Walker Crips Regulatory News (WCW)

9 Jun 2006 07:01

Walker,Crips,Weddle,Beck PLC09 June 2006 Preliminary Results for the year ended 31 March 2006 Walker, Crips, Weddle, Beck Plc (Code: WCW), the financial services group whoseactivities cover stockbroking, fund management, corporate finance and personalfinancial services, today announces preliminary results for the year ended 31March 2006, the highlights of which are: • Revenue of £16,861,000 (2005: £13,132,000), an increase of 28.4% • Pre-tax profit before exceptional items of £3,062,000 (2005: £2,253,000), an increase of 35.9% • Exceptional provision as previously announced is maintained - legal proceedings being progressed resulting in pre-tax profit of £370,000 (2005: £2,253,000) • Final proposed dividend increased to 4.2p per share (2005: 4.0p per share) • Continued excellent performance from unit trust funds with funds under management rising to over £203m from £52.6m at 31 March 2005, an increase of 285.9% • Asset management division enters distribution agreement contracts with Cofunds and Norwich Union Lifetime who will list our funds on their electronic platforms • Newly-acquired London York group makes material contribution of £321,000 operating profit Graham Kennedy, Chairman, said: "The current year has started strongly and weanticipate further strong growth in funds under management during theforthcoming year. Although stockbroking volumes remain excellent, we expect ournon-broking revenue to continue to rise as a percentage of group revenue as ourfinancial services and fund management activities continue to grow. Michael Sunderland, Chief Executive Officer, said: "There is much to report uponpositively in key areas of our business and we are now seeing quite clearly thejustification and benefits of our overall strategy laid down four years ago. Atthat time little over 26% of our pre-exceptional operating expenses were coveredby structured predictable management fee income, but we have been able toincrease this to a level of 72%, ensuring a more reliable revenue stream andenhanced operational stability. The first two months of the current trading yearhave gone well and we are excited about the outlook for the current year." For further information, please contact: Walker, Crips, Weddle, Beck plc Tel: +44 (0)20 72537502Michael Sunderland, Chief ExecutiveRodney FitzGerald, Finance DirectorStephen Bailey, Investment Director Further information on Walker, Crips, Weddle, Beck plc:Further information on Walker, Crips, Weddle, Beck plc is available on theCompany's website:www.wcwb.co.uk. Chairman's statement I am delighted to announce another improvement in the performance of thebusiness with pre-tax profit before exceptional items of £3,062,000, an increaseof 35.9% over last year. Total revenue improved 28.4% to £16,861,000,reflecting the increase in stockbroking activity across global equity markets.The results also include an initial contribution from newly-acquired G & EInvestment Services Limited, a financial services company known as the LondonYork Group. London York reported an operating profit of £321,000 on revenue of£2,225,000. The results for the year have been prepared under the International FinancialReporting Standards ('IFRS') regime as have comparatives for 2005, which havebeen re-stated. The most significant changes are that we no longer amortisegoodwill, instead we conduct an annual impairment review,. We now include acharge to income determined by the fair value of share options granted toemployees and account executives under the Company's share option schemes andthirdly, we have to recognise the potential tax liability on the unrealisedappreciation in value of our investment in the London Stock Exchange at theprior year end and Euroclear plc for both years. In addition, the cumulativegains or losses on revalued investments are now included in the income statementof the period when realised. As previously announced, these results also contain an exceptional cost of£2,692,000 relating to a specific bad debt provision. After accounting for thiscost, the Group recorded a profit before tax of £370,000 for the year comparedwith £2,253,000 a year ago. Further details are provided in the ChiefExecutive's report. Despite the provision referred to above, I am pleased to announce that thecontinued growth in pre-tax profit before exceptional items has enabled yourBoard to propose an increased final dividend of 4.2p per share (2005: 4.0p pershare) which fully reflects both our confidence in our business strategy and thefuture of the group. This dividend will be paid on 17 July 2006 to thoseshareholders on the register at the close of business on 23 June 2006. Operations The performance of our boutique fund management operation has been outstandingduring the past year with funds under management growing to over £203 million,which includes £13 million of London York funds acquired and re-badged under theWalker Crips Asset Managers brand, from £52.6 million at 31 March 2005, anincrease of 285.9% from a year ago. Our flagship fund, the Walker Crips UK Growth fund has continued its