Half Year Results

 

Press release

19 July 2013

 

WH Ireland Group plc

(“WH Ireland” or “the Group”)

 

Half Year Results

for the six months ended 31 May 2013

 

WH Ireland (AIM: WHI), the financial services group serving the private client and smaller company market, today announces its half year results for the six months ended 31 May 2013. 

 

●	Group revenue increased 3.55% on same period last year to £13.05m (half year ended 31 May 2012: £12.60m)
●	Profit before tax of £0.06m (half year ended 31 May 2012: £0.19m)
●	Basic earnings per share of 0.16p (half year ended 31 May 2012: 0.81p)
●	Total equity of £12.27m up £0.02m from year end (30 November 2012: £12.25m)
●	Total funds under management and control of £2.27bn up 31.9% from year end (30 November 2012: £1.72bn)

 

Rupert Lowe, Chairman of WH Ireland, commented:  “The Board is pleased with the progress that has been made during the period, although this is not yet fully reflected in the Group’s financial performance.  In particular, the acquisition of the Seymour Pierce private client business has strengthened our offering in this division and we are pleased to have increased our funds under management by 31.9%.  We remain focused on controlling operating costs and ensuring that the Group has the right structure and platform in place for future growth. 

 

“Despite the wider challenges that the sector faces at present, the Board is pleased with WH Ireland’s strong position and is optimistic about the medium and longer term growth prospects for the Group.” 

 

– Ends –

 

For further information please contact:

 

WH Ireland Group plc	+44 (0) 20 7220 1666
Richard Killingbeck, Chief Executive Officer
Rupert Lowe, Chairman
Panmure Gordon (UK) Limited	+44 (0) 20 7886 2500
Hugh Morgan / Callum Stewart (Corporate Finance)
Adam Pollock (Corporate Broking)
Abchurch Communications
Joanne Shears / Shabnam Bashir	+44 (0) 207 398 7707
shabnam.bashir@abchurch-group.com

 

Chairman’s statement

 

Much positive progress has been achieved at your Group during the first half year ended 31 May 2013 which is not fully reflected in the financials for this period.  The appointment of a new Chief Executive Officer, the acquisition of the Seymour Pierce private client business and a strong focus on controlling operating costs has put the Group into a better structural position to benefit from future growth in both divisions.

 

During the period revenue rose by 3.6% to £13.1 million, and a marginal profit before tax of £59,000 was reported.  These figures do not illustrate the strong performance of the Private Wealth Management division which saw revenue increase by £1.3 million, 18.0% against the comparable period last year.  Conversely, the Corporate Broking division did not record any significant success fees during this period and thus revenue declined by £0.9 million or 23.3% when compared to a strong first half in 2012, which included two significant corporate transactions.

 

The Private Wealth Management division has benefited from improved market conditions and stronger confidence amongst private clients.  In addition the acquisition of the Seymour Pierce private client business part way through this period has positively impacted the results.  We do not expect the full impact of this acquisition to become evident until 2014 but we still expect a positive contribution to earnings in the year to November 2013.  At the period end we are pleased to report a 31.9% increase in the Group’s Assets under Management to £2.3 billion.

 

Despite the decline in revenues in the Corporate Broking division, strong progress has been made in the Group’s stated strategy of increasing recurring revenues from our existing and new corporate client base.  Recurring revenue during this period rose by 44.1% to £1.5 million and when combined with new client wins during this period we expect this rate of growth to at least continue for the rest of the year.  The Group’s near term objective is to be able to cover significantly all of our direct operating costs in this division from recurring revenue.

 

At the period end our financial position remained strong with net assets of £12.3 million and cash and cash equivalents of £8.7 million.  The slight reduction in our liquidity in the period was due to seasonal variations in trade receivables and payables and the cost of the acquisition of the Seymour Pierce private client business.  At the end of the year we reinstated the Group’s dividend and we are seeking to adopt a progressive dividend policy in the future.

