Walker Crips Regulatory News (WCW)

13 June 2014

Walker Crips announces continued growth for the year

ended 31 March 2014 and a further proposed special dividend

Walker Crips Group plc ("Walker Crips", the "Company" or the "Group"), the financial services group with activities covering stockbroking, investment and wealth management services, today announces unaudited results for the year ended 31 March 2014.

Highlights

· Group delivers £2.5 million pre-tax profits inclusive of one-off investment disposal gains

· Ongoing implementation of strategic plan returns Group to underlying profit of £0.5 million (2013: loss £1.0 million) excluding one-off investment disposal gains

· Gross profit (net revenues) increased 19.5% to £14.1 million (2013: £11.8 million) demonstrating the substantial transformation of the investment management business. Revenue increased to £20.7 million (2013: £20.4 million)

· Final proposed dividend up 17.8% to 1.06p per share (2013: 0.9p per share)

· Special proposed dividend of 1.0p per share (2013: 7.5p per share) arising from final investment gains from the sale of Liontrust CULS holdings

· Strategic emphasis on asset gathering increased discretionary and advisory assets under management by 29.2% to £1.33 billion (2013: £1.03 billion)

· Like for like non-broking income as a percentage of total income increased to 52.7% (2013: 52.3%)

· Disposal of Keith, Bayley, Rogers & Co completed on 31 May 2013, for a cash consideration of £0.3 million

David Gelber, Chairman, Walker Crips, says:

"The Group has entered its next phase successfully. As we celebrate our Centenary year, the business strategy has delivered a strong foundation from which to continue expansion. Our objective is to deliver increasing share value and dividend growth to shareholders by providing our clients with performance and excellent service, through a collegiate group of dedicated individuals. 'Making investment rewarding' for those three constituencies has proved itself this year with the transformation of the business and its return to underlying profitability."

For further information, please contact:

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

Chairman's Statement

Introduction

Two years ago the Board established a Strategic Plan to transform the Company from a predominantly traditional private client stockbroker to a full service investment and wealth management group. The strategy is delivering for shareholders with the Group returning to profitability, recording an Operating Profit of £0.5m for the year compared to an operating loss (before exceptional items) of £1.0m in the prior year. Pre-tax profits this year were £2.5m inclusive of investment revenue and investment disposal gains.

We are entering a new phase, to consolidate the progress we have made over the previous two years and to continue our expansion and business transformation.

Regional expansion has gathered pace alongside growth within our main hubs in London and York. This year has seen a further significant increase in the recruitment of fifteen new individuals and teams of Investment Managers and Advisers. This expansion has continued alongside the implementation of our corporate and investment strategy and the development of our broad investment offering, whilst maintaining control of our cost base. The Company's assets under management have also grown substantially, and are set to continue to do so, as new clients and new recruits are attracted by our flexible personalised service, our traditional values and our corporate culture alongside our strong balance sheet.

After two years of transformation, acquisition of revenue generators and disposals of non-core businesses, the Group is on course to benefit from the resultant increase in revenue. The changes that flow from the implementation of our strategy are expected to continue and gather pace.

Overview

Revenue for the Period increased marginally to £20.7m (2013: £20.4m).

However, gross profit, being revenue net of commission payable, increased by 19% per cent to £14.1m (2013: £11.8m), demonstrating the success of the Strategic Plan and the progress of substantial transformation in our investment and wealth management businesses.

On a like for like basis non-broking income as a proportion of total income was slightly higher at 52.7% (2013: 52.3%). The comparator percentage s re-presented from last year's figures, as a consequence of the RDR driven changes in the commission element of the gross revenue from Structured Investments. The comparative percentage for 2013 before this re-presentation is 62.1% (Note 9).

