Final Results – 16 Months Ended 31 March 2018

19 July 2018

WH Ireland Group Plc

 

(“WH Ireland” or the “Company”)

 

Final Results

for the 16 months ended 31 March 2018

 

WH Ireland, the financial services group that provides private wealth management and corporate broking services, today announces its final results for the sixteen months ended 31 March 2018. All 2016 comparatives stated below are for the twelve months ended 30 November 2016.

 

Financial Overview

·      Revenue of £36.4m (2016: £25.4m); a 7.5% increase on an annualised basis

·      Operating loss of £1.6m before exceptional items (2016: loss of £1.3m)

·      Exceptional items of £2.5m (2016: £1.8m)

·      Significant increase in recurring revenue to £18.0m (2016: £12.0m), representing 49% of total revenues (2016: 47%)

·      Cash reserves of £7.3m (2016: £6.7m)

·      CET1 capital ratio of 11.28% (2016: 12.14%) – raised £4.0m during the 16 month period through two placings at 120p and 123p per share respectively

 

Private Wealth Management

·      Assets under management and administration (AUMA) of £2,564m (2016: £2,872m); reduction reflects deliberate policy to reduce low margin, non-discretionary assets

·      Discretionary assets under management increased to £1,081m (2016: £1,016m):

o  an increase of 6.4% compared to the increase in the UK All Share index of 5.7%

o  now represent 42% of total AUMA (2016: 35%)

·      Significant increase in management fee income to £12.2m (2016: £7.6m), reflecting strong progress in switching discretionary assets to fee based charging structure

·      Recovery in commission income to £12.0m (2016: £8.7m) after significant fall in prior year

 

Corporate Broking

·      Retainer fee income of £3.8m (2016: £3.2m)

·      Retained our AIM NOMAD ranking (based on number of clients) 3^rd (2016: 3^rd)

·      Stable number of corporate clients 84 (2015: 85 clients), despite a reduction in total AIM companies over the 16 month period:

o  Number of corporate transactions 37 (2016: 51)

o  Money raised for corporate clients £69m (2016: £69m)

 

Current trading and outlook:

·      Expect to achieve at least £2m of cost savings and revenue enhancements this year

·      Fee income is now running at approximately £1.3m per month, representing nearly 55% of total monthly revenue

·      One IPO, and a mix of private and public transactions completed to date

·      Discretionary assets under management have grown to £1.151bn as at 30 June 2018

 

Chief Executive:

·      We announced separately today:

o  Richard Killingbeck will step down as Chief Executive Officer with effect from 31 July 2018 and will step down as a director on or before the AGM on 27 September 2018

o  Phillip Wale has been appointed as Chief Executive Officer elect, with effect from 1 August 2018, subject to approval by the Financial Conduct Authority

 

 

Tim Steel, Chairman of WH Ireland, said:

“We have made considerable progress continuing the transformation of WH Ireland. However, as we previously stated, this process of change has not been without its challenges given market conditions and the scale of change that we have been implementing; this has resulted in losses being incurred last year – but a much clearer path to profitability is now ahead of us in the new financial year and beyond.

 

“We have had a good start to the new year, with progress in our core KPIs including recurring revenues, corporate transactions and discretionary funds under management. This gives us considerable confidence that we will report an improved financial performance and be profitable in the current year, with further strong progress anticipated in the following financial year as we benefit from the full cost savings and revenue enhancements from our various projects.”

 

For further information please contact:

 

WH Ireland Group plc	www.whirelandplc.com
Tim Steel, Chairman	+44(0) 20 7220 1666
SPARK Advisory Partners Limited
Mark Brady/Miriam Greenwood	+44(0) 20 3368 3551
MHP Communications
Reg Hoare/Charles Hirst	+44 (0) 20 3128 8100

 

 

Chairman’s Report

This year’s Annual Report covers the extended 16 month period that resulted from the decision to change our year end to the more conventional one of 31 March, from 30 November. I am pleased to report that considerable progress has been made to continue the transformation of WH Ireland over the period as a whole and that change has continued following the end of the period under review. However, as we identified  in my second interim report in January (for the 12 months to 30 November), this has not been without its challenges, given market conditions and the scale of change that we have been implementing. This has resulted in losses being incurred for the year – but a much clearer path to profitability is now ahead of us in the new financial year and beyond.

Trading overview

Market activity was subdued in the extra four months from November 2017 to March 2018 impacting the Corporate and Institutional Broking (CIB) division; the Wealth Management (WM) division has benefited from higher market levels but it has borne higher costs than anticipated. These costs primarily relate to the outsourcing of our custody and operational functions and legacy issues which have taken longer to resolve than anticipated. This represents the final element of the investment in transformational change within the WM division and will result in a significant decline in these costs as of July this year.