impressiveperformance with the fund remaining amongst the top performers within its sectorover all periods since launch. The Walker Crips Equity Income Fund, meanwhile,has been ranked second in its sector since its launch two years ago and sixth inthe year to date The funds continue to attract significant institutional and retail interest andwe have strengthened our sales team in order to expand our list of contacts andmaintain a high level of client support and service. We are delighted to announce that our asset management division has signedagreements with Cofunds and Norwich Union Lifetime to list our funds on theirelectronic platforms. This development should significantly enhance thedistribution of the product to a much wider audience of IFAs and discretionarymanagers who utilise these electronic platforms. It is anticipated that furtherdistribution agreements will be concluded in the coming months. Stockbroking volumes have also remained buoyant. We are pleased to report anincrease in volumes of private client transactions of 2.3% which, together withan increase in the average value of transactions, has resulted in commissionrevenues of £10,154,000, 13.3% higher than the previous year. The corporatefinance division had a more modest year after the previous year's recordperformance. We remain excited by the prospects for our financial services division. Theanticipated synergies from operating an enlarged financial services group afterthe acquisition of the London York group are continuing to be realised and weare optimistic about increasing our pension management fee base from both ourown "Ebor" SIPP product and from the additional revenues generated by thechanges subsequent to 'A-day' in April 2006. The rate of growth in revenue andprofitability is expected to increase through their second year afteracquisition. Non-broking revenue as a proportion of total income increased again in the yearto £6,948,000 to stand at 40.6%, compared to 33.7% in 2005 and, as ever, weremain committed to building up our fee-based revenue. Board changes On completion of the acquisition of the London York group in April 2005 wewelcomed David Hetherton and Robert Elliott to the board, respectively, asexecutive and non-executive directors. Executive Directors, Associates and Staff On behalf of the board I thank all subsidiary directors, account executives andstaff for their continued effort and commitment. We welcome all new associatesand account executives who have joined us in our quest for diversified growth. Our commitment to and investment in training of all our personnel has also neverbeen higher, as we look to broaden our expertise in all areas of financialservices and investment advice. Outlook The current year has started strongly and we anticipate further strong growth infunds under management during the forthcoming year. In addition, the launch ofa new fund, the Walker Crips High Alpha fund, will complement our existingrange of funds and is currently planned for the autumn of 2006. Although stockbroking volumes remain excellent, we expect our non-brokingrevenue to continue to rise as a percentage of group revenue as our financialservices and fund management activities continue to grow. We have embarked on the current year with cautious confidence and anticipationof a successful year if markets remain healthy. We will also have the benefitof the synergies from the acquisition of the London York group for the entireyear. G.N. Kennedy, CVOChairman9 June 2006 Chief Executive's Report There is much to report upon positively in key areas of our business and we arenow seeing quite clearly the justification and benefits of our overall strategylaid down four years ago. At that time little over 26% of our pre-exceptionaloperating expenses were covered by structured predictable management fee income,but we have been able to increase this to a level of 72%, ensuring a morereliable revenue stream and enhanced operational stability. Walker Crips Asset Managers Limited The dramatic growth of funds under management ("FUM") and the extension of ourunit trust range to include the London York Global Growth and Select Incometrusts has led to the recent re-branding of this subsidiary. Stephen Bailey andJan Luthman, our Fund Managers, have consistently performed well and now commandthe attention of a growing number of institutions which have contributed tooverall funds under management, growing sharply to a level of £203 million atyear end - this having been achieved over a brief period of three years. Themandate for managing a Collins Stewart Growth Fund tracking the Walker Crips UKGrowth Fund is testament to our management team's ability. We are particularly pleased to now have available the two Fund of Fundsproducts, the Global Growth Fund and the Select Income Fund, capably managed byAndy Tuck in York - his knowledge of the multi-manager market is illustrated bysolid performance over the years. We have ambitious targets for our asset management division going forward toinclude the launch of a further Fund in the autumn. Walker Crips Stockbrokers Limited The revenue and