Last checked at 4 Jun 2009 07:00
4 June 2009
Walker Crips Group plc
Preliminary results for the year ended 31 March 2009
Walker Crips Group plc ("WCG", the "Company" or the "Group"), the integrated financial services group, today announces its unaudited preliminary results for the year ended 31 March 2009.
Financial highlights
Total revenue of £15.9 million down 13.1% (2008: £18.3 million)
Pre-tax profit down 52.2% to £1.1m (2008: £2.3 million)
Shareholders' funds increased by 9.0% to £14.6 million (2008: £13.4 million)
Proposed final dividend maintained at 1.60 pence per share (2008: 1.60 pence per share)
Basic earnings per share down 48.9% to 2.3 pence (2008: 4.5 pence)
Net cash resources at year end remain healthy
Successful growth in proportion of non-broking fee income, which represented 51.3% of total revenues (2008: 48.9%)
No impairments or losses on goodwill and intangible balance sheet assets
Business highlights
Healthy regulatory capital surplus maintained
WCAM funds under management (FUM) decreased 5.4% to £383 million at the year end (2008: £405 million), compared to a 31.2% decline in the FTSE 100.
Cost saving measures implemented with the full benefit coming through in the year to 31 March 2010.
Encouraging start to the current year. WCAM FUM increased to £441 million at 31 May 2009.
Commenting on the results, David Gelber, Chairman, said:
"The results represent a relatively strong performance in the context of falling global stock markets and the significant losses, impairments and write-downs being reported by other market participants. However, we are continuing to monitor overheads and make savings where possible."
"There are early signs of a possible market recovery reflected in an improvement in our trading levels in recent weeks. Your Board maintains its conviction and confidence in a return to higher levels of profitability if the increased market activity is sustained."
For further information, please contact:
| Walker Crips Group plc Rodney FitzGerald, Chief Executive Stephen Bailey, Investment Director | Tel: +44 (0)20 3100 8000 |
| Altium Ben Thorne Tim Richardson | Tel: +44 (0)20 7484 4010 |
Further information on Walker Crips Group plc is available on the Group's website: www.wcgplc.co.uk
CHAIRMAN'S STATEMENT
Market uncertainty, particularly in the second half of the year, continued to have an impact on the Group's performance. Profit before tax for the year ended 31 March 2009 decreased 52% to £1.1m (2008: £2.3m) on revenue which fell by 13% to £15.9m (2008: £18.3m). Although disappointing, this result is a creditable performance in the context of falling global stock markets and the significant losses, impairments and write-downs being reported elsewhere. The Group continued to implement cost reduction measures in the second half with administrative expenses falling by 5% over the year to £11.9m (2008: £12.5m). The full benefit of these cost saving initiatives will be felt in the year to 31 March 2010. Our balance sheet, underpinned by healthy cash resources, remains strong with net assets up 9% to £14.6m at the year end (2008: £13.4m).
Business Performance Overview
WCAM, our asset management division, posted a robust performance for the year. Funds under management (FUM) reduced only slightly to £383m (2008: £405m) compared to a 31.2% decline in the FTSE 100 Index during the same period.
Since their respective launch dates, all of the WCAM funds have ranked in the top quartiles of their respective peer groups, a testament to the established investment strategy of our highly-rated fund management team. Since the year-end WCAM has continued to attract new investors' funds, with FUM increasing to £441m as at 31 May 2009.
During the year falling global stock markets and recessionary fears accelerated migration away from equity based investments. As a result the stockbroking division experienced sustained pressure on transaction volumes throughout the year to 31 March 2009 and net commission revenue decreased by 14% to £5.6m (2008: £6.5m).
A new product division, Walker Crips Structured Investments (WCSI) made a sound contribution to Group profitability. Our experienced team successfully marketed four structured investment plans during the second half of the year, contributing net revenue in excess of £200,000.
Board Changes
On 31 December 2008, the Board accepted the resignation of Mr Howard Saunders as a non-executive director. The Board would like to express its sincere thanks to Howard for his support and advice for the last seven years, a period during which the Group expanded rapidly, and wishes him well in his retirement.