I concentrated part of my last report to shareholders on the actions taken and implemented by the senior management team in order to help achieve the Board’s aim of achieving consistent profitability across both divisions. These changes have included structural remuneration changes, continued focus upon fee income in the WM division, and in CIB a focus upon advising larger corporate clients, whilst maintaining our existing strong corporate client list. These efforts continue and while the competitive landscape does not get any easier, it is encouraging that both divisions have made significant progress during the past year and momentum has continued into the current year.

Change in leadership

The Company announced earlier today that Richard Killingbeck, the Chief Executive Officer of the Group, is not seeking re-election as a Director of the Company at the forthcoming Annual General Meeting of the Company in order to pursue other opportunities. Accordingly, Richard will step down as CEO with effect from 31 July 2018, and will step down as a director at the Annual General Meeting on 27 September 2018. A further announcement will be made at that time. Richard joined the Company in September 2012 as Head of Private Wealth Management before being appointed Chief Executive in January 2013. The Board would like to express its thanks to Richard for his significant contribution to the Group over the past six years.  During this time, he has overseen the key transformational changes that have positioned WH Ireland as a modern and more efficient organisation.  We wish him well in the future. 

The Board is delighted to announce that Phillip Wale has been appointed as Chief Executive Officer elect of the Company, with effect from 1 August 2018, with his appointment to Chief Executive Officer being subject to approval by the Financial Conduct Authority.  Phillip brings considerable experience to the Board of WH Ireland having held a number of senior positions in similar financial services businesses which span both Wealth Management and Corporate and Institutional Broking and we believe that we can draw upon this experience to take the Group forward in the next stage of its development. This includes senior positions at Goldman Sachs in New York and London, and Chief Executive roles at Seymour Pierce and Panmure Gordon & Co.

This change in leadership comes at a time of transition for the Company, as it builds upon all the changes that have taken place in the last few years. Phillip is being tasked with delivering an accelerated path to growth and profitability, for the benefit of all of the Company’s stakeholders.

looking forward

In the new financial year that started on 1 April 2018, both divisions have witnessed better trading conditions and are beginning to see the benefits of all the changes that have been made to the business in the last few years. The CIB division has undertaken a number of transactions for corporate clients and we have begun to see the positive impact of the wider cost reduction and revenue enhancement programmes within the WM division. The latter will accelerate as the current year progresses and we expect to achieve at least £2 million of cost savings and revenue enhancements this year, with the full annual impact expected to crystallise in the financial year to March 2020.

Fee income (CIB retainers, WM management and advice fees) is now running at approximately £1.3 million a month, representing nearly 55% of our total monthly revenue. This is the highest ratio of fees to total revenue ever achieved by the business and is most encouraging for the progression of WH Ireland in the future.

I would like to thank all of those employees who have played a significant part in helping the Company evolve and who have worked extremely hard in bringing about change. In addition, I want to express my specific thanks to Richard Killingbeck for his commitment and dedication to the firm during his tenure as CEO; I have very much enjoyed working with Richard and wish him well in the future. Finally, I would like to welcome Phillip to the Company, and look forward to working with him over the coming months. As a result of all these efforts and changes, I believe that the Company has never been better positioned for the next stage in its exciting growth strategy.

Tim Steel
July 2018

CEO Report

The past five financial years has witnessed considerable change at the Group, change which during the past two years has accelerated significantly. Unsurprisingly, given the sheer complexity and scale of the transformation being undertaken, covering operational, remuneration, commercial and regulatory matters, it has taken longer and cost more to deliver.  It has also been delivered against a background of competitive and volatile market conditions, which has made growth hard to come by for most market participants.

Overall, as a result of these changes we have significantly reduced headcount without reducing our capabilities or capacity. This has provided a concomitant reduction in staff costs which is expected to continue in the current financial year. This gives us confidence that the Group’s financial performance will begin to improve significantly from here on.

Key performance indicators

Five years ago the Board set out several key performance indicators by which we would judge the transformation of the business.  The most important measures have arguably been those of increasing recurring revenues in both divisions and discretionary funds in the Private Wealth Management business, as these will ultimately deliver both profitability and shareholder value. In both cases these measures have made strong progress; recurring revenues now represent 49% as against 30% in 2013, and discretionary funds represent 42.1% of the total compared to just 20% in 2013.  Whilst there is much work still to be done in terms of delivering good operating margins, overall there has been steady progress to date in our key measures.