earnings stream from this division is ever-changing and it isclear now more than ever that the private client requires a dedicated andexperienced broker to give sound advice and a quality service to guide him orher through volatile markets. Our account executives have been exceptionallybusy over the past twelve months and have contributed in large part to grosscommission reaching a record level of £10.2 million, an incremental increase of13.3% over the previous year. The stockbroking division's Private Client Department has expanded as the clientbase has broadened through a number of associates joining the team. Portfoliosunder advice and management from the stockbroking division now total £820million with a growing requirement for our nominee service now used byapproximately 12,000 clients Proposals are being considered next year forshare certificates to be abolished and so we see our Nominee / Custody Servicegrowing to accommodate larger portfolios. PEP's and ISA's and now Child Trust Funds ("CTF") have expanded in value to arecord £230 million at the year end. Over 10,000 active Plans / Accounts areunder management / administration, generating a strong contribution to fees andinterest income. The CTF may be in its infancy but we already manage 2,300accounts with a value of £1.3 million, the majority of which have selected ourin-house range of unit trusts as a long-term investment. Many of these CTFaccounts will be supplemented in the years ahead through the ability tosubscribe £1,200 annually. I am again pleased to report that our execution-only division InvestorLink /INVESTeLINK had a further successful year, recording a gross commissioncontribution of £718,000 - importantly, the average commission per trade wasmaintained at a satisfactory £28 - we continue to receive referrals from thisclient base for other managed products within the group. The Treasury Department may not be seen as core to our operations but there iswidespread demand for our deposit service which is now used by 3,500 of ourclient base and where total deposits at year end exceeded £112 million. Ebor Pensions Management Limited At the beginning of last year we were pleased to welcome into Walker Crips theLondon York Group of Companies and in so doing take a more active interest inthe pensions market. Our confidence in David Hetherton and his team in York hasbeen fully justified with the first year's target profitability being exceeded.A number of positive initiatives are underway, not least Joint Ventures withprofessional organisations, but the new Ebor SIPP was launched in advance of 'A'Day and we already have 82 SIPPs under management with a value of £15 million -continuous steady growth of this product is anticipated. We regard pensions asa key element in creating a diversified financial services group and we arepleased to have access to the widespread expertise of our colleagues at LondonYork. Keith Bayley Rogers & Co Limited - Corporate Finance Although turnover this year was lower than the exceptional levels of 2005, ourcorporate finance division had a busy year with a positive contribution toprofits. We have extended the number of listed companies for whom we areretained to advise and which benefit from our support. The division anticipatesexpanding the service it provides to their corporate clients during the currentyear. With this in mind, it expects to add to the number of executives withinthe division and believe that the number of corporate clients they serve willexpand during the year. Current work in progress is significant and includespotential flotations on the London Stock Exchange. Exceptional Debt Provisioning In July 2005 it was necessary for our Board to announce a substantial provisionof £2,500,000 against potential irrecoverable sums from two clients. We areresolutely pursuing recovery of these sums with our forensic accountants andlawyers. Despite attempts by the clients to evade service, legal proceedingshave been commenced and are continuing against them. As is often the case withlitigation, the timetable is frustratingly slow. However, we expect to bringthe matter to a full Court hearing in the autumn. In the interim, your Boardfeel it appropriate to retain the provision intact for the time being. As andwhen we have further news we will appraise shareholders, but in the meantime wewill continue to pursue vigorously the parties involved. Our provision includesthe costs of so doing. Future Outlook In the coming year we intend relocating our office from Sophia House, London tonearby Finsbury Tower in Bunhill Row - this move should significantly enhanceour group's profile and give us a range of operational efficiencies. It is mostappropriate for me to pass on our Board's great appreciation of the hard workand at times strenuous efforts given by many of the highly capable and talentedpeople in our group who have met the challenges arising in not the easiest ofyears. The first two months of current trading have gone well and we areexcited about the outlook for the current year. We are pleased with the shapeof our business and believe 2006 / 2007 will