Share Issue
In July 2008, 1.4 million new ordinary shares of 6 2/3 pence each were issued as deferred consideration for the acquisition of the London York financial services group (G&E Investment Services). This represented the maximum number of shares due after a highly profitable earn-out period. Having achieved demanding earn out targets, London York continues to deliver longer-term benefits by providing a strong platform for further growth in the wealth management sector and bringing important diversity to our revenues.
Dividend
I am pleased to announce that, in light of the Group's profitable performance this year, together with a positive start to the new financial year, the Board is proposing that the final dividend be maintained at 1.60 pence per share (2008:1.60 pence per share) making a total dividend for the year of 2.54 pence per share (2008: 2.54 pence per share). This decision has been taken with due consideration of our established dividend policy which takes account of longer-term performance and has historically rewarded shareholders with gradual increases in dividend based on growth of shareholders' funds rather than on a single year's results. The Group maintains a healthy level of regulatory capital and distributable reserves and your Board believes that after nearly two years of challenging trading there is a reasonable prospect of a favourable change in conditions before the end of the current financial year.
It is proposed that the final dividend will be paid on 22 July 2009 to those shareholders on the register at the close of business on 19 June 2009.
Outlook
We are continuing to monitor overheads and make savings where possible. There are early signs of a possible market recovery reflected in an improvement in our trading levels in recent weeks. Your Board maintains its conviction and confidence in a return to higher levels of profitability if the increased market activity is sustained.
D M Gelber
Chairman
4 June 2009
CHIEF EXECUTIVE'S REPORT
Results Overview
I am pleased to report that against declining market activity driven by further unprecedented deterioration in global financial markets, the Group has achieved a profit before tax for the year of £1.1 m (2008: £2.3m) helped by the cost saving measures which have been implemented throughout the year. The growing range of products across the Group also provided it with a solid base and helped to contain the impact of the economic turmoil on annual Group revenue to a modest decrease of 13.1% to £15.9m (2008: £18.3m).
Asset Management (WCAM)
The asset management division made another significant contribution to Group profitability. With its relatively low cost base and sustained levels of recurring annual income, WCAM provides a sound platform for the other Group business units to add value in the current challenging climate.
Funds under management (FUM) fell 5.4 % over the year from £405m to £383m by the year end, compared to the FTSE 100 Index which fell 31.2 % over the same period. Since the year end, FUM have recovered to stand at £441m at 31 May 2009.
The expansion of the sales team during the year has resulted in an increase in investor interest in WCAM's seven actively-managed funds, which have all ranked in the top quartiles of their respective peer groups since launch.
The Board believes that these consistently high quality performance statistics provide WCAM with opportunities to gain further significant market share.
Investment Management/Stockbroking (Walker Crips Stockbrokers Limited)
Income from investment management and stock broking continued to be the largest component of Group revenue during the year at £11.9m (2008: £12.8m), a modest reduction of just over 7% in extremely challenging conditions.
Total assets under management and administration stood at £1.4bn at year end, a decrease of just 14.8% from the prior year and out performance relative to the 31.2% fall in the FTSE 100 index over the period.
In an effort to maintain profitability within the division whilst also trying to keep a nucleus of talented staff together, personnel-related cost savings have been gradually implemented during the past eighteen months, mainly from the back office and principally through natural wastage. Back office headcount has been reduced by 20% over the year.
During one of its most difficult years, the Private Client Fund Management division had a satisfactory performance with fee-based revenues being sustained at strong levels in spite of weaker stock markets. The York based stockbroking operation is now fully integrated with London and overall Funds under Management have grown to £138m of which £62m is managed on a Discretionary basis. Volatile markets have provided the Company with the opportunity to use appropriately collateralised derivative products to enhance portfolio offerings to clients. This is likely to be a key growth area for the future for both the London and York offices.
The Group's front office structure, with many advisers operating on a self-employed commission sharing basis, has proved resilient in the difficult economic environment. Unlike some of our competitors we have not been forced into making painful and large-scale redundancies in order to reduce fixed salary costs.
Following a benchmarking exercise, a comprehensive overhaul of the Group's fee tariff was completed in mid-year. Fee increases for some of our fringe services has had the impact of restoring our profit margins to realistic levels for those services.