The cost savings from the office relocations completed in May and June 2013 have been captured although they were partially offset by increased employment and infrastructure costs arising from the ongoing expansion of the business. Overall administrative expenses were contained (before exceptional items) at £13.7m (2013: £12.8m)

Group profit before tax of £2.5m (2013: £9.1m) largely reflects a one-off gain on the sale of investments following the conversion of Liontrust unsecured loan stock (CULS) originally received as part of the consideration for the WCAM disposal of £1.8m (2013: loss of £0.2m). This realised final consideration for the WCAM disposal of £16.4m compared to the original consideration at the time of disposal of £12.3m.

Basic earnings per share, boosted by the one off gain, were 5.5 pence (2013: 25.21 pence).

Operations

Discretionary and Advisory assets under management (AUM) at the year end were £1.33bn (31 March 2013: £1.03bn), reflecting the strategic emphasis and the longer term revenue benefits of asset gathering alongside transactional brokerage.

Gross revenues from the investment management division increased by 5.9% during the Period to £18.3m (2013: £17.8m), a significant improvement considering the impact on the reported gross amount as a result of revised arrangements post-RDR.

Within our Investment Management division, the Structured Investments team continued to build upon its growing reputation in the intermediary marketplace with the addition of a joint administration and distribution agreement with a major institution. The new products launched during the year proved to be attractive investments to professional advisers and their clients. In addition, our Alternative Investments Management team saw growth in new clients and assets from the Investor Immigration Programme and the launch of the UK's first regulated Short Term Lending Fund.

Revenues at our York-based wealth management division remained stable in the challenging post-RDR environment.

Corporate transactions

On 31 May 2013 the Company completed the disposal of its corporate finance subsidiary Keith, Bayley, Rogers & Co Limited for a cash consideration of £0.3m.

Statement of Financial Position

As at 31 March 2014, the Group had net assets of £21.4m (2013: £19.5m), including net cash of £8.1m (2013: £7.8m), providing an increasingly solid platform on which to build future organic growth and make selective acquisitions.

Dividend

A 17.8% increase in the final dividend to 1.06 pence per share (2013: 0.9 pence per share) will be combined with a special dividend of 1.0 pence per share (2013: 7.5 pence per share) which reflects the investment gains from the sale of the Liontrust CULS holding to make an overall final dividend of 2.06 pence (2013: 0.9 pence per share).

Combined with the interim dividend of 0.51 pence per share (2013: 0.47 pence per share), but excluding the special dividend, this makes a total dividend for the year of 1.57 pence per share (2013: 1.37 pence per share). This increase of 14.6% reflects the progress made during the Period driven by the turnaround in Operating Profit.

The final and special dividend will be aggregated and paid on 25 July 2014 to those shareholders on the register at the close of business on 11 June 2014.

Directors, Account Executives and Staff

After a year of increasing numbers of revenue generators and the absorption of investment business with transfers of clients and their assets, I would like to thank all my fellow directors, investment managers and advisers, and members of staff for their continuing hard work and diligence. The Walker Crips team remains true to the core values of your Company; and their integrity, courtesy, fairness, professionalism and loyalty make it an appealing firm for prospective clients and professionals to join.

AGM

This year's Annual General Meeting will be held at the South Place Hotel, 3 South Place, London, EC2M 2AF on 18 July 2014 at 11.00 am.

Outlook

Your Board is committed to continue the execution of the Strategic Plan and the long term value for the Company it is creating. We are confident that the Group is well positioned to benefit from longer term improvements in economic and investment activity and from increasing fee income. Whilst market conditions remained favourable throughout 2013/4, and the UK economic outlook is increasingly positive, we remain cautious nevertheless about future levels of market activity and the potential impact on commission during 2014/5.

As we celebrate our Centenary year, our outlook for the business is optimistic. We have entered our next phase as we consolidate the progress of the Strategic Plan and focus on continued expansion of the Company's investment management and wealth management divisions.

Our objective is to deliver shareholders with increasing share value and dividend growth by providing our clients with performance and service, through a collegiate and integrated team delivering an attractive and compelling proposition and investment process. 'Making investment rewarding' for these three constituencies has proved itself this year with the transformation of the business and a return to underlying profitability.