Wealth Management (WM)

The changes referred to above have primarily been implemented within the Private Wealth Management division. They include consolidating our regional office footprint, discontinuing unprofitable non-core services, recruiting high quality new staff, focusing on higher margin discretionary fund management, and investing in marketing.

The single biggest and costliest task has been outsourcing our custody and operational functions. As previously reported, this complex project has run over budget and time but we remain confident that it has resulted in a more robust and scalable operating platform (which services our clients’ assets) and an advice driven fee based model which provides for a more stable and valuable recurring revenue stream.  The benefits are expected to flow in the current financial year as the various cost and revenue enhancement programmes positively impact results. We therefore expect that the Private Wealth Management division will return to profit in the current financial year and the full impact of the programmes undertaken will be demonstrable in the year to March 2020. A gross return of 15% on assets is our near term goal for this division.

Analysis of AUMA	2017/2018	2016	2015	2014	2013
Discretionary	£1,081m	£1,016m	£767m	£722m	£506m
Advisory	639	783	892	952	931
Execution only	844	1,073	861	1,018	1,046
Total AUMA	£2,564m	£2,872m	£2,520m	£2,692m	£2,483m
Discretionary as a % of total	42.1%	35.4%	30.4%	26.8%	20.3%

 

Corporate and Institutional Broking (CIB)

The Corporate and Institutional Broking division has a low fixed cost model with a solid corporate client base. The focus remains upon increasing this client list both in number and in market capitalisation. This will allow for a greater number and value of transactions to be undertaken for these clients. Transaction volumes remain highly unpredictable and subject to market sentiment which is outside of our immediate control.

Given the above, in order to help diversify our revenue and earnings streams in CIB, we established our platform for raising growth capital for private companies, including through the ‘Investor Forum’, whose clients include HNWIs and Family Offices. A number of successful fund raises were undertaken towards the end of the reporting period and further transactions have been closed in the new financial year.  We believe that this platform has significant long term potential for both the division and the Company.

An analysis of the last five years shows the CIB division has reported a remarkably resilient performance in a very challenging market whilst the average deal size undertaken last year was significantly ahead of prior periods.  It has maintained critical mass in terms of numbers of clients and has been able to complete a decent number of transactions in most periods. This puts the team in a good position to make progress and undertake a more regular flow of deals in each quarter, rather than the somewhat sporadic corporate activity of the last few years.   

Analysis of Corporate Activity	2017/2018	2016	2015	2014	2013
Number of transactions	37	51	53	29	21
Money raised	£69m	£69m	£75m	£56m	£102m
Number of clients	84	85	98	93	87

 

Recurring income

One of our core targets for the Group has been to achieve recurring revenues of 50% of total revenues (measured as the aggregate of our corporate retainer fees and our discretionary fund management fees) – we have achieved this goal during this reporting period, and have exceeded it in the early months of the new financial year. We remain confident that a recurring fee target approaching 65% should be achievable in the next few years, with the majority of this change being driven by the continued shift to management fees in the Private Wealth Management division. This level of recurring revenue provides both confidence in the sustainability of the business and in planning for the future.

Analysis of recurring revenues	2017/2018	2016	2015	2014	2013
Total revenues	£36.4m	£25.4	£30.9m	£30.0m	£29.7m
Recurring revenues	£18.0m	£12.0m	£11.4m	£10.0m	£8.9m
% of total revenues	49.0%	47.0%	36.9%	33.3%	30.0%

 

Summary and outlook

Consistent with the Chairman’s report, I would like to thank all of our loyal and dedicated members of staff who have worked extremely hard during the past 16 months to deliver change. This also includes cultural change, an imperative element of the foundation for the future success of the Company.

Overall, I believe that the significant investment we have made to transform the business will result in positive future benefit for clients, shareholders and staff alike. As a result, the WH Ireland Group is now at an inflection point – a much stronger business has been created capable of growing faster and more profitably.

We have had a good start to the new financial year, with good progress in our core KPIs; recurring revenues are through the 50% barrier,  we have completed a number of public and private transactions and discretionary funds under management have continued to increase. This gives us considerable confidence that we will report an improved financial performance and be profitable in the current year, with further strong progress anticipated in the following financial year as we benefit from the full cost savings from our various projects already implemented.