In keeping with our proud tradition of providing a tailored service to our increasingly sophisticated client base, Walker Crips Structured Investments was successfully launched during the year aimed at external intermediaries and suitable discretionary or advisory customers. To date WCSI has successfully issued four medium-term investment products, each attracting considerable interest.
It is encouraging to report that the Company's less volatile non-broking fee income, one of our key performance indicators, exceeded 50% of total revenue for the first time this year.
Wealth Management (London York group)
Our Financial Services and Pension Management Division, based in York, has performed robustly given the difficult market conditions although its contribution to the Group's bottom line was significantly lower than in 2008.
The Ebor SIPP product had another successful year of growth. Plans now number 250 and funds under administration exceed £50m at the year end (2008: 223 plans and £44m). SSAS (Small Self Administered Scheme) plans numbered 184 at the year end with funds under administration exceeding £200m (2008: 203 plans and £175m). We envisage further growth this year for both these products, despite recent Budget announcements. In particular, our SSAS offering has already experienced a marked upturn in qualified enquiries.
One of our two joint venture companies, set up with large provincial accountancy firms based in the North of England, has been wholly acquired by our joint venture partner who exercised its right to buy us out after a mutually profitable four year incubation period. However, our business relationship will continue through the supply of compliance and other related services on a fixed fee basis. Additionally, it has undertaken to continue to support our Unit Trust Pension and Structured product range and to utilise our stockbroking services.
Corporate Finance (Keith Bayley Rogers & Co Limited)
The Corporate Finance division registered a small loss for the year as the appetite for small cap transactions remained limited, particularly on the AIM market where Keith Bayley Rogers is focused. There are few signs that the appetite for small-cap transactions will increase in the immediate future and the division has reduced its cost base accordingly in order to minimise future losses.
Corporate Activity
While the Group's strategy of combining acquisitive and organic growth to drive expansion remains unchanged, the Board has developed a more cautious attitude to acquisitions in recent months.
We have instead concentrated on recruiting teams and individuals and are delighted that a number of recent front office hires have already brought in quality business.
Liquidity
Despite material swings in working capital arising from timing differences in settlements with counterparties the current level of cash resources remains sufficient and provides adequate headroom even when faced with the volatile business flows of recent months. Much greater emphasis is being placed on the credit risk of the banking institutions with whom we place funds, with financial stability taking greater priority over rates of return.
Going Concern
The Group continues to have a strong balance sheet. The decrease in net cash at 31 March 2009 to £ 3.3m (2008: £5.1m) arose primarily by reason of timing differences in settlements.
Having conducted detailed forecasts and appropriate stress-testing, taking account of possible adverse changes in trading performance, the Board has sufficient grounds to believe the Group is well placed to manage its business risks successfully and that it will be able to operate within the level of its current financing arrangements, which includes a £3m overdraft facility. Accordingly, the Board continues to adopt the going concern basis for the preparation of the financial statements.
Regulation
The Retail Distribution Review is shortly to complete its consultation period and a fundamental strand in the proposed regulation is the achievement of a step-change in professionalism across the entire financial services sector by way of minimum qualifications for all Approved Persons. The Group embraces the proposed changes and implementation for which is planned for 2012. A plan to assist our personnel in meeting the new requirements will be implemented to ensure that they can acquire suitable qualifications well before this deadline.
Despite the inclusion of additional capital requirements to cover operational risks as well as balance sheet risk under the Capital Requirements Directive, the Group continues to hold significant surplus regulatory capital.
Directors, Account Executives and Staff
During a period when the Group has been looking to reduce costs and rationalise personnel, the Board is aware of the inevitable increased workload borne by those remaining. The degree of versatility of many members of staff has been prominent and invaluable, particularly from the longer-serving members of our very adaptable and efficient back office. In these exceptionally difficult times I would like to thank all our Approved Persons, staff and my fellow directors for their loyalty and commitment to the Group.
Outlook
The opening weeks of the new financial year have seen a marked improvement in business activity compared to the final quarter of last year. The full impact of cost saving initiatives and the revised fee tariff will be felt in the year to March 2010. There have been signs of a return in investor confidence helped by the rise in key UK equity indices. Despite general uncertainty about the recovery of global economies, your Board believes that the Group is well-positioned to benefit should this trend translate to a sustained recovery.
