Walker Crips Regulatory News (WCW)

29 July 2022

Walker Crips Group plc

("Walker Crips", the "Company" or the "Group")

Final results for the year ended 31 March 2022

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 2022.

Financial Highlights

· Total revenues increased 8.1% to £32.8 million (2021: £30.3 million).

· A significant improvement in operating profit to £326,000 (2021: £22,000), being £1,866,000 (2021: £441,000) when adjusted for operational exceptional items*.

· Profit before tax £324,000 (2021: loss before tax £114,000), being profit before tax £1,761,000 (2021: £305,000) when adjusted for total exceptional items*.

· Adjusted EBITDA increased 49% to £3.90 million (2021: £2.61 million) **.

· Underlying cash generated from operations improves 71% to £1.34 million (2021: £0.78 million)***.

· Cash and cash equivalents £11.11 million (2021: £8.86 million).

· Assets Under Management ("AUM") increased by 5.9% to £3.6 billion (2021: £3.4 billion).

· Proposed final dividend of 1.20 pence per share (2021: 0.60 pence per share), bringing the total dividends for the year to 1.50 pence per share (2021: 0.75 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 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.

For further information, please contact: 

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

Chairman's statement

Return to operational profitability and continued focus on improving operating margins.

Martin Wright

Chairman

The combination of the recovery in financial markets and focus on profit improvement has seen the Group return to profit for the full year. The core business delivered a strong performance, and continues to do so in the first part of our new financial year, albeit the impact of good growth in revenues and improving margins were marred by the exceptional costs we are reporting and which are explained further below and in the CEO's report. At a strategic level, we continue to progress a number of projects that will incur additional costs in the near-term and, as I said in my statement for the interim report, the Investment Management division's project to improve operating margins will be a long-term exercise, with the overall impact on operating margins expected to be positive, but unlikely to be smooth from reporting period to reporting period.

Overview of 2021/2022

The tumultuous events that accompanied my first year as Chairman of your company have been succeeded by conditions that are, mercifully, less traumatic but which, perhaps, still deserve to be labelled as extraordinary. The rapid rise of inflation to 40-year highs has made management strategy and investment conditions tricky, to say the least, and markets are understandably struggling to cope with the impact.

The rewards of management's efforts to reduce costs during the pandemic, accompanied by the more-benign market conditions which applied throughout the first three quarters of the financial year, gave the Group breathing space to focus on improving operating margins within the Investment Management division, in tandem with the ongoing efforts to renew growth in the Wealth Management division. That strategy is bearing fruit and should continue to do so over the longer-term.

I am also pleased to report that the Structured Investments business has bounced back from its annus horribilis of the previous year, under the guidance of its new managers, and I wish them continued success. The Investment Management division, which includes the structured investment team, was the principal driver of growth in operating profits during the year, and the division's performance was also enhanced by the improved contributions of the investment management teams in the firm's York, London and Inverness offices and the Barker Poland Asset Management team in London. We were disappointed that two investment managers from the division's Truro office have departed. Having spent eight successful years in Truro, we are committed to maintaining a local presence, and will continue to serve our existing clients. I thank our team members who have stepped in to provide continuity to our clients, while we recruit locally.

As set out in the financial highlights, revenues for the year grew by £2.5 million to £32.8 million and Adjusted EBITDA* increased by £1.29 million to £3.90 million (2021: £2.61 million), an incremental operating margin of 51.6% and testament to management's focus on margin improvement. It is therefore extremely disappointing that the very welcome improvements in financial performance generally have been undermined by a number of matters that have given rise to significant exceptional costs. Although certain exceptional costs relate to the restructuring initiated during the pandemic, those required firstly to improve our financial crime framework and separately for the estimated cost of redress to a small number of customers caused by the actions of one associate, were neither anticipated nor acceptable. We are making the changes necessary to address these matters and the associate concerned has been sanctioned. I would add that insurers have been informed of the redress matter, although at this stage no recovery has been recognised in the accounts pending finalisation of the loss and insurer's confirmation of cover. The Group is taking all appropriate measures to ensure losses in relation to this matter are recovered. I can also confirm that the Executive Directors were not awarded the discretionary bonuses approved by shareholders at last year's annual general meeting.

Results have also been hampered by the residual effect of the decline in Bank of England base rates during the previous year and lower contributions from the Group's alternative businesses.

After exceptional costs, the Group's profit before tax for the year is £324,000, an improvement on the loss of £114,000 reported in the previous year. The exceptional costs noted are non-recurring and therefore, given the underlying improvement in trading, the Directors are recommending a final dividend of 1.20 pence per share, doubling the previous year's final dividend.

Strategy

The pandemic demonstrated the resilience of the core Investment Management business, which, exceptional costs aside, has bounced back robustly. The Wealth Management business has rebounded from adviser and client losses during the previous year and its recruitment strategy has started to produce revenue growth. The York office, which is home to our biggest Wealth Management team and one of our largest Investment Management teams, leads the firm in its ability to derive revenue-synergies from both types of service, and points the way forward for the rest of the Group in generating top-line growth. We hope to replicate that close working relationship between the Wealth Management division's new Southampton office and our other teams of investment managers around the country.

The Group's seamless transition to flexible working, which is now more entrenched than ever as a working practice at our own and most other companies, justified our focus on technology. The Group believes that continued investment in technology is crucial to providing innovative and effective services to our clients, investment managers and staff. EnOC Technologies Limited's project to commercialise our technology remains a key limb of our growth plan. The Group will therefore maintain its focus on revenue growth and margin improvement, and continue keeping a tight rein on costs in light of current inflationary pressures and the tight labour markets.

Dividend

Our aim is always to reward our shareholders for their continued support. In that light, having taken into account the Group's improved profitability and potential for continuing improved operating margins, capital headroom, and short-term and long-term cash flow considerations, the Board will recommend for shareholders' approval at the forthcoming AGM for a final dividend of 1.20 pence per share (2021: 0.60 pence) payable on 7 October 2022 to those shareholders on the register at the close of business on 23 September 2022, with an ex-dividend date of 22 September 2022. As noted earlier, this is a twofold increase on the previous year's final dividend.