RW Killingbeck
July 2018

Consolidated statement of comprehensive income

		16 Months ended          31 Mar 2018	12 Months ended          30 Nov 2016
	Note	£’000	£’000
Revenue	3 & 5	36,416	25,421
Administrative expenses	6	(40,517)	(28,454)
Operating loss		(4,101)	(3,033)
Operating loss before exceptional items:		(1,595)	(1,253)
Exceptional items	6	(2,506)	(1,780)
Operating loss after exceptional items		(4,101)	(3,033)
Gain on sale of property, plant and equipment		343	–
Realised investment gains		16	21
Fair value profit/(losses) on investments		31	(155)
Finance income	8	21	10
Finance expense	8	(24)	(47)
Loss before tax		(3,714)	(3,204)
Tax income	9	769	460
Loss for the year		(2,945)	(2,744)
Total other comprehensive income		–	–
Total comprehensive income		(2,945)	(2,744)
Earnings per share	11
Basic		(10.08)p	(10.72)p
Diluted		(10.08)p	(10.72)p

 

All results for the current and prior year relate to continuing operations.

There were no items of other comprehensive income for the current or prior year.

Consolidated and Company statement of financial position

 

		Group		Company
£’000		16 Months ended 31 Mar 2018	12 Months ended                          30 Nov 2016	16 Months ended      31 Mar 2018	12 Months ended                          30 Nov 2016
	Note
ASSETS
Non-current assets
Goodwill	13	258	258	–	–
Intangible assets	14	3,425	3,582	–	–
Investment in subsidiaries	15	–	–	9,550	5,035
Property, plant and equipment	12	1,274	1,207	2	10
Investments	16	245	118	–	–
Loan receivable	28	–	–	746	731
Subordinated Loan	17	–	–	985	960
Deferred tax asset	18	1,197	807	81	14
		6,399	5,972	11,364	6,877
Current assets
Trade and other receivables	19	17,339	18,985	2,358	4,720
Other investments	20	692	530	–	–
Asset held for sale	12	–	4,750	–
Cash and cash equivalents	21	7,277	6,657	–	–
		25,308	30,922	2,358	4,720
Total assets		31,707	36,894	13,722	11,597
LIABILITIES
Current liabilities
Trade and other payables	22	(15,744)	(19,848)	(194)	(1,936)
Corporation tax payable		–	(52)	–	–
Borrowings	23	–	(187)	(5)	(187)
Finance Leases	31	(282)	(282)	–	–
Deferred Consideration	25	(1,179)	(1,130)	–	–
Provisions	24	(33)	(28)	–	–
		(17,238)	(21,527)	(199)	(2,123)
Non-current liabilities
Borrowings	23	–	(807)	–	(807)
Finance Leases	31	–	(352)	–	–
Deferred tax liability	18	–	(92)	–	–
Accruals and deferred income		(439)	(282)	–	–
Deferred Consideration	25	(1,123)	(2,101)	–	–
Provisions	24	(35)	(21)	–	–
		(1,597)	(3,655)	–	(807)
Total liabilities		(18,835)	(25,182)	(199)	(2,930)
Total net assets		12,872	11,712	13,523	8,667
EQUITY
Share capital		1,493	1,309	1,493	1,309
Share premium		5,503	1,621	5,503	1,621
Available-for-sale reserve		7	7	–	–
Other reserves		982	982	229	229
Retained earnings		5,633	8,524	6,298	5,508
Treasury shares	28	(746)	(731)	–	–
Total equity		12,872	11,712	13,523	8,667

 

The Company has elected to take the exemption under Section 408 of the Companies Act 2006 not to present the Company Statement of Comprehensive Income. The profit after tax of the Company for the year was £735k (2016: Profit £1,199k).

These financial statements were approved by the Board of Directors on 18 July 2018 and were signed on its behalf by:

Tim Steel                                               
Director                                                                

Consolidated and Company statement of cash flows

 