David Gelber

Chairman

Chief Executive's Report

Performance overview

Our overall performance during the year under review has been one of continued expansion, particularly in our core investment management and stockbroking businesses which helped restore the group to a solid operating profit of £0.5m compared with a loss before exceptionals of £1.0m in the previous year. In addition, it is very pleasing to report to shareholders that the disposal of our residual holding in Liontrust Convertible Loan Stock from the sale of our asset management subsidiary in 2012 added a further £1.8m to help produce a significant group profit before tax of £2.5m (2013: £9.1m). The prior year amount includes the one-off gain on sale of subsidiary of £11.7m.

We intend to consolidate the progress we have made since implementing the Strategic Plan and continue our expansion and transformation of the business.

The reported revenue of £20.7m against last year's £20.4m appears steady when in fact a material revenue increase of 28.5% from £16.1m has been achieved on a like-for-like basis. The Retail Distribution Review introduced on 1 January 2013 affected certain commercial arrangements and its impact in the prior year of grossing down our fees received for arranging, designing and distributing structured investments has distorted the comparison of both the revenue and commission payable figures on the Consolidated Income Statement. However, gross profit is not affected and shows an increase of 19% to £14.1m. Administration expenses for the period have been largely contained despite an outlay of £0.47m on development and infrastructure costs supporting our current and proposed revenue generating initiatives. Growth in Assets under Management continued at the impressive pace set in the prior year, with Discretionary and Advisory Managed funds totalling £1.33bn (2013: £1.03bn) while total Assets under Management and Administration now approach the £3bn milestone. The Group is now well placed for further growth; the stream of new advisers joining us with their own client bases has continued into the current year.

Administrative expenses were closely monitored and were contained with a small increase over the prior year. However, specific front end development costs were incurred in executing the Board's growth strategy, thereby increasing overheads linked to the expected and materialising increase in attributable revenues and the full realisation of much larger related cost savings.

The profit before tax for the year of £2.5m (2013: £9.2m) reflects, in particular, the significant £1.8m realised gain on the disposal of our holding of Convertible Unsecured Loan Stock in Liontrust Asset Management plc. The performance of this investment, acquired on the sale of our Asset Management subsidiary in 2012, has far exceeded our original expectations thus enabling a further Special Dividend of 1.0p to be proposed to be paid to shareholders.

Earnings per share for the year of 5.5 pence (2013: 25.21 pence) reflect the impact of the above and other non-operating items in the last two years.

Investment Management

The combination of a sound reputation, a strong balance sheet, robust systems, and experienced and efficient administrative personnel, together with a responsive, compliant and ambitious management team, has proved to be the effective blend that makes our company special. It is an appealing amalgam that continues attracting new advisers at a rapid pace. The front office, with its London base and national footprint of regional offices, has doubled in size from two years ago. No fewer than 38 new client-facing recruits have joined us since March 2012. They have brought strong client relationships with them and have had an immediate impact on group revenue.

We continue to embrace industry-wide changes to deliver more transparent fee structures, which we will further streamline. We are also looking to maintain the growth in our fee based income and look forward to reporting progress on this in future results.

Our traditional Advisory and Execution-only business enjoyed more active markets, registering a significant 27.0% increase in commission income of £2.0m more than in the previous year.

Against the background of low interest rates, rendering Cash ISAs unattractive, subscriptions into our Stocks and Shares ISA product maintained their momentum and increased by a further 32% this year with even more positive government initiatives to look forward to next year.

The Structured Investments team produced another record year as it continued to strengthen and foster new relationships with some of the industry's leading institutions. The forthcoming year is equally as promising as the team prepare to launch a new range of products in the latter part of the summer, a range which we hope the professional adviser community will find just as popular as the award winning structured investments Walker Crips has been producing over the past few years.

Wealth Management

Our innovative Wealth Management division, based in York, continues to be driven by focused management and a competent team of advisers, who provide a committed, premium service to its predominantly regional base.