Our community

We believe that in challenging times, it is important that we continue to support our chosen charities. In addition to financial support, we try to do more by using our technology for good, engaging in technology philanthropy, and using technology as a catalyst to boost the efforts of those charities, working with them to design, deploy and maintain those systems.

Our partner charity, www.twiningenterprise.org.uk, has a mission to combat mental health stigma and to assist people who are struggling with mental health issues around work. Their goal is to ensure that everyone with a mental health issue can find employment and cope with the challenges of working life, to support employers and raise awareness around mental health in general and to reduce stigma and discrimination.

This is a mission whose work is crucial, as has been highlighted during this pandemic. We urge you to join us by signing on to support Twining in their mission, staying informed of their latest news and activities, and support them financially by going to www.enoc.pro/community.

Directors, Account Executives and staff

Whilst I am hopeful that the challenging period of the pandemic is behind us all, and pleased to have reported a return to profit, the Group nevertheless faces challenges ahead. This includes acknowledging and making the necessary changes to our culture, leadership team, behaviours and controls to mitigate recurrence of the failures that gave rise to the exceptional costs noted above. We know these costs and the reasons therefore will be disappointing news for our shareholders. Your Directors and the leadership team are focused on the required changes and the need to make them without distracting from the many positive actions being taken to grow the business and improve margins. 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.

Outlook

The rebound in the underlying trading performance this year demonstrates the Group's potential to generate revenue growth and improve profitability, which continues to bode well for the future.

Martin Wright

Chairman

29 July 2022

* 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.

CEO's statement

Innovating, Digitising and Focussing on Customer Outcomes

Sean Lam

Chief Executive Officer

I am proud that our investment managers, financial planners, advisers, and our staff have continued to serve our customers diligently through the global challenges of the past few years. There was a job to be done, and they got it done. I am thankful to, and grateful for, all my colleagues for ensuring that our customers were well taken care of, without interruption in service.

After nearly two years of working from home, we have now comfortably settled into a hybrid working model where members can either work all week in the office, desk-share a few days a week, hot-desk once in a while, or work from home, depending on the needs of the department while balancing the needs of the staff. This can only work if there's mutual trust and responsibility, and I'm pleased to say that we have both in spades. As long as our performance and customer engagement remain high, hybrid working can continue.

Group's Performance

In our Investment Management division, we were sensitive to the dual risk of a simultaneous fall in asset values and a decline in interest income, but we reviewed and streamlined certain parts of our business during the past two years which led to significant improvements in operating margins and profitability. We will accelerate our effort to simplify and digitise our business further, making our business more efficient, more scalable, but still providing good outcomes to our customers. We will continue to improve the revenue-growth potential of the existing businesses, generate greater profitability from such growth opportunities, while also maintaining a tight control of, and increasing the productivity of, our cost-base. The division generally had a strong year, with robust, double-digit growth in fee income offsetting the decline in commissions and interest income.

Our Wealth Management and Barker Poland Asset Management divisions have also had a year of strong revenue growth. Our new Solent branch in Fareham has had a great start and contributed strongly to the Wealth Management division. Our York office has worked very well together, providing financial planning, investment management and pensions (SIPP & SSAS) services, working together for our customers. The investment team continues to manage the firm's flagship Service First model portfolios, Inheritance Tax Relief model portfolios, and has oversight over the Truro branch, ensuring that we maintain our service offering to our customers in Cornwall.

Our Structured Investments team contributed to the Investment Management division's performance with significant growth in fee income, as the industry bounced back vigorously from a very difficult last financial year. Walker Crips is now the leading structured products distributor in the UK and we thank the team for holding fast during the difficulties of last year, where one of the most significant players exited the market completely, and we are now poised to capitalise on the opportunities of this year.

Challenges

We continue to invest heavily in our regulatory framework. Regulation continues to move forward unabated and we must adapt swiftly. The next big regulatory initiative is Consumer Duty which, amongst other things, places emphasis on consumer outcomes and firms' obligations to proactively deliver them. Firms are required to 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.

During the year, the Investment Management division incurred significant costs that have been designated exceptional in the accounts that follow and explained in note 10 to the financial statements, including two material items I want to address upfront. The first relates to expenditure to upgrade and improve our financial crime control framework, which was subject to an independent review. I wish to stress that there has been no evidence of financial crime, but our controls and procedures around this area needed significant improvement. The remediation and enhancement project commenced during the year and the total estimated cost of £595,000 has been provided for. Secondly, and separate from upgrading and improving our financial crime control framework, we identified that there was inappropriate conduct by an associate that caused financial detriment to a small number of customers. The associate concerned has been sanctioned and their contract terminated, and whilst we should have identified it in a timelier manner, management is satisfied that this was an isolated incident. All relevant parties have been informed, including the regulator, and we are in the process of finalising the redress calculation which is presently estimated to be £650,000 including associated costs before any potential insurance recoveries. Any future recovery will also be treated as an exceptional item.

In light of these weaknesses, management is embedding a broader review of the Group's regulatory compliance framework to ensure our processes are at industry standards and are able to adapt to the changing regulatory landscape. Our financial planning and budgeting reflect this planned step-up in risk and compliance costs. We are also reinforcing a tenet of our core principles that "Compliance and Risk are everybody's responsibility", renewing our emphasis and setting the tone from the top.

During the year, the Group sold its one-third share of its investment in Walker Crips Property Income Limited for £105,000. This will have minimal impact on our future revenues. We stopped onboarding new customers to the Tier 1 Investor Visa programme in November 2021 and the government permanently closed the Tier 1 (Investor) Visa route for foreign nationals on 17 February 2022. For customers who are already in the programme, we will continue to service them until its natural conclusion.

Nevertheless, the Group is able to report a profit before tax of £324,000 for the full year after all exceptional items, an improvement on the £114,000 loss reported in the previous year. This was assisted by the return to growth of the core businesses of investment management, wealth management and structured investments.

