Walker Crips Regulatory News (WCW)

7 Jun 2007 07:02

Walker,Crips,Weddle,Beck PLC07 June 2007 7 June 2007Walker, Crips, Weddle, Beck plc Preliminary results for the year ended 31 March 2007 WALKER, CRIPS, WEDDLE, BECK DELIVERS RECORD PROFITABILITY Walker, Crips, Weddle, Beck plc ("WCWB", the "Company" or the "Group"), the integrated financial services group, today announces its unaudited preliminary results for the year ended 31 March 2007. Financial highlights • Revenues up 6.5% to £17.96 million (2006: £16.86 million) • Successful growth of non-broking fee income, which represented 46.2% of total revenues (2006: 40.9%) • Gross profit up 15.8% to £13.71 million (2006: £11.84 million); a gross margin of 76% (2006: 70%) • Operating profit (before exceptional administrative expenses) up 12.0% to £2.41 million (2006: £2.15 million) • Pre-tax profit before exceptional items and profit on disposal of investments up 10.4% to £2.64 million (2006: £2.39 million) • Profit after tax up 561% to £1.52m (2006: £0.23m) • Earnings per share up 560% to 13.2 pence (2006: 2.0 pence); Earnings per share (before exceptional items) up 13.2% to 16.36 pence (2006: 14.45 pence) • Proposed final dividend up 8.3% to 4.55 pence per share (2006: 4.20 pence per share) - total dividend for the year up 8.3% to 7.20 pence per share (2006: 6.65 pence per share) • Net cash resources remained strong, increasing to £6.1 million at the year end (2006: £2.4 million) Business highlights • All business units contributed to the record performance over the year and have commenced the current year strongly • Funds under management at Walker Crips Asset Managers Limited ("WCAM") rose 88.6% to £383 million at the year end (2006: £203 million) - Important mandate win to manage part of an institutional income fund - Launch of UK High Alpha Fund • Substantial growth in sales of Ebor SIPP plans, our London York subsidiary's flagship pension product • New office move underway; an important catalyst for further expansion • Board changes and proposed change of name to Walker Crips Group plc herald new era • Proposed 3 for 1 share split to improve marketability and liquidity of shares Commenting on the results, David Gelber, Chairman, said: "We have embarked on the current year with confidence and, assuming that marketsremain healthy, anticipate another successful year in all of our divisions." Rodney FitzGerald, Chief Executive Officer, said: "I am very pleased to note that all of our business units contributed to this excellent result, heralding an improvement in the quality of the Group's earnings and justifying our strategy of diversifying the Group's revenue base. The Group is well placed for further expansion under the new management team." For further information, please contact: Walker, Crips, Weddle, Beck plc Tel: +44 (0)20 7253 7502Rodney FitzGerald, Chief ExecutiveStephen Bailey, Investment Director Altium Tel: +44 (0)20 7484 4010Ben ThorneTim Richardson Further information on Walker, Crips, Weddle, Beck plc is available on the Company's website: www.wcwb.co.uk Chairman's Statement In early March the Board was informed of the very sad news concerning the deathof Graham Kennedy. Graham served as Chairman of WCWB for seven years and oversawa period of considerable change and development within the Group. The Boardbenefited greatly from Graham's professionalism and business skills gainedthrough a highly successful career in the City. I would like to record thegratitude of the Board for Graham's contribution. Martin Wright kindly agreed to step in as interim Chairman and I was appointedto the position on 11 May 2007. I am grateful to him for his assistance duringthat time. By way of introduction to myself as your new Chairman, before thisappointment I served as Group Chief Operating Officer of ICAP plc from 1994 to2005 and previously held the position of Chief Operating Officer of HSBC GlobalMarkets. I hope the extensive operational experience, knowledge of plc boardsand the range of contacts acquired with these two substantial organisations willenable me to make a relevant and effective contribution to the Group's ambitiousplans for growth. Results overview I have great pleasure in announcing another excellent performance by the Group,reflected by a record pre-tax profit of £2.12 million, compared to £0.37 millionlast year. Pre-tax profit before exceptional costs and profit on sale ofinvestments was £2.64 million (2006: £2.39 million) an increase of 10.4%. Whilst Group revenue increased by 6.5% to £17,959,000, our efforts to increasethe proportion of revenues derived from non-sharing asset-driven fees resultedin a reduction in commission payable and gross profits increasing 15.8% to£13,706,000, a margin of 76%. Basic earnings per share increased 560 per cent to 13.2 pence (2006: 2.0 pence)whilst the figure for earnings per share adjusted for exceptional items was up13.2% to 16.36 pence (2006: 14.45 pence). Our net cash resources of £6.1 million at the year end (2006: 2.4 million)remain healthy