In the year to 31st March 2014, York operations delivered further operating profit and, post the advent of RDR, activity remains strong, boosted by Auto Enrolment activity, a good pipeline and a helpful Spring Budget which may be a prelude to a busy and productive year to April 2015.

Overall Funds under Administration at the year-end, in the Pensions division which is also based in York, totalled £303 million (2013; £301 million). The SIPP (Self Invested Personal Pension) product experienced a satisfactory year with 4% net growth in the number of SIPP plans to 342 at the year-end (31 March 2013; 330). SIPP Funds under Administration at the period end were also up by 2% at just over £97 million (2013; £95 million). SSAS assets under our care at the year-end amounted to £206 million (2013: £206 million).

Liquidity

The current level of cash resources within the business remains more than sufficient for working capital purposes and provides adequate headroom even when faced with volatile business flows. Cash at the year end stood at £8.1m (2013: £7.8m) with no borrowings in place. Great emphasis is placed on the credit risk of the banking institutions with whom we place funds, with financial stability taking priority over high rates of return which are rare in current economic conditions.

Going Concern

The Group continues to maintain a robust financial position. Having conducted detailed cash flow and working capital forecasts and appropriate stress-testing on liquidity, profitability and regulatory capital, taking account of possible adverse changes in trading performance, the Board has sufficient grounds to believe the Group is well placed to manage its business risks adequately; and that it will be able to operate within the level of its current financing arrangements and regulatory capital limits. Accordingly, the Board continues to adopt the going concern basis for the preparation of the financial statements.

Staff

It is the professionalism, diligence and camaraderie of the personnel at Walker Crips which makes it the unique company it is and I would like to thank all members of the team, staff and associates, for their efforts during the year.

Outlook

We are encouraged by the growth pattern we have now established, particularly in the investment management division. Our search for further suitable acquisitions of the right individuals, teams and entities continues.

We anticipate that the pension flexibility measures introduced in the March 2014 Budget will change the investment landscape radically with a particularly positive impact on growth potential for both our SIPP and SSAS offerings in the current year and beyond.

Overall trading activity in the opening weeks of the new financial year has been somewhat muted. However, your Board believes that, with cautious optimism, the Group is well positioned to capitalise on improvements in its markets over the longer term and that the right strategy is in place to deliver underlying growth in the next phase of the Group's development.

Rodney FitzGerald

Chief Executive Officer

CONSOLIDATED INCOME STATEMENT

Year ended 31 March 2014

Consolidated Statement of Changes in Equity

Year ended 31 March 2014

Notes to the Accounts

Year ended 31 March 2014

1. The financial information set out in the announcement does not constitute the company's statutory accounts for the years ended 31 March 2014 or 2013. The financial information for the year ended 31 March 2013 is derived from the statutory accounts for that year which have been delivered to the Registrar of Companies. The auditor's report on those accounts was unqualified and did not contain a statement under s. 498(2) or (3) Companies Act 2006. The statutory accounts for the year ended 31 March 2014 are yet to be signed but will be finalised on the basis of the financial information presented by the directors in this preliminary announcement and will be delivered to the Registrar of Companies following the company's annual general meeting.

Going Concern

The Group's business activities, together with the factors likely to affect its future development, performance and position are set out in the Chairman's Statement and Chief Executive's report.

The Group has healthy financial resources together with a long established, well proven and tested business model. As a consequence, the directors believe that the Group is well placed to manage its business risks successfully.

After conducting enquiries, the directors believe that the Group has adequate resources to continue in existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the financial statements.

2. Whilst the information as set out in this preliminary announcement is prepared in accordance with International Financial Reporting Standards ('IFRS') the announcement itself does not contain sufficient information to comply with IFRS.

The accounting policies are consistent with those applied in the full financial statements and are consistent with those of the prior year.

3. Earnings per share

The calculation of basic earnings per share for continuing operations is based on the post-tax profit for the financial year of £2,034,000 (2013: £9,153,000) and on 36,967,116 (2013: 36,305,572) ordinary shares of 6⅔p, being the weighted average number of ordinary shares in issue during the year.