R. A. FitzGerald FCA
Chief Executive Officer
4 June 2009
Walker Crips Group plc
Consolidated income statement
Year ended 31 March 2009
| Notes | 2009 £'000 | 2008 £'000 | |||
| Revenue | 5 | 15,865 | 18,312 | ||
| Commission payable | (3,225) | (3,749) | |||
| Gross profit | 12,640 | 14,563 | |||
| Share of after tax profits of joint ventures | 175 | 69 | |||
| Administrative expenses - other | (11,906) | (12,530) | |||
| Administrative expenses - exceptional items | 3 | - | (106) | ||
| Total administrative expenses | (11,906) | (12,636) | |||
| Operating profit | 909 | 1,996 | |||
| Investment revenues Finance costs | 193 (5) | 324 (3) | |||
|
| |||||
| Profit before tax | 1,097 | 2,317 | |||
| Analysed as: Profit before tax and exceptional items Administrative expenses - exceptional items Profit before tax | 3 | 1,097 - ________ 1,097 | 2,423 (106) ________ 2,317 | ||
| Taxation | (283) | (745) | |||
| Profit for the year attributable to equity holders of the company | 814 | 1,572 | |||
| Earnings per share | |||||
| Basic | 4 | 2.3p | 4.5p | ||
| Diluted | 4 | 2.2p | 4.2p | ||
Walker Crips Group plc
Consolidated statement of recognised income and expense
Year ended 31 March 2009
| 2009 £'000 | 2008 £'000 | ||
| Gain on revaluation of available-for-sale investments taken to equity | 248 | 282 | |
| Deferred tax on gains on available-for-sale investments |
| (70) | (62) |
| Deferred tax on share options |
| (120) | (148) |
| Net income recognised directly in equity | 58 | 72 | |
| Profit for year | 814 | 1,572 | |
| Total recognised income and expense for the year attributable to equity holders of the company | 872 | 1,644 | |
Walker Crips Group plc
Consolidated balance sheet
31 March 2009
| Note | Group 2009 £'000 | Group 2008 £'000 | ||
| Non-current assets | ||||
| Goodwill | 5,121 | 5,121 | ||
| Other intangible assets | 691 | 806 | ||
| Property, plant and equipment | 1,203 | 1,451 | ||
| Investment in joint ventures | 28 | 93 | ||
| Available for sale investments | 1,418 | 1,170 | ||
| 8,461 | 8,641 | |||
| Current assets | ||||
| Trade and other receivables | 31,907 | 40,864 | ||
| Trading investments | 316 | 216 | ||
| Cash and cash equivalents | 3,671 | 5,353 | ||
| 35,894 | 46,433 | |||
| Total assets | 44,355 | 55,074 | ||
| Current liabilities | ||||
| Trade and other payables Current tax liabilities Bank overdrafts Deferred tax liability Shares to be issued Cash consideration due under acquisition agreements | (28,891) (292) (337) (134) - (150) | (39,489) (524) (301) (84) (1,105) - | ||
| (29,804) | (41,503) | |||
| Net current assets | 6,090 | 4,930 | ||
| Non-current liabilities Cash consideration due under acquisition agreements | - | (150) | ||
| Net assets | 14,551 | 13,421 | ||
| Equity | ||||
| Share capital | 2,464 | 2,360 | ||
| Share premium account | 1,605 | 1,568 | ||
| Own shares | (173) | (173) | ||
| Retained earnings | 5,013 | 5,101 | ||
| Revaluation reserve | 967 | 789 | ||
| Other reserves | 4,675 | 3,776 | ||
| Equity attributable to equity holders of the company | 6 | 14,551 | 13,421 | |
Walker Crips Group plc
Consolidated cash flow statement
Year ended 31 March 2009
| 2009 £'000 | 2008 £'000 | |||
| Operating activities | ||||
| Cash (used in) /generated by operations | (414) | 1,101 | ||
| Interest received | 150 | 295 | ||
| Interest paid | (5) | (3) | ||
| Tax paid | (581) | (657) | ||
| Net cash (used in) /generated by operating activities | (850) | 736 | ||
| Investing activities | ||||
| Joint venture termination fee Deferred consideration payment under acquisition agreements | 205 - | - (302) | ||
| Net Purchase of property, plant and equipment | (195) | (700) | ||
| Purchase of investments held for trading | (100) | (78) | ||
