Walker Crips Group plc (the "Company" or the
"Group"), the integrated financial services group,
today announces its unaudited preliminary results for the
year ended 31 March 2012 (the "period").
Highlights
· Total revenue up 1% to £20.31 million (2011: £20.12
million)
· Net revenue (gross profit) down 2.8% to £14.57
million (2011: £14.99 million)
· Pre-exceptional profit before tax down 39.9% to £1.06
million (2011: £1.76 million)
· Basic earnings per share down 64% to 1.21 pence
(2011: 3.35 pence)
· Non-broking income as a proportion of total income
increased to 60.3% (2011: 52.3%)
· Disposal of asset management subsidiary
("WCAM") shortly after period end for £12.7
million
· Gain on disposal in excess of £10 million adding to
net assets of £13.8 million at period end
Commenting on the results, David Gelber, Chairman,
said:
"Whilst WCAM increased its core funds under
management over the period, total funds under management
declined. Trading conditions over the period were generally
difficult and relatively low equity market volumes were
reflected in our trading performance.
The disposal of WCAM was completed successfully on 12
April 2012 with the approval of shareholders. The Board
believes that the Group's core investment, wealth and
pension management businesses have significant growth
opportunities over the longer term and is now fully focused
on accelerating the expansion of these businesses. The
significant additional resources made available to the Group
from the WCAM disposal will allow us to grow by acquisition
as well as organically, as evidenced by the recently
announced recruitment of six experienced investment managers,
who join us together with their clients.
Whilst our expansion plans have been progressed in the
current year, our markets have remained uncertain, not least
due to the continuing troubles in the Eurozone, which is
undermining investor confidence and impacting trading. In the
medium to long term, your Board is confident that the
Group's strong financial position and range of products,
allied with access to the financial resources resulting from
the WCAM disposal, will enable the implementation of a
strategy to effectively grow our core business and deliver
competitive returns for shareholders."
For further information, please contact:
Walker Crips Group plc
Rodney FitzGerald, Chief Executive Tel: +44 (0)20 3100
8000
Altium Tel: +44 (0)20 7484 4010
Tim Richardson
Katie Hobbs
Further information on Walker Crips Group plc is
available on the Group's website: www.wcgplc.co.uk
CHAIRMAN'S STATEMENT
Against the backdrop of the most difficult market
conditions for stockbroking in decades, I am pleased to
report another profitable year for the Group, albeit below
the level of the previous period.
Despite an increase in gross revenue, the combination
of higher shared commission paid and increased overhead costs
(although both relatively moderate in size) resulted in
pre-exceptional profit before tax falling 39.9% to £1.06
million (2011: £1.76 million).
The Group incurred significant legal and other
professional costs during the period, mostly relating to the
disposal of WCAM. Although this transaction (see below for
more detail) was completed post the period end, accounting
standards require the expensing of such costs as they are
incurred. The Board has accordingly treated these expenses as
exceptional.
Post exceptional profit before tax fell to £0.77
million (2011: £1.76 million) and basic earnings per share
(after exceptional items) decreased by 64% to 1.21p (2011:
3.35p).
Despite the difficult market conditions, the
Group's financial position at the period end remained
healthy with net assets of £13.8 million (31 March 2011:
£14.7 million). Cash balances at the period end of £0.93
million (2011: £4.3 million), reflect a temporary sharp fall
relating to the settlement of unusually high-value client
trading just prior to the period end, but have since returned
to more normal levels. Overall working capital at the period
end remained steady at £6.9 million (31 March 2011: £7.1
million).
Business Performance Overview
The fund management division performed well and
experienced an increase in revenues and profits over the
year, although investment funds under management at the
period end fell to £628 million (2011: £787 million) due to
the transfer of non-core offshore fund administration back to
the fund managers.
Transaction volumes in the investment management
division fell by 13% over the period, contributing
significantly to its disappointing performance. A strategy
for growth is being implemented by our recently appointed
Chief Investment Officer, Mark Rushton, encompassing the
recruitment of a number of revenue generators and the
marketing of a fuller service proposition which, combined
with continuing cost control, should result in a much
improved performance going forward.
As microcap investors reduced their risk exposures in
the face of continuing uncertainties, raising finance at this
end of the market became increasingly difficult. As a result,
the corporate finance division saw revenues fall 11% over the
period and segment losses increase to £94,000 (2011:
£64,000). Opportunities for further cost reductions have been
taken.