Technology Advantage

We will accelerate our vision to "Simplify and Digitise". We will do what we do but we must do it better, faster, and more economically. We will use our EnOC Pro Platform to create technologies that will transform processes, create greater efficiencies, reduce the use of paper, provide better services to our customers, and allow our staff to do the more complex, thinking work and less of the manual repetitive processes. We must continue to adapt and innovate, and our dependence on technology will only increase. We will continue to prioritise and invest in developing our own technology, utilising our digital capabilities to create and innovate for our customers and the firm. We are technology makers, not just technology takers.

Reducing our Carbon Footprint

If we want our children to see tomorrow, like we saw yesterday, then let's not screw up today. We must not pillage the earth like a Ponzi scheme; it is unconscionable to plunder from the future to satisfy today. Put simply, we must safeguard our planet for our children, and for our children's children.

We consciously began our journey in small steps back in 2007 when we moved offices. We installed PIR lighting, refurbished the old doors instead of buying new (surprisingly, it costs the same!), and for the first time embarked on a de-papering exercise. In 2013, we decided to better utilise cloud services which resulted in the long-term reduction of our server room size by 75%, reducing heat emissions by requiring fewer on-site servers, less air conditioning and less electricity. Our lighting is powered by low-energy consumption LEDs.

Hybrid working is here to stay, and we are currently merging some of our offices to better utilise our available square footage. We have turned off excess appliances like refrigerators and dishwashers. It may seem minuscule, but it all adds up. We are also persuading the landlords of our buildings to sign up with "green" energy suppliers using sustainable resources. One of our mantras is to "Simplify and Digitise"; digitisation increases efficiencies and reduces the drain on resources. We have engaged carbon emission auditors to determine our carbon output, and our goal is to continue to reduce it each year. Time is running out for our planet, so it needs to be more like a sprint, and less like a marathon.

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. E.g. 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.

Outward Focus

As a Group, we continue to support www.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 enoc.pro/community.

Conclusion

As I conclude, I wish to reiterate our mission: 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.

I wish to thank all my colleagues at Walker Crips for their energy, enthusiasm, loyalty, dedication and their can-do attitude, and for their unwavering focus on ensuring that our customers are well looked after.

Sean Lam

Chief Executive Officer

29 July 2022

Chief Investment Officer's analysis

The persistence of speculative excess was the market's undoing

Chris Darbyshire

Chief Investment Officer

Having reached peak exuberance during the year, investor sentiment ended up accelerating into the trough of despair. But it was a hard-fought contest and, for much of the year, the enormous amounts of cash being pumped into the economy by central banks and governments continued to find their way into financial assets. The nature of the assets being bought showing very clearly who was doing the buying: analysts at Bank of America estimated that American retail investors poured nearly $900 billion into global equity funds in the year to November 2021, more than the combined total over the previous 19 years. Robust inflows continued right through the inflation shock and the situation in Ukraine, with US equity funds taking in an estimated $84 billion in the first calendar quarter of 2022. Meanwhile, US corporate share buybacks reached all-time highs during our financial year, and were still accelerating as the year ended.

Reflection

The vast majority of flows were captured by index trackers, reinforcing the dominance of the world's largest companies which, in turn, reinforced the dominance of the technology sector. Flush with money and enthusiasm, investors in the US ignored a growing, global wave of anti-technology lawsuits and regulations. Indeed, as recently as December, a three-times leveraged fund tracking the Nasdaq 100 stock index saw record inflows (of $1.5 billion) in a single day. At the same time, Apple's market value reached nearly 3% of the value of all the world's stock markets combined, and the top five US technology companies represented over 10% of the world's stock market value. Not only did the behemoths lead indexes higher, but they did so with an unusual serenity for most of the year: at one point in the fourth calendar quarter of 2021, the S&P 500 rose to all-time highs for seven days in a row. Long after the peak in equity markets, signs of speculation in the mega-caps were still abundant, with announcements of stock splits by US technology companies greeted by extremely outsized responses. Alphabet (Google) enjoyed a $130 billion boost to its market value on the day of the announcement, Amazon saw an $80 billion boost for its stock split and, more recently, Tesla an $84 billion boost.

As a result, equity markets were able to maintain their relative calm while bond markets entered an inflation-inspired meltdown, but that's now history, of course. Within two months of the end of 2021, the capital markets were in panic mode, catalysed by inflation and the war in Ukraine. Indeed, markets themselves have now become the headlines, and not in a good way. Having spent most of the last two years blithely ignoring any and all risks, many investors have no choice but to focus only on risk.

Nothing captured the zeitgeist better than the cryptocurrency universe, whose total market value exceeded $2 trillion in April 2021, supposedly driven by "institutional" demand as traditional asset managers discovered its true value. To put that in perspective, $2 trillion exceeded the cash in circulation of most national currencies, and you could have bought the entire German stock market with it. At one point the government of El Salvador caught the speculative bug with its historic, but ultimately botched, decision to make Bitcoin legal tender. Other governments moved in the other direction: central banks in the developed world began to encircle the technology with the threat of regulation, and China went all-out when it declared all crypto-currency transactions to be illegal. In case anybody missed it, this edict was issued simultaneously by the People's Bank of China and nine other government institutions, including the Supreme Court and the police. Cryptos were already losing value by the end of the year as the inflows of cash required to pump prices higher began to subside and, subsequent to the year-end, there has been a more substantial implosion caused by failures of the technologies involved. Books about cryptocurrencies will soon take their place in the economic literature about speculative bubbles.

The rise of inflation and the fall of central bankers

A sharp acceleration in inflationary forces first became visible in the economic data in May 2021, but it was a full six months before bond markets began to pay much attention. By then, expectations for inflation had already doubled. Month after month, as each inflation report trounced expectations, bonds refused to concede defeat. In July 2021, for example, German government 10-year bonds rallied by the most since the start of the pandemic. It was a similar story across the rest of the developed world, with bonds rallying despite economic growth roaring back and inflation surging towards its highs of the last two decades.