and will leave us well placed to take advantage of opportunitiesto make suitable acquisitions of complementary businesses or teams as theyarise. Dividend I am pleased to announce that the continued growth in pre-tax profit has enabledyour Board to propose an increased final dividend of 4.55 pence per share (2006:4.20 pence per share) which fully reflects both our confidence in our businessstrategy and the future of the Group. This proposed final dividend will be paidon 23 July 2007 to those shareholders on the register at the close of businesson 15 June 2007 and will give a total dividend for the year of 7.2 pence pershare (2006: 6.65 pence per share), an 8.27% increase. Business performance overview Each of the Group's core businesses delivered improved performances over theprevious year. Despite lower transaction volumes, our stockbroking subsidiary performedcreditably and benefited from a growing proportion of its revenue beingfee-based. Commission and fees totalled £13.11 million (2006: £12.68 million). Once again our unit trust management subsidiary, Walker Crips Asset Managers Ltd(WCAM), enjoyed a healthy period with funds under management rising from £203million to £383 million in the year to 31 March 2007. WCAM successfully launcheda new fund in October 2006, the UK High Alpha, which attracted assets of £45million in the period from launch to 31 March 2007. Our financial services division, London York, reported an impressive increase inoperating profit to £517,000 compared with £321,000 a year ago, justifying theBoard's view that the London York group could be integrated successfully intothe Group and contribute strongly to our overall development. The corporate finance division completed an increased number of assignmentsduring the year, resulting in a 21% increase in fee income over the previousyear. Non-broking, recurring revenue in the year increased to £8.4million and equatedto 46.2% of total income (2006: 40.9%). As ever, we remain committed todeveloping our recurring revenue stream. Board changes Apart from my own appointment mentioned above, with effect from 1 January 2007Rodney FitzGerald became the Group's Chief Executive Officer. Rodney, who servedas the Group's Finance Director between 1999 and 2006, also retains the financemandate. Rodney's predecessor, Michael Sunderland who has been with the Companysince 1972 and was CEO from 1996, remains on the Board as Executive Directorwith special responsibility for the expansion of the Private Client Department. Also with effect from 1 January 2007 and to further enhance the current boardstructure, Sean Lam was appointed Group Managing Director. On 18 January 2007, the Board accepted the resignation of Mr Loh Hoon Sun as anon-executive director and wish him well. Proposed change of name To better reflect the current and expected future range of the Group's revenuestreams and its current corporate structure, the Board announces that aresolution will be proposed for shareholder approval at the next Annual GeneralMeeting, to be held on 20 July 2007, to change the Company's name to WalkerCrips Group plc. Proposed Share split The Board consider that having a larger number of ordinary shares in issue willserve to improve the marketability and liquidity of the Company's shares. It istherefore announcing today the proposed sub division of the Company's sharecapital (the 'Share Split'). A resolution to subdivide each issued and unissued ordinary share of 20 penceeach in the capital of the Company into three new ordinary shares of 6 2/3 penceeach will be proposed at the Annual General Meeting. The Share Split will only become effective if approved by shareholders on 20July 2007. The final dividend will therefore be paid by reference to theexisting ordinary shares. Outlook The current year has started strongly across the Group. Our soon to be completed move to new, larger and more appropriate officepremises at Finsbury Tower is expected to be a catalyst for ensuring thecontinuation of our business development plans. The additional space and modernsurroundings should be of benefit to our existing staff and an attraction to newpersonnel. We have embarked on the current year with confidence and assuming that marketsremain healthy, anticipate another successful year in all our divisions. D M Gelber Chairman Chief Executive's Report This is my first report as Chief Executive Officer and I am therefore delightedto inform you that the Company has achieved another record year ofprofitability. Despite fluctuating investment conditions, I am very pleased tonote that all of our business units contributed to this excellent result,demonstrating an improvement in the quality of the Group's earnings andjustifying our strategy of diversifying the Group's revenue base. The Group is well placed for further expansion under the new management team andI look forward to reporting on the next phase of its growth over the excitingperiod ahead. Our head office relocation to nearby Finsbury Tower after 16 yearsat Sophia