The wealth and pension management division performed
admirably over the period, with revenues up 2% to £2.06
million (2011: £2.02 million) and segment profits up 8% to
£0.2 million.
Walker Crips' Structured Investments team continued
to perform strongly, building and strengthening IFA
relationships during the period. Even in these adverse
economic conditions, revenues and profits increased
significantly over the previous year.
Subsequent Event
On the 12 April 2012, the Board completed the disposal
of the major portion of the Group's asset management
business, WCAM, for a consideration of approximately £12.7
million, £6.5 million of which was in cash, £2.2 million in
ordinary shares in Liontrust Asset Management plc, the UKLA
listed purchaser ("Liontrust") and £4.0 million in
unsecured loan stock units convertible into ordinary shares
in Liontrust. Shareholders approved this disposal at a
general meeting on 5 April 2012.
The Circular, dated 12 March 2012, convening this
general meeting, highlighted the Board's reasons for the
disposal and possible options for the optimal use of the sale
proceeds.
Dividends
The Board is pleased to announce a final dividend for
the period of 0.9 pence per ordinary share (2011: 1.8 pence
per ordinary share) which, when combined with the interim
dividend of 0.94 pence per ordinary share (2011: 0.94 pence
per ordinary share) makes a total dividend for the year of
1.84 pence per ordinary share (2011: 2.74 pence per ordinary
share). This reduced dividend reflects the lower
profitability of the period and recognises the current
trading environment for the continuing Group.
The dividend will be paid on 27 July 2012 to those
shareholders on the register at the close of business on 22
June 2012.
Following the receipt of the proceeds from the disposal
of WCAM, the Board is also considering a special dividend for
shareholders. It is the Board's intention to put a
resolution to shareholders in this regard either at the
Annual General Meeting or at a specially convened meeting
shortly thereafter. A further announcement will be issued in
due course.
AGM
This year's annual general meeting will be held at
Armourers' Hall, 81 Coleman Street, London EC2R 5BJ on 20
July 2012 at 11.00 am. Coffee and biscuits will be served for
a short time before and after the meeting.
Outlook
Whilst WCAM increased its core funds under management
over the period, total funds under management declined.
Trading conditions over the period were generally difficult
and relatively low equity market volumes were reflected in
our trading performance.
The disposal of WCAM was completed successfully on 12
April 2012 with the approval of shareholders. The Board
believes that the Group's core investment, wealth and
pension management businesses have significant growth
opportunities over the longer term and is now fully focused
on accelerating the expansion of these businesses. The
significant additional resources made available to the Group
from the WCAM disposal will allow us to grow by acquisition
as well as organically, as evidenced by the recently
announced recruitment of six experienced investment managers,
who join us together with their clients.
Whilst our expansion plans have been progressed in the
current year, our markets have remained uncertain, not least
due to the continuing troubles in the Eurozone, which is
undermining investor confidence and impacting trading. In the
medium to long term, your Board is confident that the
Group's strong financial position and range of products,
allied with access to the financial resources resulting from
the WCAM disposal, will enable the implementation of a
strategy to effectively grow our core business and deliver
competitive returns for shareholders.
D M Gelber
Chairman
13 June 2012
CHIEF EXECUTIVE'S REPORT
Results overview
After reporting a resilient performance in the first
half of the year, the second half proved to be far more
difficult as the continuing effects of the global financial
crisis translated into reduced volumes and lower levels of
commission income. Although there was a small increase in
revenue the proportion of income subject to commission
sharing arrangements also increased, resulting in higher
commissions payable and lower gross profits.
The spread of profitability across divisions has grown
wider, with the asset management division contributing the
majority of profits before un-attributable overheads. Our
wealth management division in York increased its net
contribution for the year as did the growing Structured
Investments team. The severe change in market conditions
since the middle of last year had a negative impact on
private client investor sentiment which led to further falls
in transaction volumes, broking income and overall
profitability.
Administrative expenses were closely monitored and
increased only slightly. The majority of the 2% increase over
the prior year related directly to increased property
expenses of the leased head office. Due to the very low level
of global interest rates, investment revenues continued at
levels well below those of recent years.
Fund Management (WCAM)
WCAM, our in-house fund management division, continued
to make good progress during the year with increased revenues
and profits. Since 31 March 2011, the unit trust and other
mandated UK based funds managed by Stephen Bailey and Jan
Luthman increased from £562 million to £615 million at the
period end. However, the Group's total funds under
management declined by 20% to £628 million at the period end
after the wind-down of all non-core open-ended offshore
funds, managed by a separate team within WCAM. After
completion of the disposal of WCAM in April 2012, the Group
will continue to manage three in-house unit trust funds
totalling £35 million.