Central bankers were complicit in the delusion. As late as August, Federal Reserve Chairman Jerome Powell was reiterating his view that the surge in inflation was only temporary and, not only would the asset purchases continue in the near-term, but any "tapering" of asset purchases would not be accompanied by higher interest rates. At that time, Chairman Powell was unwilling to pick a fight with markets, even if that meant running more inflation risk and further inflating asset-price bubbles. Everything was priced for perfection, but with a massive, post-pandemic rebound in the economy, record levels of corporate profits, and ultra-loose monetary policy providing maximum support, perfection was still very much on the menu. By the end of the year, inflation had more than doubled but $300 billion a month was still being injected into government bond markets via asset purchase programmes. The monetary policy needle was still set to "maximum growth", and bond markets had begun to reflect uncertainty around the extent, duration and consequences of inflation.

The Federal Reserve's ("the Fed") credibility was further undermined by reports in the media that Fed officials had front-run crucial decisions by the central bank, and that the Chairman's own portfolio had been advantaged by the choice of assets under the Fed's asset purchase programme. The officials concerned immediately liquidated their personal portfolios, and the Chairman initiated a review of the rules on investments by Fed insiders. As a result, Fed officials were forced to exit markets in their personal portfolios, while simultaneously facing the biggest policy dilemma since the Credit Crunch.

Within a couple of months, the energy crisis had begun to materialise and central banks went from dismissing inflation as being "transitory" to inflation being their main concern. At first, only the tone changed, while the existing policy guidance was left intact. However, bond markets weren't buying it, prompting gut-wrenching shifts in rate expectations all around the world. Such was the momentum that, at one point, investors were able to observe in real time the President of the European Central Bank ("ECB") explaining at length why the ECB would not be raising rates anytime soon while, simultaneously, Eurozone bond yields rocketed into orbit. It was like a visit to the Hall of Mirrors.

By now, Fed governors were queuing up to signal a faster withdrawal from the Fed's $120 billion a month asset-purchase programme but, in a sign of the times, markets initially reacted with exuberance. Equity markets hit new all-time highs in December and even Bond markets managed a decent rally during the fourth calendar quarter of 2021. It was January before they finally got the message: bond markets shifted from steady eddies to screaming demons in a regime change of record-breaking rapidity.

The mood darkened further, however, as successive inflation reports outstripped forecasters' expectations, and inflation spread from pandemic-affected goods to the broader service economy. With higher house prices also feeding into higher rental costs, a major component of inflation calculations, a higher trajectory for inflation was locked in.

China went from investable to uninvestable, and back again

Having been the lead underwriter of global economic growth since the Credit Crunch, China spent the year in reverse gear. China's economy was the first to lose some momentum following the pandemic, as the central bank acted early to tighten interest rates and the costs of financing. The Chinese government, meanwhile, reined in borrowing by heavily indebted local authorities to fund infrastructure projects. A series of high-profile corporate restructurings dealt a further blow to China's economic credibility, starting with Huarong Asset Management, a state-owned enterprise and one of China's biggest issuers. Huarong threatened to default on $42 billion of debt, of which $23 billion was denominated in US dollars and held by foreigners. This was followed by the effective bankruptcy of the giant, debt-laden Chinese property company Evergrande, whose debt burden was estimated by some sources to be equivalent to 2-3% of Chinese GDP.

But what really scared investors was a year-long regulatory crackdown on technology companies. First was the authorities' cancellation of the flotation of Ant Financial, one of the largest initial public offerings ever planned, apparently following public criticisms by its founder, Jack Ma, of China's regulatory approach to the finance sector. Jack Ma disappeared from view for several months afterwards, but was back in the spotlight recently when another of his creations, internet giant Alibaba Group Holdings, was fined a record $2.8 billion by Chinese regulators for anti-competitive practices.

These fears moved to a whole new level of intensity with the announcement of probes into three Chinese companies that had listed on US stock exchanges within the last few weeks. One of them, Didi Global (the Chinese version of on-line taxi company Uber), had listed on the New York Stock Exchange a mere two days previously. All three companies were ordered to halt new user registrations, and app stores were told to remove Didi's service from their platforms. That the authorities were targeting Chinese companies that have just raised money in the US should be seen in the context of the broader trade war between China and the developed world. By doing this, Beijing demonstrated its dislike of overseas listings, discouraged Chinese technology firms from having foreign investors and, moreover, undermined the credibility of the New York Stock Exchange as a venue for Chinese listings. Capital markets became weaponised. This would normally have subdued capital markets in the developed world but, fortunately for investors, pandemic stimulus had replaced Chinese government stimulus as the driver of sentiment.

Meanwhile, the rapid downward spiral in US-China political and trade relations continued. President Biden put another nail in the coffin with a ban on investment in a blacklist of Chinese companies with ties to China's military; US investors were given one year to divest any holdings. The legislation was a continuation of an initiative started by President Trump, but Biden took it a step further, adding more companies to the list and strengthening it against legal challenges. International investors and global corporates were faced with a dilemma: Chinese markets are attractive because the economic growth expectations are huge. But to participate you have to bow-down to the powers in Beijing, while running the gauntlet of western public opinion.

Adding to these issues, the pandemic continued to cause serious problems for China's economy due to the government's zero-tolerance approach to managing Covid risk. Although the onset of the Omicron variant initially panicked markets all over the world, causing the worst daily decline in more than a year, it took only a month for developed world stock markets to shrug it off. This largely reflected the response of western consumers, whose behaviour (influenced by vaccination programmes) has been progressively less affected by each wave of the virus. China's zero-Covid policy, on the other hand, which was so effective at containing the first wave of the pandemic, has led to a lack of acquired immunity. Moreover, Sinovac, the Chinese Covid vaccine, was found to be relatively ineffective against Omicron - a result that increases the risk of any given variant causing a healthcare crisis. This makes it very unlikely that China will be able to alter its zero-tolerance approach to Covid even if it wanted to, and increases the likelihood of Chinese factory closures, further global supply chain blockages and persistent inflation.

The Chinese off-shore stock market, and its technology sector in particular, reflected this sequence of disasters. The Hang Seng China Enterprises Index, which measures the prices of Chinese companies listed in Hong Kong, fell by 32% during our financial year, and subsequently fell another 10% on top of that. The Nasdaq Golden Dragon Index, an index of Chinese companies listed in the US, fell 70% from peak-to-trough. Even the on-shore domestic equity markets, which were reported to have benefited from government support, traded below the levels reached in 2015.