| Dividends received | 78 | 79 | ||
| Net cash used in investing activities | (12) | (1,001) | ||
| Financing activities | ||||
| Proceeds on issue of shares | 46 | 25 | ||
| Dividends paid | (902) | (858) | ||
| Net cash used in financing activities | (856) | (833) | ||
| Net (decrease) in cash and cash equivalents | (1,718) | (1,098) | ||
| Net cash and cash equivalents at beginning of year | 5,052 | 6,150 | ||
| Net cash and cash equivalents at end of year | 3,334 | 5,052 | ||
| Cash and cash equivalents | 3,671 | 5,353 | ||
| Bank overdrafts | (337) | (301) | ||
| 3,334 | 5,052 | |||
Notes
For the year ended 31 March 2009
1. The financial information set out in the announcement does not constitute the company's statutory accounts for the years ended 31 March 2009 or 2008. The financial information for the year ended 31 March 2008 is derived from the statutory accounts for that year which have been delivered to the Registrar of Companies. The auditors reported on those accounts; their report was unqualified and did not contain a statement under s. 237(2) or (3) Companies Act 1985. The statutory accounts for the year ended 31 March 2009 are yet to be signed but will be finalised on the basis of the financial information presented by the directors in this preliminary announcement and will be delivered to the Registrar of Companies following the company's annual general meeting.
Going concern
The Group's business activities, together with the factors likely to affect its future development, performance and position are set out in the Chairman's Statement and Chief Executive's report.
The Group has healthy financial resources together with a long established, well proven and tested business model. As a consequence, the directors believe that the Group is well placed to manage its business risks successfully despite the current difficult climate.
After conducting enquiries, the directors believe that the Company and the Group have adequate resources to continue in existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the financial statements.
2. Whilst the information as set out in this preliminary announcement is prepared in accordance with International Financial Reporting Standards ('IFRS') the announcement itself does not contain sufficient information to comply with IFRS
The accounting policies are consistent with those applied in the full financial statements and are consistent with those of the prior year.
3. Exceptional items
Last year, final judgement was awarded in the High Court in the Company's favour against two clients' unauthorised transactions (as per the Group's announcement of the 3 July 2007). Additional legal expenses of £106,000 were incurred beyond the original exceptional provision made in the year to 31 March 2006 and were charged to the income statement last year.
4. 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 £814,000 (2008: £1,572,000) and on 35,988,221 (2008: 34,920,683) ordinary shares of 6 2/3p, being the weighted average number of ordinary shares in issue during the year.
The effect of options granted would be to reduce the reported earnings per share. The calculation of diluted earnings per share is based on 37,067,260
(2008: 37,049,416) ordinary shares, being the weighted average number of ordinary shares in issue during the period adjusted for dilutive potential ordinary shares.
5. Segmental analysis
For management purposes the Group is currently organised into four operating divisions - Investment Management/Stockbroking, Corporate Finance, Financial Services and Fund Management. These divisions, all of which conduct business in the United Kingdom only, are the basis on which the Group reports its primary segment information.
