---------- ---------
Contributions by and distributions
to owners
--------- --------- --------- --------- ---------- ---------
Dividends paid - - - - (617) (617)
--------- --------- --------- --------- ---------- ---------
Total contributions by and
distributions to owners - - - - (617) (617)
--------- --------- --------- --------- ---------- ---------
Equity as at 31 March 2023 2,888 3,763 (312) 4,723 7,853 18,915
--------- --------- --------- --------- ---------- ---------
The following Accounting Policies and Notes form part of these financial statements.
Notes to the Company accounts
year ended 31 March 2023
39. Significant accounting policies
The separate financial statements of Walker Crips Group plc, the Parent Company, are presented as required by the Companies Act 2006.
The financial statements have been prepared under the historical cost convention except for the modification to a fair value basis for certain financial instruments as specified in the accounting policies below, and in accordance with Financial Reporting Standard (FRS 102), the Financial Reporting Standard applicable in the UK and the Republic of Ireland, and the Companies Act 2006.
The preparation of financial statements in compliance with FRS 102 requires the use of certain critical accounting estimates. It also requires Management to exercise judgement in applying the Parent Company's accounting policies (see note 40).
The financial statements are presented in the currency of the primary activities of the Parent Company (its functional currency). For the purpose of the financial statements, the results and financial position are presented in GBP Sterling (GBP). The principal accounting policies have been summarised below. They have all been applied consistently throughout the year and the preceding year.
The Parent Company has chosen to adopt the disclosure exemption in relation to the preparation of a cash flow statement under FRS 102.
Going concern
After conducting enquiries, the Directors believe that the Parent Company has adequate resources to continue in existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the financial statements. The Parent Company's business activities, together with the factors likely to affect its future development, performance and position, have been assessed.
Property, plant and equipment
Fixtures and equipment are stated at historical cost less accumulated depreciation and provision for any impairment. Depreciation is charged so as to write-off the cost or valuation of assets over their estimated useful lives using the straight-line method on the following bases:
Computer hardware 33(1) /(3) % per annum on cost Computer software between 20% and 33(1) /(3) % per annum on cost Leasehold improvements over the term of the lease Furniture and equipment 33(1) /(3) % per annum on cost
The gain or loss on the disposal or retirement of an asset is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in income. The residual values and estimated useful life of items within property, plant and equipment are reviewed at least at each financial year end. Any shortfalls in carrying value are impaired immediately through profit or loss.
Impairment of non-financial assets
At each reporting date, the Parent Company reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). If there is an indication of possible impairment, the recoverable amount of any affected asset (or group of related assets) is estimated and compared with its carrying amount. If the estimated recoverable amount is lower, the carrying amount is reduced to its estimated recoverable amount, and an impairment loss is recognised immediately in profit or loss.
Taxation
The tax expense represents the sum of the tax currently payable and any deferred tax.
Current tax, including UK corporation tax and foreign tax, is provided at amounts expected to be paid or recovered using the tax rates and laws that have been enacted or substantively enacted by the balance sheet date. Current tax charges arising on the realisation of revaluation gains recognised in the statement of comprehensive income are also recorded in this statement.
Deferred tax is recognised in respect of all timing differences that have originated but not reversed at the balance sheet date where transactions or events that result in an obligation to pay more tax in the future or a right to pay less tax in the future have occurred at the balance sheet date.
A deferred tax asset is regarded as recoverable and therefore recognised only when, on the basis of all available evidence, it can be regarded as probable that there will be suitable taxable profits from which the future reversal of the underlying timing differences can be deducted. Deferred tax assets and liabilities are not discounted.
Own shares held
Own shares consist of treasury shares which are recognised at cost as a deduction from equity shareholders' funds. Subsequent consideration received for the sale of treasury shares is also recognised in equity with any difference being taken to retained earnings. No gain or loss is recognised on sale of treasury shares.
Financial instruments
Financial assets and financial liabilities are recognised in the balance sheet when the Parent Company becomes a party to the contractual provisions of the instrument. Section 11 of FRS 102 has been applied in classifying financial instruments depending on the nature of the instrument held.
Revenue
Income consists of profits distribution from Barker Poland Asset Management LLP, interest received or accrued over time and dividend income recorded when received.