Following our year-end, the pendulum swung back in favour of investors, with a series of supportive statements from the authorities, including from President Xi himself. First among them, the top Chinese financial regulator committed to stability in capital markets, supporting overseas stock listings, resolving risks in the property market and to completing the crackdown on the technology sector "as soon as possible." The Nasdaq Golden Dragon Index of Chinese companies listed in America promptly rallied by a third. At one point, the Hang Seng China Enterprises Index, comprising Chinese companies listed in Hong Kong, rallied by 20% in two days. Next, the central bank intervened to weaken the Chinese yuan, and the Chinese government distanced itself from the conflict in Ukraine. Finally, President Xi offered the prospect of a change in the country's longstanding zero-Covid policy by committing to reduce Covid's economic impact. Optimists described this as akin to Draghi's "we will do whatever it takes" moment during the eurozone crisis. While the pace of good news-flow has slowed somewhat since then, such public statements are usually perceived by Chinese investors as a state-sanctioned buy-signal.

How did we do?

The year started with our clients' portfolios enjoying some of the best returns in years, with UK shares having been caught up in the all-encompassing global stock market rally. The further down the size-scale you went, the better it got: the FTSE 100 index had rallied but was outshone by small and mid-sized British companies, where our portfolios are typically overweight compared with relevant benchmarks. The FTSE 250, which tracks the performance of small and mid-sized British companies, reached new all-time highs early in our financial year and the FTSE AIM, which tracks the smallest UK listed companies, rose to 35% above its pre-pandemic level.

The pound sterling was the missing piece, however, as acrimonious post-Brexit dealings with the EU damaged confidence in the prospects for what is still the UK's single biggest trading relationship. Threats by the British government to walk away from its treaty obligations with the EU set a worrying precedent and, at the very least, are hardly likely to encourage investment from the EU. Meanwhile the EU was aggressively encouraging providers of financial services - one of the UK's biggest exports - to relocate within the single market.

As the year went on, and the speculative fervour supporting small-cap stocks wore off, the FTSE 100's bias towards energy, mining and banking stocks meant it actually benefited from the surge in inflation, while most other global stock market indices slipped. Our portfolios benefited from an inherent overweight to UK large-cap exposure and to old-economy dividend-payers. The decision by European countries, notably Germany, to increase military expenditure predictably sent defence-related stocks soaring. This was a boon to a host of British companies. For the first time in nearly two decades, investors seeking income outperformed those seeking growth. It's tempting to say that the long-running pre-eminence of growth stocks over value stocks has finally come to an end, but there have been many false dawns of this kind in the past.

Clients seeking growth have been impacted by the crash in the valuations of growth stocks. However, the reversal in the market's attitude to growth stocks has been indiscriminate, punishing some companies whose prospects for revenues and profits remain undimmed by inflationary trends. The ability of a company to prosper despite inflation, or even during a recession, depends on the strength of its brand, products and business model. It's extremely unlikely that good companies become bad companies overnight, but that is what the market is pricing. Good companies are now available on very attractive valuations, and we are inclined to see this as an opportunity. Time will tell whether we are correct, but, for now, we do not believe that the current market swing towards value will endure long enough to justify wholesale changes to portfolios. We remain long term investors and believe the quality of the underlying investments will outlast this uncertainty.

Where now for ESG?

Progress towards a parallel, Environmental, Social and Governance ("ESG") conscious world for investors is accelerating. Even central banks are getting in on the act. During our financial year, the European Central Bank set out plans to involve climate change considerations in its analysis of the economy and financial markets, the Bank of Japan published a climate change strategy, in which it will purchase foreign currency-denominated green bonds issued by governments and other foreign institutions. Meanwhile, the UK became the first country to introduce a green savings product from a sovereign issuer.

Should investors be weighting portfolios towards ESG-friendly investments? With extreme weather events affecting the harvests of coffee, corn, wheat and sugar this year, sending their commodity-market prices soaring, and with wildfires and other extreme weather-events becoming seemingly commonplace, it's natural to want to respond.

The war in Ukraine may have caused some governments to roll back plans to mothball fossil fuel technologies, but it has also been a boon to energy generators everywhere, including those of renewable energy. Moreover, performance of ESG-friendly funds has been strong over the past several years, though that has more to do with their historically large allocations to the technology sector than their inherent ESG qualities.

Ultimately, all types of risk end up being financial if they cause asset prices to fluctuate. The ESG concept isolates and unites particular sources of risk under a common banner, which is increasingly being championed by governments, the financial services sector and regulators worldwide. It's not unusual for major risks to attract this level of attention - witness the pandemic stimulus programmes that united governments and central banks in a coordinated policy response.

The difference is that the "E" in ESG is going to be with us for a very long time. Unlike social and governance issues, climate-related risks have potentially profound and wide-ranging consequences for asset prices. The good news is that these will most likely unfold over a long horizon, giving investors - and asset prices - the ability to react appropriately. Financial theory says that competitive markets are very quick to assess and incorporate threats and opportunities, so it should not be easier to earn returns in ESG investments than in any other sector. But it's worth considering the risks and potential rewards that are specific to this sector, and which make it so distinctive. One is the pace of climate change itself which, if it becomes very volatile, raises the risk of abrupt, unforeseen shifts in government policies. These would be reflected in increasing volatility of prices of fossil fuel-dependent industries as well as of green champions.

Another distinct risk is whether, and how, societies adapt to the long-term goal of a zero-emissions world. After all, adapting to the post-Covid world has not exactly gone smoothly. Like vaccine-deniers, climate change-deniers abound, and society as a whole must bear the cost of the transition to sustainable energy production and consumption. With inflation already raging, that looks unlikely to be a vote-winner in the short-term. Volatility in the pace of policy change is therefore a distinct possibility, despite the current momentum towards green goals.

Chris Darbyshire

Chief Investment Officer

29 July 2022

Finance Director's review

Building on the strength of the underlying business.

Sanath Dandeniya

Finance Director

The business responded well to the challenges caused by the pandemic, and now we look to build on that resilience as the Group continues its focus on revenue growth and margin improvement.