 

By maintaining control of operating costs whilst adopting a more focused expansion of the business, WH Ireland is in a strong position to benefit from the changes and challenges which are currently in place within the financial sector.  We are now the third largest NOMAD by number of corporate clients and we are one of the fastest growing wealth management companies.  Our focus on recurring revenue in both divisions gives the Board confidence in the near term as well as in the longer term outlook for the Group.  Despite the challenges of markets and regulation, the Board is optimistic for the second half of the year.

 

 

Rupert Lowe

Chairman

18 July 2013

Consolidated statement of comprehensive income – unaudited

for the half year ended 31 May 2013

 

		Half year	Half year	Year
		ended	ended	ended
		31 May	31 May	30 November
		2013	2012	2012
	Note	£’000	£’000	£’000
Revenue	2	13,051	12,603	25,079
Administrative expenses		(12,847)	(12,434)	(24,989)
Operating profit		204	169	90
Other income		–	–	16
Investment gains/(losses)		30	(52)	47
Fair value (losses)/gains on investments		(154)	65	(287)
Finance income		6	31	13
Finance expense		(27)	(28)	(56)
Profit/(loss) before tax		59	185	(177)
Tax (charge)/credit		(22)	4	(33)
Profit/(loss) for the period		37	189	(210)
Other comprehensive income
Transferred to profit or loss on sale of investments		–	–	(1)
Tax relating to components of other comprehensive income		–	2	6
Total other comprehensive income		–	2	5
Total comprehensive income attributable to the owners of the parent		37	191	(205)
Earnings per share for profit attributable to the ordinary equity holders of the parent during the period
Basic	6	0.16p	0.81p	(0.89)p
Diluted	6	0.15p	0.75p	(0.89)p

 

 

Consolidated statement of financial position – unaudited

as at 31 May 2013

 

		31 May	31 May	30 November
		2013	2012	2012
	Note	£’000	£’000	£’000
Assets
Non-current assets
Property, plant and equipment		5,357	5,468	5,412
Goodwill		470	612	542
Intangible assets		640	604	604
Investments	3	853	958	1,251
Loan note receivable		–	25	–
Deferred tax asset		618	701	625
		7,938	8,368	8,434
Current assets
Trade and other receivables		34,357	37,832	34,266
Other investments		808	917	313
Corporation tax recoverable		–	36	–
Cash and cash equivalents	4	8,739	5,024	9,340
		43,904	43,809	43,919
Total assets		51,842	52,177	52,353
Liabilities
Current liabilities
Trade and other payables		(36,620)	(36,565)	(37,238)
Corporation tax payable		(79)	–	(30)
Obligations under finance leases		(119)	(119)	(119)
Borrowings		(168)	(167)	(168)
Provisions		(492)	(186)	(299)
		(37,478)	(37,037)	(37,854)
Non-current liabilities
Borrowings		(1,435)	(1,604)	(1,519)
Deferred tax liability		(318)	(428)	(320)
Obligations under finance leases		(288)	(407)	(347)
Accruals and deferred income		(27)	(122)	(41)
Provisions		(21)	(21)	(21)
		(2,089)	(2,582)	(2,248)
Total liabilities		(39,567)	(39,619)	(40,102)
Total net assets		12,275	12,558	12,251
Equity
Share capital	5	1,185	1,184	1,184
Share premium		5	6,526	–
Available-for-sale reserve		170	167	170
Other reserves		982	1,472	982
Retained earnings		10,715	3,991	10,697
Treasury shares		(782)	(782)	(782)
Total equity		12,275	12,558	12,251

 

 