Investments in subsidiaries
Investments in subsidiaries are stated at cost less, where appropriate, provisions for impairment.
Debtors
Other debtors are classified as basic financial instruments and measured at initial recognition at transaction price. Debtors are subsequently measured at amortised cost using the effective interest rate method. A provision is established when there is objective evidence that the Group will not be able to collect all amounts due.
Cash and cash equivalents
Cash and cash equivalents comprise cash in hand and demand deposits, together with other short-term highly liquid investments, which are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value.
Financial liabilities and equity
Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the Parent Company after deducting all of its liabilities. Equity instruments issued by the Parent Company are recorded at the proceeds received, net of direct issue costs.
Leases
Rentals under operating leases are charged on a straight-line basis over the lease term even if the payments are not made on such a basis. Benefits received as an incentive to enter into an operating lease are also spread on a straight-line basis over the lease term.
40. Key sources of estimation uncertainty and judgements
The preparation of financial statements in conformity with generally accepted accounting practice requires Management to make estimates and judgements that affect the reported amounts of assets and liabilities as well as the disclosure of contingent assets and liabilities at the balance sheet date and the reported amounts of revenues and expenses during the reporting period.
41. Profit for the year
Profit for the financial year of GBP89,000 (2022: profit of GBP285,000) is after an amount of GBP23,000 (2022: GBP57,000) related to the auditor's remuneration for audit services to the Parent Company.
Particulars of employee costs (including Directors) are as shown below. Employee costs during the year amounted to:
2023 2022
GBP'000 GBP'000
Employee costs during the year amounted to:
--------- ---------
Wages and salaries 186 175
--------- ---------
Social security costs 14 25
--------- ---------
Other costs 3 -
--------- ---------
203 200
--------- ---------
In the current year, employee costs include the costs of the Non-Executive Directors and a proportion of Executive Directors. The remaining Executive Directors' employee costs are borne by Walker Crips Investment Management Limited.
The monthly average number of staff employed during the year was:
2023 2022
Number Number
Executive Directors 2 2
-------- --------
Non-Executive Directors 4 4
-------- --------
6 6
-------- --------
42. Investments measured at cost less impairment
2023 2022
GBP'000 GBP'000
Subsidiary undertakings 21,907 21,757
--------- ---------
During the year, the Company made an investment of GBP150,000 in Walker Crips Financial Planning Limited, an indirect 100% owned subsidiary of the Group.
A complete list of subsidiary undertakings can be found in note 50.
43. Trade and other receivables
2023 2022
GBP'000 GBP'000
Amounts owed by Group undertakings 799 758
--------- ---------
Prepayments and accrued income - -
--------- ---------
Taxation and social security 2 -
--------- ---------
801 758
--------- ---------
A presentational change was made in this note to exclude the deferred tax asset from this grouping and to present it in its own line on the face of the statement of financial position.
44. Deferred taxation
2023 2022
GBP'000 GBP'000
At 1 April - 74
--------- ---------
Use of Group Relief (29) (14)
--------- ---------
Credit/(charge) to the income statement 30 (60)
--------- ---------
At 31 March 1 -
--------- ---------
Deferred tax has been provided at 25% (2022: 19%).
In the Spring Budget 2021, the Government announced that from 1 April 2023, the UK corporation tax rate will increase from 19% to 25%. This will have a consequential effect on the Company's future tax charge.
45. Trade and other payables
2023 2022
GBP'000 GBP'000
Accruals and deferred income 99 61
--------- ---------
Amounts due to subsidiary undertakings 3,744 3,270
--------- ---------
Other creditors 46 76
--------- ---------
3,889 3,407
--------- ---------
46. Risk management policies
Procedures and controls are in place to identify, assess and ultimately control the financial risks faced by the Parent Company arising from its use of financial instruments. Steps are taken to mitigate identified risks with established and effective procedures and controls, efficient systems and the adequate training of staff.
The Parent Company's risk appetite, along with the procedures and controls mentioned above, are laid out in the Group's Internal capital adequacy and risk assessment (ICARA).
The overall risk appetite for the Parent Company and for the Group as a whole is considered by Management to be low, despite operating in a marketplace where financial risk is inherent in the core businesses of investment management and financial services.