Financial performance

Our response to the pandemic challenged the Group to focus on revenue generation, cost reduction and cash management in the core business. These actions served us well and the resilience of the core business, recovery in markets and actions taken have returned the Group to profitability, notwithstanding the inflationary pressures we now face and the significant investment we made and continue to make in strengthening our risk and compliance functions.

Total revenue

Total revenue increased by 8.1% to £32.8 million (2021: £30.3 million), a record for the Group and more than offsetting the loss in interest income that adversely impacted the results in recent years. The increase was due to strong performances in our core business. Management fee income was robust, rising by 9.7%. The recovery in markets played a role in this, but most of our businesses were also able to generate additional revenue growth, strengthening our position against the heightened uncertainty encountered in market conditions since the start of the current calendar year. Our Structured Investment business recovered from an extremely difficult year in 2020/21, and made a significant contribution to revenue growth. Barker Poland Asset Management also had another strong year, generating revenue growth of 19%. The Wealth Management division began to see the benefits of its recruitment drive, with revenue growth of 14.9%.

These sources of revenue growth compensated for other areas of our business where performance was below that of the previous year. Specifically, trading commissions decreased by 10.5% (equating to £0.95 million) due to lower volumes, our arbitrage desk made a positive but reduced contribution (£0.67 million down), and the investor immigration business contracted by £0.1 million. This latter business has subsequently closed to new applicants following the government's decision to shut the Tier 1 Investor visa route based on rising worldwide security concerns, but we will continue to service our existing clients. The effects of the reduction in base rates from the previous year continued to exert a residual downward effect on revenues and operating profit, reducing both by £0.1 million.

As a result of the strength in management fees and the changing mix in our business, broking income fell to 24.5% of revenues, from 29.7% in 2021. Our gross operating margin also increased from 68.2% to 72.4%, reflecting the changing mix and management actions to improve profitability. Notwithstanding the increase in revenues, commissions and fees paid reduced by £0.6 million, reflecting a strong performance by the Private Client Department teams and actions tilting the mix of revenue growth towards full-time employees and away from self-employed associates. Commissions and fees paid decreased as a percentage of revenues from 32% to 27.8%, although some of this gain was offset by higher staff costs in administrative expenses.

The Wealth Management division, excluding exceptional income and the new Solent addition, has seen a marginal growth in revenue in the year and the increase in both client numbers and Assets under Administration ("AUA") bodes well for the future. Client numbers increased by 144 to 1,117 and AUA increased by £61 million to £579 million. The new Solent office (Southampton team) is now up and running and continuing to onboard new clients and recorded recurring revenues of £164,000 by the year-end.

The Wealth Management division is continuing its graduate training plan which was successfully launched last year and due to be replicated this July, with the idea of growing its talented financial planners of the future. Additionally, the continual search for advisers to join the firm who share the same ethos on looking after clients' long-term and holistic needs. Working more closely with the internal Investment Managers is gaining momentum to facilitate greater client servicing for the wider Group.

Expenses

Administrative expenses, excluding exceptional items, increased by £1.63 million, or 8.0%, but this increase does not represent a like-for-like comparison due to various initiatives taken during the height of the pandemic last year to reduce costs. In addition, we have made further investments to develop our new Southampton office. Adjusting for these factors, expenses increased by 5.4%, largely driven by increases in staff costs, including the restoration of directors' pay from a voluntary pay-cut taken in the previous year. It should be noted that with tight labour markets, we continue to experience inflationary wage pressures.

We are also reporting significantly increased exceptional costs this year. These relate to the restructuring and redundancy initiatives initiated during the pandemic along with specific items noted in the CEO's report and the Chairman's Statement. These costs were partially offset by the exceptional income from a confidential settlement agreement also reported in the interim results. The exceptional items are further explained in note 10.

Cash management

The Group is highly cash generative and recorded a cash inflow from operations of £4.2 million (2021: £1.8 million). 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), was £1.34 million (2021: £0.78 million), demonstrating cash generative ability of the Group's operating model. After deducting cash deployed in investing activities and dividends paid, cash and cash equivalents increased to £11.11 million at year-end (2021: £8.86 million).

Financial result and alternative performance measures

The Group's operating profit and profit before tax for the year of £326,000 and £324,000, respectively (2021: £22,000 and a loss of £114,000, respectively), reflect the continued momentum from the first half of the year, although the pace of revenue growth slowed as markets declined and volatility increased towards the end of our financial year. Nevertheless, the Group was able to report operating profit of £206,000 in the second half of the financial year, up from £120,000 in the first half.

The annual results include operating exceptional charges of £1,540,000, being total exceptional charges of £1,437,000 including the profit on disposal of our associated company Walker Crips Property Income Limited (renamed Crystal Property Income Limited) (2021: £419,000). 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 £1.87 million and £1.76 million, respectively (2021: £441,000 and £305,000, respectively), and reflect the improvement in the Group's core business.

The Group's adjusted EBITDA (being EBITDA adjusted for exceptional items - see adjacent reconciliation) is £3.9 million (2021: £2.6 million), an increase of 49.3% demonstrating a robust current year trading performance.

Total Assets Under Management and Administration ("AUMA") averaged £5.6 billion during the year, compared with £4.9 billion in the previous year, reflecting the recovery in equity markets from the global pandemic. Discretionary and Advisory Assets Under Management similarly benefited from the market recovery, rising by the end of the year to £3.6 billion (2021: £3.4 billion). Total AUMA is up slightly from March 2021 levels to £5.5 billion (2021: £5.4 billion).

Divisional performance

The Investment Management division, including exceptional costs, delivered an operating profit of £1.16 million for the year, compared to £1.33 million in the previous year. Operating profits when adjusted for exceptional costs grew by £1.2 million to £2.9 million (2021: £1.27 million). This reflects the strong performance of Investment Management and advisory fees, plus a rebound in Structured Investments business, offset by reduced activity in commissions, in the arbitrage and investor immigration businesses, as well as the continuing drag from the reduction in BoE base rate in the previous year. Regarding the latter: the change in the interest rate cycle, with continued increases in base rate expected, should exert a favourable impact on revenues and profits during the next financial year. Nevertheless, management will remain focused on initiatives to improve the division's operating margins and reduce reliance on interest returns. The prospects for the Structured Investments business remain positive as pricing conditions have improved and certain competitors have exited this sector, we believe that the Structured Investments team is well-positioned to build on its prominent market position.