The effect of options granted would be to reduce the reported earnings per share. The calculation of diluted earnings per share is based on 37,717,319 (2013: 37,525,275) ordinary shares, being the weighted average number of ordinary shares in issue during the Period adjusted for dilutive potential ordinary shares.

4. Administrative expenses - exceptional items

There were no exceptional items incurred during the year (2013 costs: £1,299,000).

In the prior period costs were incurred in relocating a large part of the Group's operations to more cost effective premises The Group wrote down Leasehold improvement costs incurred for the old lease premises to a level more accurately reflecting their value in use. Additional write down costs amounted to £228,000 during the previous year.

In the prior year significant legal and professional fees were incurred in the transfer of a number of investment managers and their clients from Savoy Investment Management Ltd and other corporate transactions. These amounted to £585,000 in the period and due to their size and one-off nature, the Board decided to disclose them separately.

In the prior year to 31 March 2013, the Group awarded discretionary bonuses to specific staff and executive directors of £486,000 in recognition of their efforts in helping to create and support the asset management subsidiary (WCAM) whose sale realised a profit of £11.7 million.

5. Gain on disposal of investments

During the period, conversion and disposal of Liontrust Convertible Unsecured Loan Stock (CULS) with a nominal value of £3.03million and the redemption of the remaining holding with a nominal value of £0.07m, yielded a profit of £1,836,000.

During the prior year to 31 March 2013 the Group disposed of its entire holding of Liontrust ordinary shares, incurring a loss on disposal of £579,000.

In addition, conversion and disposal of a part of the holding of Liontrust Convertible Unsecured Loan Stock yielded a profit of £390,000 in the year to 31 March 2013. Due to their level of materiality and one-off nature, the Board has decided to disclose all these items separately.

6. Loss on disposal of subsidiary undertaking

On 31 May 2013 the Group completed the disposal of its subsidiary Keith Bayley Rogers & Co Limited (following FCA approval) making a loss of £13,000.

On 12 April 2012, the Group completed the disposal of its subsidiary WCAM to Liontrust Asset Management plc (following FCA and shareholder approval). The gain on this disposal in the year to 31 March 2013 was £11.7m,

7. Goodwill impairment charges 

There were no impairment charges during the year.

In the year to 31 March 2013, given the difficulties experienced generally in global markets, and the continued negative impact on the trading performance of some of the Group's business units, the Board decided to write down the Goodwill associated with the reduction in the cash generative performance of these businesses.

8. Segmental analysis

For management purposes the Group is currently organised into two operating divisions - Investment Management and Wealth Management. These divisions, all of which conduct business in the United Kingdom only, are the basis on which the Group reports its primary segment information.

Subsequent to the sale of subsidiary Keith Bayley Rogers & Co Ltd, the Directors have determined that Corporate Finance is no longer a segment of continuing significance. The Directors have also determined that the activities previously reported under Fund Management segment should be reported under the Investment Management segment to better describe the business conducted and to align with the Group's dual division strategic focus. The Corporate Finance and Fund Management segments have therefore been omitted from current and prior periods which have been restated. The immaterial amounts involved have been included within the Investment Management segment for both periods.

9. Revenue/Income

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

* Re-presented to show the impact of the Retail Distribution Review Described below

The introduction of the Retail Distribution Review (RDR) on 1 January 2013, and resultant new fee arrangements, has affected how the Group's Revenue is recorded. In particular, prior to RDR, fees received for the design and distribution of Structured Investments were disclosed gross and introducing commission paid to intermediaries was shown separately in Commission Payable. Post RDR, the net amount of these fees and commissions is included as Revenue. This has the effect of reducing both Revenue and Commissions Payable by the same amount (on a pre-RDR basis), but does not impact Gross Profit (Net Revenue).

Commission payable during the prior Period had such gross values of £4.3m reflecting the distortion in both recorded commissions payable to intermediaries and hence total income referred to above.