be a more successful year. Michael J. SunderlandChief Executive Officer9 June 2006 Walker, Crips, Weddle, Beck plcConsolidated Income StatementFor the year ended 31 March 2006 2006 2005 £'000 £'000 unaudited restated unaudited Revenue 16,861 13,132Commission payable (5,022) (4,416) Gross profit 11,839 8,716Share of after tax profits of joint 50 -ventureAdministrative expenses - other (9,736) (7,344)Administrative expenses - exceptional item (2,692) -Total administrative expenses (12,428) (7,344) Operating (loss)/profit (539) 1,372Investment revenues 262 396 Finance costs (21) (5)Profit on disposal of available-for-sale 668 490investments Profit before tax 370 2,253 Analysed as:Profit before tax and exceptional item 3,062 2,253Administrative expenses - exceptional item (2,692) - Profit before tax 370 2,253Taxation (136) (633) Profit for the year attributable to equityholders of the company 234 1,620 Earnings per shareBasic 2.0p 15.2pDiluted 1.9p 15.0p Dividends Paid: - Final 4.00p 3.00p - Interim 2.45p 2.35p Walker, Crips, Weddle, Beck plcConsolidated statement of recognised income and expenseFor the year ended 31 March 2006 2006 2005 £'000 £'000 unaudited restated unaudited Gain on revaluation of available-for-sale investments taken to 51 187equityLSE share consolidation - (150)Deferred tax on gains on available-for-sale investments (15) (12)Net income recognised directly in equity 36 25TransfersTransferred to profit or loss on sale of available-for saleinvestments (544) (481)Tax on sale of available-for-sale investments 162 145Profit for the period 234 1,620 Total recognised income and expense for the period attributable toequity holders of the company (112) 1,309 Walker, Crips, Weddle, Beck plcConsolidated balance sheet31 March 2006 Group Group 2006 2005 £'000 £'000 unaudited restated unaudited Non-current assetsGoodwill 4,677 2,297Other intangible assets 1,036 -Property, plant and equipment 547 296Investment in joint venture 55 -Available for sale investments 845 1,338 7,160 3,931Current assetsTrade and other receivables 50,659 76,928Trading investments 135 276Cash and cash equivalents 2,549 5,126 53,343 82,330Current liabilitiesTrade and other payables (46,797) (74,465) Current tax liabilities (483) (914) Bank overdrafts and loans (165) (105) Provisions (411) (350) (47,856) (75,834) Net current assets 5,487 6,496 Non-current liabilitiesDeferred tax liabilities (268) (401)Shares to be issued (1,113) - (1,381) (401) Total assets less liabilities 11,266 10,026 EquityShare capital 2,326 2,153Share premium account 1,396 1,337Own shares (173) (173)Retained earnings 3,654 4,158Revaluation reserve 515 862Other reserves 3,548 1,689 Equity attributable to equity holders of thecompany 11,266 10,026 Walker, Crips, Weddle, Beck plcConsolidated cash flow statementFor the year ended 31 March 2006 2006 2005 £'000 £'000 unaudited restated unaudited Cash (used)/generated from operating activitiesCash (used) generated from operations (1,521) 2,570Interest received 239 203Interest paid (21) (5)Tax paid (454) (545) Net cash (used)/generated from operating activities (1,757) 2,223 Cash (used)/generated from investing activitiesAcquisition of subsidiary/business (740) (55)Purchase of property, plant and equipment (306) (196)Proceeds from disposal of available-for-sale investments 668 490Proceeds/(purchase) from disposal of investments held for 141 (108)tradingDividends received 23 193 Net cash (used)/generated from investing activities (214) 324 Cash generated from financing activitiesProceeds on issue of shares 72 84Purchase of own treasury shares - (173)Dividends paid (738) (569) Net cash used in financing activities (666) (658) Net (decrease)/increase in cash and cash equivalents (2,637) 1,889Cash and cash equivalents at beginning of year 5,021 3,132 Cash and cash equivalents at end of year 2,384 5,021 Walker Crips Weddle Beck plcNotesFor the year ended 31 March 2006 1. The financial information set out in the announcement does notconstitute the company's statutory accounts for the years ended 31 March 2006 or2005. The financial information for the year ended 31 March 2005 is derivedfrom the statutory accounts for that year which have been delivered to theRegistrar of Companies. The auditors reported on those accounts; their reportwas unqualified and did not contain a statement under s. 237(2) or (3) CompaniesAct 1985. The statutory accounts for the year ended 31 March 2006 are yet to besigned but will be finalised on the basis of the financial information presentedby the directors in this preliminary announcement and will be delivered to theRegistrar of Companies following the company's annual general meeting. 2. Whilst the financial information included in this preliminaryannouncement has been computed in accordance with International FinancialReporting Standards (IFRSs) for the first time, this announcement does notitself contain sufficient information to comply with IFRSs. The Company expectto publish full financial statements that comply with IFRSs in June 2006. This information is provided by RNS The company news service from the London Stock Exchange