The Wealth Management division has cemented its recovery from departures of several advisers in the previous year, and revenues have been rejuvenated by the hiring of new advisers and the acquisition of a client book with funds under management. The cost-base should improve as recruitment-related costs subside but, as yet, the division has not returned to profit, reporting a loss before tax of £258,000 (2021: loss before tax of £127,000).

Our tech arm, EnOC Technologies Limited ("EnOC"), reported an operating loss of £86,000 (2021: £122,000). 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, comprising solely of equity capital, provides a stable platform to support growth. At year end, net assets are £22.11 million (2021: £22.32 million), reflecting a net decrease of £0.21 million (2021: reduction of £0.3 million), due to the reported profit after tax less dividends paid. Liquidity remains strong with cash and cash equivalents increasing over the year to £11.1 million (2021: £8.9 million), testimony to the Group's underlying resilience and the continued recovery from the pandemic. Regulatory capital at year end, including audited reserves for the year, is £12.3 million (2021: £11.7 million), comfortably in excess of the Group's capital requirements as shown in the tables below. The finance team has also implemented the new prudential regulatory regime.

Dividends

In view of the Group's financial performance, capital and liquidity position, the Board is recommending a final dividend of 1.20 pence per share to be paid on 7 October 2022 for those members on the shareholders' register on 23 September 2022. The ex-dividend date of 22 September 2022. Including the interim dividend of 0.30 pence per share (2021: 0.15 pence per share), the total dividend for the year is 1.50 pence per share (2021: 0.75 pence per share).

Sanath Dandeniya

Finance Director

29 July 2022

Consolidated income statement

year ended 31 March 2022

The following Accounting Policies and Notes form part of these financial statements.

Consolidated statement of comprehensive income

year ended 31 March 2022

The following Accounting Policies and Notes form part of these financial statements.

Consolidated statement of financial position

as at 31 March 2022

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 29 July 2022.

Signed on behalf of the Board of Directors

Sanath Dandeniya FCCA

Director

29 July 2022

Consolidated statement of cash flows

year ended 31 March 2022

* Total repayment of lease liabilities under IFRS 16 in the period was £1,052,000 (2021: £1,133,000)

The following Accounting Policies and Notes form part of these financial statements.

Consolidated statement of changes in equity

year ended 31 March 2022

The following Accounting Policies and Notes form part of these financial statements.

Notes to the accounts

year ended 31 March 2022

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 (£). 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.

Going concern

The financial statements of the Group have been prepared on a going concern basis. At 31 March 2022, the Group had net assets of £22.11 million (2021: £22.32 million), net current assets of £11.1 million (2021: £9.8 million) and cash and cash equivalents of £11.1 million (2021: £8.9 million). The Group reported an operating profit of £326,000 for the year ended 31 March 2022 (2021: £22,000), inclusive of exceptional expense of £1,540,000(2021: £419,000), and net cash inflows from operating activities of £4.2 million (2021: £1.8 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 taken into account the following:

· The Group's three-year base case projections based on current strategy, trading performance, expected future profitability, liquidity, capital solvency and dividend policy.

· 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 2022 and the projections over the next three years.

Key assumptions that the Directors have made in preparing the base case cash flow forecasts are that:

· Revenues reflect the impact of (i) expected client and revenue losses from Truro IM resignation, (ii) net interest income from managing client deposits prudently capped at £1.2 million, and (iii) no further significant impact from the pandemic other than what is already known. The total revenue is expected to increase by 1.27% with gains from fee income offset by the lower trading commissions. Years two and three growth expectation set conservatively at 2%.

· Base case costs prudently reflect only the actions Management has taken to date.

Key stress scenarios that the Directors have then considered include:

· A "bear stress scenario": representing a further 10% fall in income compared to the base case scenario in the reporting periods ending 31 March 2023 and 31 March 2024.

· A remote "severe stress scenario": representing a 20% fall in commission income and 15% fall in fee income compared to the base case for each forecast period.

· Both stress scenarios assume no mitigating actions and include a further prudent adjustment for the estimation uncertainty in respect of certain provisions (see note 4).

Liquidity and regulatory capital resource requirements exceed the minimum thresholds in both the base and bear scenarios. However, 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 January 2024. The Directors consider this scenario to be remote in view of the prudence built into the base case planning and that further mitigations available to the Directors are not reflected therein. Such mitigating actions within Management control include reduction in proprietary risk positions, delayed capital expenditure, further reductions in discretionary spend and additional reduction in employee headcount. Other mitigating actions which may be possible include seeking shareholder support, sale of assets and stronger cost reductions.

Following the assessment of the Group's financial position and its ability to meet its obligations as and when they fall due, including the financial implications of the pandemic, the Directors are not aware of any material uncertainties that cast significant doubt on the Group's ability to continue as a going concern.

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.

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 re-measurement 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 re-measured 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 had a 33% associate investment in Walker Crips Property Income Limited ("WCPIL"). This investment was disposed fully during the period (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 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 inhouse self-employed investment managers.

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.

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 Wealth Management 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:

· The Group's right to receive payment of dividends is established;

· When it is probable that economic benefits associated with the dividend will flow to the Group;

· 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 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 re-translated at the rates prevailing on the balance sheet date. Exchange differences arising on the settlement of monetary items, and on the re-translation 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 underIFRS 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 exactly 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 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.

De-recognition

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 £10 and not greater than £150) to acquire Ordinary Shares in the Parent Company (Partnership Shares). Partnership Shares are acquired monthly.

In response to mitigate some perceived impacts from the pandemic on the Group, the matching option was temporarily suspended during the twelve-month period to 31 March 2021. On 1 April 2021, the matching option was reinstated to one-half for every Partnership Share purchased. This arrangement will continue until 31 March 2022. 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 timeis recognised as 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 three years after the award has been made (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 estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. 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 £4.4 million (2021: £4.4 million) as shown in note 17.