Consolidated statement of cash flows – unaudited

for the half year ended 31 May 2013

	Half year	Half year	Year
	ended	ended	ended
	31 May	31 May	30 November
	2013	2012	2012
	£’000	£’000	£’000
Operating activities
Profit/(loss) for the period	37	189	(210)
Adjustments for:
Depreciation, amortisation and impairment	181	177	372
Finance income	(6)	(31)	(13)
Finance expense	27	28	56
Taxation	53	(6)	33
Changes in investments	133	179	130
Non-cash adjustment for share based payments	95	236	325
Decrease in trade and other receivables	(199)	(11,176)	(7,610)
(Decrease)/increase in trade and other payables	(631)	9,350	9,940
Increase in provisions	193	121	234
(Increase)/decrease in current asset investments	(495)	(499)	105
Net cash (used in)/generated from operations	(612)	(1,432)	3,362
Income taxes (paid)/received	–	–	–
Net cash (used in)/generated from operating activities	(612)	(1,432)	3,362
Investing activities
Proceeds from sale of investments	717	140	664
Interest received	6	31	13
Acquisition of property, plant and equipment	(54)	(22)	(686)
Acquisition of intangible assets	(36)	(604)	(604)
Acquisition of investments	(452)	(335)	(1,103)
Redemption of loan notes	–	–	25
Net cash generated from/(used in) investing activities	181	(790)	(1,691)
Financing activities
Proceeds from issue of shares	–	133	133
Repayment of borrowings	(84)	(156)	(240)
(Repayment of)/increase in obligations under finance leases	(59)	(69)	484
Interest paid	(18)	(18)	(56)
Interest paid under finance leases	(9)	(10)	(18)
Net cash (used in)/generated from financing activities	(170)	(120)	303
Net (decrease)/increase in cash and cash equivalents	(601)	(2,342)	1,974
Cash and cash equivalents at beginning of period	9,340	7,366	7,366
Cash and cash equivalents at end of period	8,739	5,024	9,340
Clients’ settlement cash	6,400	2,759	4,189
Group cash	2,339	2,265	5,151
Cash and cash equivalents at end of period	8,739	5,024	9,340

Condensed consolidated statement of changes in equity – unaudited

for the half year ended 31 May 2013

 

			Available
	Share	Share	for-sale	Other	Retained	Treasury	Total
	capital	premium	reserve	reserves	earnings	shares	equity
	£’000	£’000	£’000	£’000	£’000	£’000	£’000
Balance at 1 December 2011	1,171	6,406	165	1,472	3,853	(1,069)	11,998
Total comprehensive income for the period	–	–	2	–	189	–	191
Recognition of share-based payments	–	–	–	–	236	–	236
Share options exercised	13	120	–	–	–	–	133
Treasury shares issued to employees	–	–	–	–	(287)	287	–
Balance at 31 May 2012	1,184	6,526	167	1,472	3,991	(782)	12,558
Total comprehensive income for the period	–	–	3	–	(399)	–	(396)
Recognition of share-based payments	–	–	–	–	89	–	89
Share capital reduction	–	(6,526)	–	–	6,526	–	–
Reserve transfer	–	–	–	(490)	490	–	–
Balance at 30 November 2012	1,184	–	170	982	10,697	(782)	12,251
Total comprehensive income for the period	–	–	–	–	37	–	37
Recognition of share-based payments	–	–	–	–	89	–	89
Share options exercised	1	5	–	–	–	–	6
Dividends (note 7)	–	–	–	–	(108)	–	(108)
Balance at 31 May 2013	1,185	5	170	982	10,715	(782)	12,275

 

 

Notes to the condensed consolidated interim financial statements

for the half year ended 31 May 2013

1. Basis of preparation

Statement of compliance

The interim financial information in this report has been prepared in accordance with the disclosure requirements of AIM Rules and the recognition and measurements of International Financial Reporting Standards (IFRS), as adopted by the European Union (EU).

 

The consolidated interim report does not include all of the information required for full annual financial statements.

 

The accounting policies adopted by the Group in the preparation of its 2013 interim report are those which the Group currently expects to adopt in its annual financial statements for the year ending 30 November 2013 and are consistent with those disclosed in the annual financial statements for the year ended 30 November 2012.

 

The financial information for the year ended 30 November 2012 does not constitute the Company’s statutory accounts.  The statutory accounts for the year ended 30 November 2012 have been delivered to the Registrar of Companies in England and Wales.  The auditor has reported on those accounts.  Its report was unqualified, did not draw attention to any matters by way of emphasis, and did not contain a statement under Section 498(2) or 498(3) of the Companies Act 2006.  The financial information for the half year ended 31 May 2013 and 31 May 2012 is unaudited.