The Group considers its financial risks arising from its use of financial instruments to fall into three main categories:
(i) credit risk;
(ii) liquidity risk; and
(iii) market risk.
Further information on the disclosures and policies carried out by the Parent Company and the Group is given in note 25 of the consolidated financial statements.
(i) Credit risk
Maximum exposure to credit risk:
2023 2022
GBP'000 GBP'000
Cash 95 335
--------- ---------
Other debtors 799 758
--------- ---------
As at 31 March 894 1,093
--------- ---------
The credit quality of banks holding the Company's cash at 31 March 2023 is analysed below with reference to credit ratings awarded by Fitch.
2023 2022
GBP'000 GBP'000
A - -
--------- ---------
A+ 95 335
--------- ---------
AA- - -
--------- ---------
As at 31 March 95 335
--------- ---------
Analysis of other debtors due from financial institutions:
2023 2022
GBP'000 GBP'000
Neither past due, nor impaired 799 758
--------- ---------
Amounts past due, but not < 30 days - -
impaired
------------ --------- ---------
> 30 days - -
--------------------------------------------- --------- ---------
> 3 months - -
--------------------------------------------- --------- ---------
- -
--------------------------------------------- --------- ---------
(ii) Liquidity risk
The tables below analyse the Parent Company's future undiscounted cash outflows based on the remaining period to the contractual maturity date:
2023 2022
GBP'000 GBP'000
Creditors due within one year 3,889 3,407
--------- ---------
Creditors due after more than one year - -
--------- ---------
As at 31 March 3,889 3,407
--------- ---------
2023 2022
GBP'000 GBP'000
Within one year 3,889 3,407
--------- ---------
Within two to five years - -
--------- ---------
After more than five years - -
--------- ---------
As at 31 March 3,889 3,407
--------- ---------
The Company is in a net liability position, but this is primarily driven by an intercompany creditor balance with its subsidiary. This is deemed to not affect liquidity as the subsidiary is 100% owned and controlled by the Company.
(iii) Market risk
Market risk is the risk that changes in market prices such as foreign exchange rates or equity prices will affect the Group's income.
These relate to price risk breached on available-for-sale and trading investments and closely monitored using limits to prevent significant losses.
Fair value of financial instruments
No financial instruments at fair value were held by the Parent Company in the current or prior financial year.
47. Called-up share capital
2023 2022
GBP'000 GBP'000
Called-up, allotted and fully paid
--------- ---------
43,327,328 (2021: 43,327,328) Ordinary Shares of
6(2) /(3) p each 2,888 2,888
--------- ---------
No new shares were issued in the year to 31 March 2023 or the prior year.
The Parent Company holds 750,000 of its own shares, purchased for a total cash consideration of GBP312,000. In line with the principles of FRS 102, section 11, these treasury shares have been deducted from equity. No gain or loss has been recognised in the profit and loss account in relation to these shares.
The following movements in share capital occurred during the year:
Number Share Share Total
of shares capital premium GBP'000
GBP'000 GBP'000
At 1 April 2022 43,327,328 2,888 3,763 6,651
----------- --------- --------- ---------
At 31 March 2023 43,327,328 2,888 3,763 6,651
----------- --------- --------- ---------
Apart from share capital and share premium, the Parent Company holds reserves at 31 March 2023 under the following categories:
Own shares held (GBP312,000) (2022:
(GBP312,000)) * the negative balance of the Parent Company's own
shares that have been bought back and held in
treasury.
Retained earnings GBP7,853,000 (2022:
GBP8,381,000) * the net cumulative earnings of the Parent Company,
which have not paid out as dividends, retained to be
reinvested in our core or new business.
-------------------- -----------------------------------------------------------------
Other reserves GBP4,723,000 (2022:
GBP4,723,000) * the cumulative premium on the issue of shares as
deferred consideration for corporate acquisitions
GBP4,612,000 (2022: GBP4,612,000) and
non-distributable reserve into which amounts are
transferred following the redemption or purchase of
the Group's own shares.
-------------------- -----------------------------------------------------------------
48. Financial commitments
Capital commitments
At the end of the year, there were capital commitments of GBPnil (2022: GBPnil) contracted but not provided for and GBPnil (2022: GBPnil) capital commitments authorised but not contracted for.