Other intangible assets - judgement

Acquired client lists are capitalised based on current fair values. During the year, one intangible asset, a client list, was 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. The Directors conduct a review of indicators of impairment and also consider a life of up to twenty years to be both appropriate and in line with peers.

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

The Company has provided for the estimated cost of the project relating to the upgrade of its financial crime control framework, which was subject to an independent review that highlighted the need for significant improvement. The costs of the review and to implement the remediation are estimated to be £595,000, of which £455,000 remains provided at year end. Management has a detailed project plan underpinning the estimate for the remaining provision, but this includes assumptions regarding required resources which may change. A provision has also been made for Management's present estimate for potential customer redress and associated costs although the review remains at an early stage. Management has engaged third-party legal and regulatory expert advice and opinion to assist in this matter and ensure a fair customer outcome is achieved. The Group's insurers have been kept informed of this matter although at this time no asset has been recognised for any potential insurance recovery until the extent of cover has been formally agreed. As work remains ongoing the estimated provision is subject to change. Areas of estimation uncertainty remain the appropriateness of the methodology and validation of input assumptions pending legal and regulatory expert advice.

In light of the uncertainty in respect of the above two provisions, for the purposes of the going concern and viability assessment, Management has prudently applied a 50% adverse stress to the amounts provided. It is noted that there also may be downward revisions to the estimates and, in respect of client redress, insurance recoveries pending further discussions with and the agreement of insurers.

Finally, the Company established dilapidation provisions based on quotes and reasonable estimates of the amounts for works, as well as appropriate rates of inflation and discount rates (see below).

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. During the year, £16,000 of additional provisions were recognised, including £4,000 of interest and released a further £77,000 of excess provision, totaling £618,000 provision at 31 March 2022.

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 liabilities 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.

5. Revenue

An analysis of the Group's revenue is as follows:

Timing of revenue recognition

The following table presents operating income analysed by the timing of revenue recognition of the operating segment providing the service:

6. Segmental analysis

For segmental reporting purposes, the Group currently has three operating segments; Investment Management, being portfolio-based transaction execution and investment advice; Wealth Management, being financial planning 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 Wealth Management provides advisory and administrative services to clients in relation to their 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.

7. Commissions and fees paid

Commissions and fees paid comprises:

8. Investment in associate

The Group disposed of its 33.33% interest in its associate, Walker Crips Property Income Limited ("WCPIL"), during the year for a consideration of £105,000. The brought forward value of the Group's share of net assets in WCPIL was £2,000. The Board of WCPIL submitted management accounts to 31 December 2021 reporting an after-tax profit of £171,000, giving the Group a £57,000 entitlement from which a dividend of £57,000 was paid to the Group in the period.

9. Profit/(loss) for the year

Profit/(loss) for the year on continuing operations has been arrived at after charging:

A more detailed analysis of auditor's remuneration is provided below:

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.

In the prior year, the Group incurred professional fees and other expenses relating to the actions taken in response to the pandemic, including restructuring and redundancy costs, and a contractual dispute. In addition, the Group recognised a change in fair value of deferred consideration in respect of acquired client relationships.

In the current year, the following items have been classified as exceptions due to their materiality and non-recurring nature. These are:

a) Completion of the Group's restructuring and redundancy activity commenced during the pandemic;

b) The Group received compensation under a confidential settlement agreement, without admission of liability by either party in relation to a dispute;

c) The costs of an independent review and resulting actions to remediate and enhance the Group's financial crime framework. See notes 4 and 27;

d) The actions of an associate combined with an internal control failure resulted in customer detriment. Provision has been made for the present estimate of redress and associated costs. We are working with our insurers to confirm scope of cover and any future recovery will also be treated as an exceptional item. See notes 4 and 27; and

e) The Group disposed of its 33.33% interest in its associate, Walker Crips Property Income Limited ("WCPIL").

In total, £1,437,000 has been expensed in the current year. The directors acknowledge this is a significant amount but consider transparent disclosure and explanation provides readers with an improved understanding of the Group results.

11. Investment revenue

Investment revenue comprises:

12. Finance costs

Finance costs comprises:

13. Staff costs

Particulars of employee costs (including Directors) are as shown below:

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 39 certified self-employed account executives (2021: 40).

The average number of staff employed during the year was:

The table incorporates the new staff classification under Senior Managers and Certification Regime ("SM&CR").

14. Taxation

The tax charge is based on the loss/profit for the year of continuing operations and comprises:

Corporation tax is calculated at 19% (2021: 19%) of the estimated assessable profit for the year.

The charge for the year can be reconciled to the (loss)/profit per the income statement as follows:

Current tax has been provided at the rate of 19%. Deferred tax has been provided at 25% (2021: 19%).

The exceptional charge of £1,437,000 (2021: £419,000), disclosed separately on the consolidated income statement, is tax deductible to the value of £373,000 (2021: £80,000) 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.

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:

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/(loss) per share

The calculation of basic earnings/(loss) per share for continuing operations is based on the post-tax profit for the financial year of £173,000 (2021: post-tax loss of £258,000) and divided by 42,577,328 (2021: 42,577,328) Ordinary Shares of 62/3 pence, being the weighted average number of Ordinary Shares in issue during the year.

No dilution to earnings/(loss) per share in the current year or in the prior year.

The calculation of the basic earnings/(loss) per share is based on the following data:

Number of shares

This produced basic earnings per share of 0.41 pence (2021: basic loss per share of 0.61 pence).

17. Goodwill

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:

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 16% for the London York CGU value-in-use to equal the respective carrying values. Revenues would need to fall by £341,000 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 £7.8 million (2021: £5.4 million) with headroom, after selling costs, of £4.2 million (2021: £1.7 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 58% decrease in BPAM's profit after tax would result in potential impairment of £15,000.

18. Other intangible assets

* During the previous year, the cost and accumulated depreciation of software assets were reclassified as intangible assets from property, plant and equipment. There was no impact to the Consolidated Income Statement in the current or prior years.

The intangible assets are amortised over their estimated useful lives in order to determine amortisation rates. "Client lists" are assessed on a client-by-client basis and are amortised over periods of three to twenty years and "Software licences" are amortised over five years. There are no indications that the value attributable to client lists or software licences should be impaired.

19. Property, plant and equipment