Investment Management
The Private Client Portfolio Management business
experienced significant falls in commission revenue, but was
buoyed by growth in fee based income resulting from
impressively higher than expected new client take on. In line
with clients' demand, the division's services now
include more complex derivative instruments as well as
traditional bonds and equities and alternative asset classes.
With offices in both York and London, funds under management
increased by 6% to £192 million (2011: £181 million).
Our strategy and approach to investment management has
recently been re-energised with the introduction in February
2012 of our new Chief Investment Officer, Mark Rushton. In
just three months he has already made progress in redefining
the investment processes, proposition and offering to attract
more investment advisers, asset gatherers and customers. This
renewed and more structured focus on revenue growth will
complement, and make optimal use of, our existing very
efficient administration and settlement teams. Mark is also
spearheading the impending launch of discretionary investment
portfolio models aimed at building the IFA client access
channels and extending the traditional private client
base.
The division is well prepared to meet the industry-wide
Retail Distribution Review (RDR) Level 4 qualification
requirement for broker/portfolio managers. The majority of
the team have now exceeded this minimum by achieving the
Level 6 exams well before the requirements come into place.
New products and service offerings specifically designed to
capitalise on the opportunities arising from the RDR are
expected to be launched later this year.
Our structured investments business, Walker Crips
Structured Investments, has continued to grow market share
with an expanding range of innovative products and continues
to contribute an increasing proportion of group
profitability.
Our traditional advisory and execution-only business
bore the brunt of the turbulent markets, registering a
significant decrease in commission income of £1.53 million
over the prior year.
Subscriptions into our ISA product increased by 17%
year on year, justifying once again our policy of incubating
products for several years until more lucrative returns can
be enjoyed.
Wealth Management
Our innovative Financial Services and Pensions
Management division continues to be driven by focused
management and a very competent team of advisers, who provide
a committed, premium service to a predominantly regional
client base.
Once again, the RDR implementation process is well in
hand with 90% of advisers already qualified to the RDR
standard.
The SIPP (Self Invested Personal Pension) product
showed pleasing growth. In addition, the SSAS (Small Self
Administered Scheme) is being marketed to small corporate and
family controlled companies in need of dedicated pension
services. SIPP plans at year end numbered 300 (2011: 279) and
funds under administration at the period end were up 6% at
just over £87 million (2011: £82 million). SSAS plans under
administration amounted to £204 million (2011: £204
million).
The joint venture with a provincial firm of accountants
providing Wealth Management services to their client base
continued to increase its profitability.
Corporate Finance
The Corporate Finance division suffered a further loss
during another challenging year, with the number of retained
clients decreasing to 12. The division had a better second
half after further overhead reductions.
Staff
I would like to thank all our personnel for their
efforts this year, in particular the account executives, many
of whom are faced with the difficult task of studying and
re-qualifying under the RDR. Our back and middle office staff
unwaveringly demonstrated loyalty and commitment despite the
seemingly unending commercial and regulatory pressures of the
past five years.
Liquidity
The current level of cash resources within the business
remains more than sufficient for working capital purposes,
particularly after the sale of WCAM, and provides adequate
headroom even when faced with volatile business flows. Great
emphasis is placed on the credit risk of the banking
institutions with whom we place funds, with financial
stability taking priority over rates of return.
Going Concern
The Group continues to maintain a robust financial
position, particularly following receipt of the proceeds of
the WCAM sale soon after the period end. 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.
Outlook
We are encouraged by the growing number of revenue
generators who bring their own client bases and who consider
our organisation an attractive firm to join with its
compelling offering in this exciting phase of expansion of
our core businesses.
Alongside additional revenue generators based in
London, Bristol and Ulverston, we have attracted six
investment managers who will bring with them both significant
client bases and substantial funds under management.
Overall trading activity in the opening weeks of the
new financial year has been quiet, reflecting the ongoing
global economic uncertainty. Whilst this may impact short
term performance, your Board believes that the Group is well
positioned to capitalise on improvements in its markets over
the longer term and deliver its strategy for growth in
profitability with the additional resources now available for
the next phase of business.
R A FitzGerald FCA
13 June 2012
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