House will provide a much improved working environment for our staffand will be an important catalyst for this expansion. My thanks, on behalf of the Board, go to my predecessor, Michael Sunderland, whohas been the driver of the Company's progress since 1996 and the architect ofthe business model which has delivered the successes of recent years. Under hisleadership we have progressed from a traditional private client stockbroker to afully-listed integrated securities business with interests in fund management,corporate finance, stockbroking and wealth management. The recent changes to the Company's Board, including the appointments of DavidGelber, who brings a wealth of experience, gained at the highest level, asChairman and Sean Lam as Group Managing Director, herald a new era and we lookforward with confidence to meeting the many future challenges of our industry onthe strong foundations which have been created. Walker Crips Asset Managers Limited (WCAM) The excellent performance of our unit trust management team continued apace.Funds under management grew from £203 million to £383 million during the yearwhich also saw the launch of the new CF Walker Crips High Alpha Fund. WCAM nowmanages seven unit trusts and also a significant institutional equity mandate.In recent months our two multi manager funds have been listed on several majorelectronic dealing platforms which should improve the product distributionfurther. The division delivered a significant contribution to group profitability and itsfee income underpins the upward progress of one of our key performanceindicators, the percentage of Group income represented by recurring revenues.WCAM's successful track record provides the platform for further growth in fundsunder management and our experienced sales team should ensure effectivedistribution into the wealth management community. The two multi manager funds managed by Andy Tuck in the York office continuedtheir growth with the Select Income Fund proving particularly popular with fundsunder management increasing almost 20% over the year. This is due, in part, toongoing top decile performance within its peer group. Wider distributionchannels which are now in place coupled with impressive sector performanceshould lead to even stronger inflows of new monies in the second half of 2007. Walker Crips Stockbrokers Limited Despite the growing diversification of the Group's revenue stream, traditionalstockbroking prevails as the engine room of our business. Total income fromstockbroking clients in the year was £13.1 million (2006: £12.7 million). Against a background of increasing regulation, greater competition and moredemands on technology, our account executives generated gross commission of £9.9million (2006: £10.2 million). The number of commission-sharing associates islower now compared to last year, many having retired, but in all cases theirbusiness has been retained by the company under an established successionpolicy. The private client department expanded again during the year, in particularthrough the adoption of clients from departing account executives. Revenues inexcess of £1 million were generated by a desk of nine advisers now under themore focused leadership of Michael Sunderland. The growing demands of today'smore knowledgeable investors has led to further conversions of commission-basedadvisory clients into discretionary status, ensuring their portfolios receive amore dedicated and bespoke service. Our nominee and custody services, together with our PEP, ISA and Child TrustFunds investment and administration products, continue to bolster ournon-broking income base. Our managed deposit service, which enables immediateswitching from an interest-bearing account into investment products, contributedto the increase in total client monies held by the Group to £116 million.Investorlink and Investelink, our telephone and online execution dealingservices, both repeated their commendable performances of last year and providethe necessary outlet to the client base for fast and efficient trading inperiods of greater activity. We intend to more actively look to recruit individuals and teams of accountexecutives to our new offices or acquire suitable stockbroking businesses in ourdrive to preserve our earnings mix. London York Group - Financial Services Due in part to the new pensions environment which commenced in April 2006 (ADay), profitability at our York-based financial services arm, the London Yorkgroup, increased dramatically by 61 per cent over the previous year. The EborSIPP product, through which we offer administration and personalised PensionPortfolio Management services, has completed a successful year with the numberof plans rising from 80 to 161. Total amounts held at the year end within EborSIPPs, now fast becoming the flagship product of our financial servicesdivision, will soon exceed £25 million. Our subsidiary Ebor Trustees Limitedachieved full regulatory status from the FSA ahead of many other providers whoare yet to meet