49. Related party transactions
Key Management are those persons having authority and responsibility for planning, controlling and directing the activities of the Parent Company and Group. In the opinion of the Board, the Parent Company and Group's key Management are the Directors of Walker Crips Group plc.
Total compensation to key management personnel is GBP491,000 (2022: GBP491,000).
50. Contingent liability
From time to time, the Company receives complaints or undertakes past business reviews, the outcomes of which remain uncertain and/or cannot be reliably quantified based upon information available and circumstances falling outside the Company's control. Accordingly contingent liabilities arise, the ultimate impact of which may also depend upon availability of recoveries under the Company's indemnity insurance and other contractual arrangements. Other than the complaints deemed to be probable, the Directors presently consider a negative outcome to be remote or a reliable estimate of the amount of a possible obligation cannot be made. As a result, no disclosure has been made in these financial statements.
51. Subsequent events
There are no material events arising after 31 March 2023, which have an impact on these financial statements.
52. Subsidiaries and associates
Principal place Principal activity Class and percentage
of business of shares held
Group
---------------- ---------------------- ---------------------
Trading subsidiaries
---------------- ---------------------- ---------------------
Walker Crips Investment United Kingdom Investment management Ordinary Shares
Management Limited(1) 100%
---------------- ---------------------- ---------------------
London York Fund United Kingdom Management services Ordinary Shares
Managers Limited(2) 100%
---------------- ---------------------- ---------------------
Walker Crips Financial United Kingdom Financial services Ordinary Shares
Planning Limited advice 100%
(formerly Walker
Crips Wealth Management
Limited)(2)
---------------- ---------------------- ---------------------
Ebor Trustees Limited(2) United Kingdom Pensions management Ordinary Shares
100%
---------------- ---------------------- ---------------------
EnOC Technologies United Kingdom Financial regulation Ordinary Shares
Limited(1) and other software 100%
---------------- ---------------------- ---------------------
Barker Poland Asset United Kingdom Investment management Membership 100%
Management LLP(1)
---------------- ---------------------- ---------------------
Non-trading subsidiaries
---------------- ---------------------- ---------------------
Walker Crips Financial United Kingdom Financial services Ordinary Shares
Services Limited(1) 100%
---------------- ---------------------- ---------------------
G & E Investment United Kingdom Holding company Ordinary Shares
Services Limited(2) 100%
---------------- ---------------------- ---------------------
Ebor Pensions Management United Kingdom Dormant company Ordinary Shares
Limited(2) 100%
---------------- ---------------------- ---------------------
Investorlink Limited(1) United Kingdom Agency stockbroking Ordinary Shares
100%
---------------- ---------------------- ---------------------
Walker Cambria Limited(1) United Kingdom Dormant company Ordinary Shares
100%
---------------- ---------------------- ---------------------
Walker Crips Trustees United Kingdom Dormant company Ordinary Shares
Limited(1) 100%
---------------- ---------------------- ---------------------
W.B. Nominees Limited(1) United Kingdom Nominee company Ordinary Shares
100%
---------------- ---------------------- ---------------------
WCWB (PEP) Nominees United Kingdom Nominee company Ordinary Shares
Limited(1) 100%
---------------- ---------------------- ---------------------
WCWB (ISA) Nominees United Kingdom Nominee company Ordinary Shares
Limited(1) 100%
---------------- ---------------------- ---------------------
WCWB Nominees Limited(1) United Kingdom Nominee company Ordinary Shares
100%
---------------- ---------------------- ---------------------
Walker Crips Consultants United Kingdom Dormant company Ordinary Shares
Limited(1) 100%
---------------- ---------------------- ---------------------
Walker Crips Ventures United Kingdom Financial services Ordinary Shares
Limited(1) advice 100%
---------------- ---------------------- ---------------------
The registered office for companies and associated undertakings is:
1 Old Change House, 128 Queen Victoria Street, London, England, EC4V 4BJ. 2 Apollo House, Eboracum Way, York, England, YO31 7RE.
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END
FR FLFLDDAILVIV
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July 31, 2023 13:25 ET (17:25 GMT)
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