| 2009 | Investment Management / Stockbroking £'000 | Corporate Finance £'000 | Financial services £'000 | Fund Management £'000 | Consolidated Year ended 31 March 2009 £'000 |
| Revenue | |||||
| External sales | 11,922 | 311 | 1,056 | 2,576 | 15,865 |
| Total revenue | 11,922 | 311 | 1,056 | 2,576 | 15,865 |
| Result | |||||
| Segment result | 109 | (174) | 180 | 1,464 | 1,579 |
| Unallocated corporate expenses | (670) | ||||
| Operating profit | 909 | ||||
| Investment revenues | 193 | ||||
| Finance costs | (5) | ||||
| Profit before tax | 1,097 | ||||
| Tax | (283) | ||||
| Profit after tax | 814 | ||||
| Other information | |||||
| Capital additions | 183 | - | 12 | - | 195 |
| Depreciation | 354 | 18 | 48 | 23 | 443 |
| Balance sheet | |||||
| Assets | |||||
| Segment assets | 34,149 | 132 | 620 | 1,021 | 35,922 |
| Unallocated corporate assets | 8,433 | ||||
| Consolidated total assets | 44,355 | ||||
| Liabilities | |||||
| Segment liabilities | 28,779 | 51 | 259 | 565 | 29,654 |
| Unallocated corporate liabilities | 150 | ||||
| Consolidated total liabilities | 29,804 | ||||
5. Segmental analysis (continued)
| 2008 (As restated) | Investment Management / Stockbroking £'000 | Corporate Finance £'000 | Financial services £'000 | Fund Management £'000 | Consolidated Year ended 31 March 2008 £'000 |
| Revenue | |||||
| External sales | 12,827 | 820 | 2,013 | 2,652 | 18,312 |
| Total revenue | 12,827 | 820 | 2,013 | 2,652 | 18,312 |
| Result | |||||
| Segment result | 772 | 122 | 490 | 1,734 | 3,118 |
| Unallocated corporate expenses | (1,122) | ||||
| Operating profit | 1,996 | ||||
| Investment revenues | 324 | ||||
| Finance costs | (3) | ||||
| Profit before tax | 2,317 | ||||
| Tax | (745) | ||||
| Profit after tax | 1,572 | ||||
| Other information | |||||
| Capital additions | 686 | 10 | 5 | - | 701 |
| Depreciation | 309 | 5 | 73 | 4 | 391 |
| Balance sheet | |||||
| Assets | |||||
| Segment assets | 42,800 | 841 | 1,213 | 1,579 | 46,433 |
| Unallocated corporate assets | 8,641 | ||||
| Consolidated total assets | 55,074 | ||||
| Liabilities | |||||
| Segment liabilities | 38,776 | 210 | 551 | 861 | 40,398 |
| Unallocated corporate liabilities | 1,255 | ||||
| Consolidated total liabilities | 41,653 | ||||
As the Group's joint ventures are primarily engaged in financial services activities, it has been decided that the results of these joint ventures will now be reported under financial services. Consequently the result for financial services in the year to 31 March 2008 has been restated to include the £69,000 share of after tax profits of the joint ventures.
6. Reconciliations of movements in shareholders funds
| Called up share capital | Share premium | Own shares held | Capital Redemption | Other | Revaluation | Retained earnings | Total Equity | |
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
| Equity as at 31 March 2007 | 2,356 | 1,547 | (173) | 111 | 3,796 | 569 | 4,387 | 12,593 |
| Revaluation of investment at fair value | - | - | - | - | - | 282 | - | 282 |
| Deferred tax charge to equity | - | - | - | - | - | (62) | - | (62) |
| Movement on deferred tax on share options | - | - | - | - | (148) | - | - | (148) |
| Profit for the year | - | - | - | - | - | - | 1,572 | 1,572 |
| Dividends paid | - | - | - | - | - | - | (858) | (858) |
| Share based payments | - | - | - | - | 17 | - | - | 17 |
| Issue of shares on exercise of options | 4 | 21 | - | - | - | - | - | 25 |
| Equity as at 31 March 2008 | 2,360 | 1,568 | (173) | 111 | 3,665 | 789 | 5,101 | 13,421 |
| Revaluation of investment at fair value | - | - | - | - | - | 248 | - | 248 |
| Deferred tax charge to equity | - | - | - | - | - | (70) | - | (70) |
| Movement on deferred tax on share options | - | - | - | - | (120) | - | - | (120) |
| Profit for the year | - | - | - | - | - | - | 814 | 814 |
| Dividends paid | - | - | - | - | - | - | (902) | (902) |
| Share based payments | - | - | - | - | 9 | - | - | 9 |
| Issue of shares as deferred consideration | 95 | - | - | - | 1,010 | - | - | 1,105 |
| Issue of shares on exercise of options | 9 | 37 | - | - | - | - | - | 46 |
| Equity as at 31 March 2009 | 2,464 | 1,605 | (173) | 111 | 4,564 | 967 | 5,013 | 14,551 |