 

Going concern

The information in this interim report has been prepared on a going concern basis.  In making this assessment, the Directors have prepared detailed financial forecasts for the period to November 2015, which consider the funding and capital position of the Group.  Those forecasts make assumptions in respect of future trading conditions, notably the economic environment and its impact on the Group’s revenues and costs.  In addition to this the nature of the Group’s business is such that there can be considerable variation in the timing of cash inflows.  The forecasts take into account foreseeable downside risks, based on the information that is available to them at the time of the approval of this interim report.

 

Certain activities of the Group are regulated by the Financial Conduct Authority (FCA) which is a statutory regulator for financial services business in the UK and has responsibility for policy, monitoring and discipline for the financial services industry as a whole.  The FCA requires the Group’s capital resources to be adequate; that is sufficient in terms of quantity, quality and availability, in relation to its regulated activities.  The Directors monitor the Group’s regulatory capital resources on a daily basis and they have developed appropriate scenario tests and corrective management plans which they are prepared to implement to address any potential deficit as required.  These actions may include cost reductions, regulatory capital optimisation programmes or further capital raising.  The Directors consider that, taking account of foreseeable downside risks, regulatory capital requirements will continue to be met.

 

The Directors have renewed the Group’s banking facilities, confirming that these will be available until 28 February 2014. 

 

2. Segmental reporting

The Group has two operating segments.  The Private Wealth Management division offers investment management and stockbroking advice and services to individuals and contains our Independent Financial Advisory (“IFA”) business, giving advice on and acting as intermediary for a range of financial products.  The Corporate Broking division provides corporate finance and corporate broking advice and services to companies and acts as Nominated Adviser to clients listed on the Alternative Investment Market (“AIM”) and contains our Institutional Sales and Research business, which carries out stockbroking activities on behalf of companies as well as conducting research into markets of interest to its clients.

 

All divisions are located in the UK.  Each reportable segment has a segment manager who is directly accountable to and maintains regular contact with the chief operating decision maker (CODM).  The Head Office segment comprises centrally incurred costs and revenues.

 

No customer represents more than ten percent of the Group’s revenue.

 

The following tables represent revenue and profit information for the Group’s business segments:

 

Half year ended 31 May 2013

	Private Wealth	Corporate	Head
	Management	Broking	Office	Group
	£’000	£’000	£’000	£’000
Revenue	8,407	3,081	1,563	13,051
Segment result	2,171	573	(2,540)	204
Other Income	–	–	–	–
Investment gains	–	–	30	30
Fair value losses on investments	(32)	(51)	(71)	(154)
Finance income	–	–	6	6
Finance expense	–	–	(27)	(27)
Profit/(loss) before taxation	2,139	522	(2,602)	59
Taxation	–	–	(22)	(22)
Profit/(loss) on continuing operations after taxation	2,139	522	(2,624)	37

 

Half year ended 31 May 2012

	Private Wealth	Corporate	Head
	Management	Broking	Office	Group
	£’000	£’000	£’000	£’000
Revenue	7,125	4,015	1,463	12,603
Segment result	1,976	855	(2,662)	169
Other Income	–	–	–	–
Investment losses	–	–	(52)	(52)
Fair value (losses)/gains on investments	(103)	131	37	65
Finance income	–	–	31	31
Finance expense	–	–	(28)	(28)
Profit/(loss) before taxation	1,873	986	(2,674)	185
Taxation	–	–	4	4
Profit/(loss) on continuing operations after taxation	1,873	986	(2,670)	189

 