the stringent requirements for approval. Towards the year end a tax-efficient AIM Portfolio Management Service waslaunched and funds under management have already reached £1.2 million. There areplans to build further on the existing strategy of broadening the package beingoffered to the Wealth Management customer by adding an Inheritance Tax planningservice later this year. Our colleagues in Yorkshire, under the leadership ofDavid Hetherton, have already implemented a number of other successfulinitiatives such as joint ventures with large provincial firms of CharteredAccountants. The London financial services team's systems will be merged withLondon York's proven model in the near future. The present income charging policy of taking modest transactional commissionsand concentrating on growing recurring management fees provides a solid andsustainable foundation for future growth. Keith Bayley Rogers & Co Limited - Corporate Finance After a moderate 2006 by its standards, the corporate finance division bouncedback in the current year with a 194% increase in profitability to £0.24 million.Operating mainly within the LSE, AIM and Plus Markets, the division has morethan 20 retained clients. With more prestigious office space now available,greater emphasis is being given this year to recruiting and expanding thecorporate broking services department to support the growing corporate clientbase. The division remains busy, under the joint management of Howard Drummonand Derek Crowhurst, with a significant pipeline of assignments in progress. Exceptional debt provision We continue to vigorously pursue the outstanding debts of approximately £2.5million which we reported as an exceptional item and provided for last year.Following an adjournment in May 2007, we are now scheduled for trial in mid-Juneand we anticipate being awarded judgement and commencing recovery proceedings.The Board feel it prudent to retain the provision, which also covers legalcosts, in these results. Directors, account executives and staff On behalf of the Board, in a very successful year, I would like to thank myfellow directors, all our account executives and members of staff for theircontinued loyalty and commitment in the face of ever-increasing and seeminglycontinuous regulatory and technological change. Having successfully adopted thecomplex EU Savings Directive in 2006, resources are now directed towards thechanges and systems implementations of MiFID and the Capital RequirementsDirective. We were proud to see ten members of staff from our group run in this year'sLondon Marathon. All ten completed the race and they have raised over £14,000for Leukaemia CARE to date. Future Outlook The Board expects that the upgraded office environment will provide not onlymuch-needed improved accommodation for our staff but also the impetus for theorganisation to project a more professional and modern image, which in turn willprovide a springboard for capitalising on many new business opportunities. Theproposed change of name to Walker Crips Group plc will reflect the diversifiednature of the complementary business units within the corporate group and embodythe start of a new era. The current year has started well and we look forward with confidence toreporting further progress in the interim statements later this year. R.A. FitzGerald FCA Chief Executive Officer Consolidated income statementYear ended 31 March 2007 Note 2007 2006 £'000 £'000 Revenue 17,959 16,861Commission payable (4,253) (5,022) -------- --------Gross profit 13,706 11,839Share of after tax profits of joint ventures 50 50+------------------------------------------------------------------------------+|Administrative expenses - other (11,347) (9,736)||Administrative expenses - exceptional items 3 (520) (2,692)|+------------------------------------------------------------------------------+Total administrative expenses (11,867) (12,428) -------- --------Operating profit/(loss) 1,889 (539)Investment revenues 243 262Finance costs (14) (21)Profit on disposal of available-for-sale - 668investments -------- --------Profit before tax 2,118 370+------------------------------------------------------------------------------+|Analysed as: 3 2,638 2,394 ||Profit before tax, exceptional items and profit || on disposal of investments - 668 || ||Profit on disposal of investments (520) (2,692)||Administrative expenses -------- --------|| - exceptional items 2,118 370 ||Profit before tax |+------------------------------------------------------------------------------+Taxation (595) (136) -------- --------Profit for the year attributable to equityholders of 1,523 234the company ======== ======== Earnings per shareBasic 13.2p 2.0pDiluted 12.8p 1.9p ======== ========Dividends paid - Final in respect of previous year 4.2p 4.00p - Interim 2.65p 2.45p ======== ======== Consolidated Statement of recognised income and expenseYear ended 31 March 2007 2007 2006 £'000 £'000 Gain on revaluation of available-for-sale investments taken toequity 43 50Deferred tax