Year ended 30 November 2012

	Private Wealth	Corporate	Head
	Management	Broking	Office	Group
	£’000	£’000	£’000	£’000
Revenue	14,395	7,031	3,653	25,079
Segment result	3,109	1,246	(4,265)	90
Other Income	–	–	16	16
Investment gains	–	47	–	47
Fair value (losses)/gains on investments	(219)	25	(93)	(287)
Finance income	–	–	13	13
Finance expense	–	–	(56)	(56)
Profit/(loss) before taxation	2,890	1,318	(4,385)	(177)
Taxation	–	–	(33)	(33)
Profit/(loss) on continuing operations after taxation	2,890	1,318	(4,418)	(210)

 

 

3. Investments

	Half year	Half year	Year
	ended	ended	ended
	31 May	31 May	30 November
	2013	2012	2012
	£’000	£’000	£’000
Available-for-sale investments
Fair value:            quoted	16	12	15
unquoted	578	309	746
	594	321	761
Investments at fair value through the income statement
Fair value:            quoted	231	312	405
warrants	28	325	85
	259	637	490
Total investments	853	958	1,251

 

Fair value, in the case of quoted investments, represents the bid price at the reporting date.  In the case of unquoted investments, the fair value is estimated by reference to recent arm’s length transactions.  The fair value of warrants is estimated using established valuation models.

 

4. Cash, cash equivalents and bank overdrafts

For the purposes of the statement of cash flows, cash and cash equivalents comprise cash in hand and deposits with banks and financial institutions with a maturity of up to three months.

 

Cash and cash equivalents represent the Group’s and the Company’s money and money held for settlement of outstanding transactions.

 

Free money held on behalf of clients is not included in the statement of financial position.  Free money at 31 May 2013 was £89.8m (31 May 2012: £72.0m; 30 November 2012: £76.4m).

 

5. Share capital

The total number of authorised ordinary shares is 34.5 million shares of 5p each (31 May 2012 and 30 November 2012: 34.5 million).  The total number of issued ordinary shares is 23.7 million shares of 5p each (31 May 2012: and 30 November 2012: 23.7 million).

 

6. Earnings per share

Basic earnings per share (EPS) is calculated by dividing the profit attributable to equity holders of the Company by the weighted average number of ordinary shares in issue during the year, excluding ordinary shares purchased by the Company and held as treasury shares.

 

Diluted EPS is the basic EPS, adjusted for the effect of conversion into fully paid shares of the weighted average number of all dilutive employee share options outstanding during the period.  Options over 144,524 (31 May 2012: 5,017, 30 November 2012: 7,164) shares are excluded from the EPS calculation as they are anti-dilutive.  Anti-dilutive options represent options issued where the exercise price is greater than the average market price for the period.

 

Reconciliations of the earnings and weighted average number of shares used in the calculations are set out below:

 

	Half year	Half year	Year
	ended	ended	ended
	31 May	31 May	30 November
	2013	2012	2012
	‘000	‘000	‘000
Weighted average number of shares in issue during the period	23,695	23,405	23,547
Effect of dilutive share options	1,228	1,942	1,651
	24,923	25,347	25,198
	£’000	£’000	£’000
Earnings attributable to ordinary shareholders	37	189	(210)
Basic EPS
Continuing operations	0.16p	0.81p	(0.89)p
Diluted EPS
Continuing operations	0.15p	0.75p	(0.89)p

 

7. Dividends

A final dividend of 0.5p per share, in respect of the year ended 30 November 2012, was approved by shareholders at the Annual General Meeting held on 22 May 2013.  This was subsequently paid on 7 June 2013 and therefore appears in Trade and Other Payables in these Interim Financial Statements.  No interim dividend has been paid or proposed in respect of the current financial year (2012: nil).

 

8. Contingent liability

The Company has been informed that a former employee has started legal proceedings for unfair dismissal, wrongful dismissal and breach of contract regarding a share agreement.  The Company vigorously denies that it was at fault and is intending to defend itself against any such action.  It is anticipated the case will be concluded during 2013.

 

9. Availability of Interim Report

Copies of this Report will be available to the public, free of charge from the Company’s registered office at 5th Floor, 24 Martin Lane, London, EC4R 0DR and can be downloaded from the Company’s website at www.wh-ireland.co.uk.

 

– Ends –