on gains on available-for-sale investments 11 (15)Deferred tax on share options 275 - -------- --------Net income recognised directly in equity 329 35TransfersTransferred to profit or loss on sale of available-for saleinvestments - (544)Tax on sale of available-for-sale investments - 162 -------- -------- - (382)Profit for period 1,523 234 -------- -------- Total recognised income and expense for the year attributable to equity holders of the company 1,852 (113) ======== ======== Consolidated balance sheet31 March 2007 2007 2006 £'000 £'000Non-current assetsGoodwill 5,152 4,677Other intangible assets 921 1,036Property, plant and equipment 1,143 547Investment in joint ventures 74 55Available for sale investments 888 845Deferred tax asset 178 20 -------- -------- 8,356 7,180Current assetsTrade and other receivables 64,290 50,659Trading investments 138 135Cash and cash equivalents 6,298 2,549 -------- -------- 70,726 53,343 -------- --------Total assets 79,082 60,523 ======== ========Current liabilitiesTrade and other payables (63,656) (47,185)Current tax liabilities (448) (383)Bank overdrafts (148) (165)Provisions (649) (411) -------- -------- (64,901) (48,144) -------- --------Net current assets 5,825 5,199 -------- --------Non-current liabilities Shares to be issued (1,588) (1,113) -------- -------- Net assets 12,593 11,266 ======== ========EquityShare capital 2,356 2,326Share premium account 1,547 1,396Own shares (173) (173)Retained earnings 4,387 3,654Revaluation reserve 569 515Other reserves 3,907 3,548 -------- --------Equity attributable to equity holders of the company 12,593 11,266 ======== ======== Consolidated cash flow statementYear ended 31 March 2007 2007 2006 £'000 £'000Operating activitiesCash generated from / (used in) operations 5,384 (1,521)Interest received 216 239Interest paid (14) (21)Tax paid (435) (454) -------- --------Net cash generated from / (used in) operating activities 5,151 (1,757) -------- --------Investing activitiesJoint venture investment (20) -Acquisition of subsidiary - (740)Purchase of property, plant and equipment (830) (306)Proceeds from disposal of available-for-sale investments - 668Purchase of investments held for trading (3) -Disposal of investments held for trading - 141Dividends received 77 23 -------- --------Net cash used in investing activities (776) (214) -------- --------Financing activitiesProceeds on issue of shares 181 72Dividends paid (790) (738) -------- --------Net cash used in financing activities (609) (666) -------- --------Net increase/(decrease) in cash and cash equivalents 3,766 (2,637)Net cash and cash equivalents at beginning of year 2,384 5,021 -------- --------Net cash and cash equivalents at end of year 6,150 2,384 ======== ========Cash and cash equivalents 6,298 2,549Bank overdrafts (148) (165) -------- -------- 6,150 2,384 ======== ======== NotesFor the year ended 31 March 2007 1. The financial information set out in the announcement does not constitute theCompany's statutory accounts for the years ended 31 March 2007 or 2006. Thefinancial information for the year ended 31 March 2006 is derived from thestatutory accounts for that year which have been delivered to the Registrar ofCompanies. The auditors reported on those accounts; their report was unqualifiedand did not contain a statement under s. 237(2) or (3) Companies Act 1985. Thestatutory accounts for the year ended 31 March 2007 are yet to be signed butwill be finalised on the basis of the financial information presented by thedirectors in this preliminary announcement and will be delivered to theRegistrar of Companies following the company's annual general meeting. 2. Whilst the information as set out in this preliminary announcement is prepared in accordance with International Financial Reporting Standards("IFRS") the announcement itself does not contain sufficient information tocomply with IFRS. The accounting policies are consistent with those applied inthe full financial statements and are consistent with those of the prior yearexcept for the early adoption of IFRIC 11 in relation to share basedtransactions. 3. Exceptional item During the year, the group secured a lease on new premises to allow thecontinued expansion of the business. Until the new premises are fully occupiedand the old lease expires, costs are being incurred with no economic benefitsbeing received. The directors consider it prudent to provide in full wherenecessary for these onerous lease costs. The incremental costs relating to thenew lease premises are included as an exceptional item in the income statement. Last year, the group made a bad debt provision of £2.5 million relating to theoutstanding settlement of unauthorised transactions of two clients for whichlegal proceedings are ongoing. The full value of the debt, reduced by amountsrecovered and collateral held, together with legal costs were included in theprior year income statement, as an exceptional item. This information is provided by RNS The company news service from the London Stock Exchange