		Group		Company
£’000		16 Months ended 31 Mar 2018	12 Months ended 30 Nov 2016	16 Months ended 31 Mar 2018	12 Months ended  30 Nov 2016
	Note
Operating activities:
(Loss)/profit for the year		(2,945)	(2,744)	735	1,199
Adjustments for:
Depreciation, amortisation and impairment	12,13 & 14	785	475	8	6
Finance income	8	(21)	(10)	–	–
Finance expense	8	24	47	(15)	18
Tax	9	(766)	(517)	–	–
Gain on sale of property		(343)	–	–	–
Losses/(gains) in investments		(47)	187	–	–
Non-cash adjustment for share option charge	7	55	262	55	262
Decrease/(increase) in trade and other receivables		1,256	4,327	2,422	(76)
(Decrease)/increase in trade and other payables		(3,855)	(4,259)	(1,742)	896
(Decrease)/increase in provisions		19	(1,172)	–	–
Decrease/(increase) in current asset investments	20	(162)	1,402	–	–
Net cash (used in)/generated from operations		(6,000)	(2,002)	1,463	2,305
Income taxes paid		(52)	(236)	–	–
Net cash inflows from operating activities		(6,052)	(2,238)	1,463	2,305
Investing activities:
Proceeds from sale of property	12	5,093	–	–	–
Proceeds from sale of investments		596	581	–	–
Interest received	8	21	10	–	–
Investment in subsidiary	15	–	–	(4,515)	(3,324)
Repayment of deferred consideration	25	(1,216)
Increase in intangible fixed asset	14	(106)	(189)	–	–
Acquisition of property, plant and equipment	12	(589)	(878)	–	–
Acquisition of investments	16	(752)	(526)	–	–
Net cash (used in)/generated from investing activities		3,047	(1,002)	(4,515)	(3,324)
Financing activities:
Proceeds from issue of share capital		4,066	1,326	4,066	1,326
Repayment of borrowings	23	(994)	(179)	(994)	(179)
Increase in deferred consideration	25	929	106	–	–
Capital element of finance leases repaid	31	(352)	515	–	–
Issue of subordinated loan		–	–	(25)	(110)
Interest paid	8	(24)	(47)	–	(18)
Dividends paid		–	–	–	–
Net cash generated from/(used in) financing activities		3,625	1,721	3,047	1,019
Net (decrease)/increase in cash and cash equivalents		620	(1,519)	(5)	–
Cash and cash equivalents at beginning of year		6,657	8,176	–	–
Cash and cash equivalents at end of year		7,277	6,657	(5)	–

Consolidated statement of changes in Equity

 

£’000	Share capital	Share premium	Available-for-sale reserve	Other reserves	Retained earnings	Treasury shares	Total equity
Group
Balance at 30 November 2015	1,225	379	7	982	11,006	(731)	12,868
Loss after tax	–	–	–	–	(2,744)	–	(2,744)
Total comprehensive income	–	–	–	–	(2,744)	–	(2,744)
Transaction with owners
Employee share option scheme	–	–	–	–	205	–	205
Deferred tax on employee share options	–	–	–	–	57	–	57
New share capital issued	60	1,014	–	–	–	–	1,074
Shares options exercised	24	228	–	–	–	–	252
Dividends	–	–	–	–	–	–	–
Balance at 30 November 2016	1,309	1,621	7	982	8,524	(731)	11,712
Loss after tax	–	–	–	–	(2,945)	–	(2,945)
Total comprehensive income	–	–	–	–	(2,945)	–	(2,945)
Transaction with owners
Employee share option scheme	–	–	–	–	–	–	–
Deferred tax on employee share options	–	–	–	–	(36)	–	(36)
New share capital issued	184	3,882	–	–	–	(15)	4,051
Other movements	–	–	–	–	90	–	90
Shares options exercised	–	–	–	–	–	–	–
Dividends	–	–	–	–	–	–	–
Balance at 31 March 2018	1,493	5,503	7	982	5,633	(746)	12,872

 

Retained earnings include £10k of ESOT reserve.

At 31 March 2018 the total number of authorised ordinary shares is 34.5million shares of 5p each (2016: 34.5 million shares of 5p each). At 31 March 2018 the total number of issued ordinary shares is 29.9 million shares of 5p each (2016: 26.2 million shares of 5p each). 3,684,943 shares were issued during the period (2016: 1,673,551).

Company statement of changes in Equity

 

£’000	Share capital	Share premium	Available-for-sale reserve	Other reserves	Retained earnings	Treasury shares	Total equity
Company
Balance at 30 November 2015	1,225	379	–	229	4,047	–	5,880
Profit after tax	–	–	–	–	1,199	–	1,119
Total comprehensive income	–	–	–	–	1,199	–	1,199
Employee share option scheme	–	–	–	–	205	–	205
Deferred tax on employee share options	–	–	–	–	57	–	57
New share capital issued	60	1,014	–	–	–	–	1,074
Shares options exercised	24	228	–	–	–	–	252
Dividends	–	–	–	–	–	–	–
Balance at 30 November 2016	1,309	1,621	–	229	5,508	–	8,667
Profit after tax	–	–	–	–	735	–	735
Total comprehensive income	–	–	–	–	735	–	735
Employee share option scheme	–	–	–	–	–	–	–
Deferred tax on employee share options	–	–	–	–	(36)	–	(36)
New share capital issued	184	3,882	–	–	–	–	4,066
Other movements	–	–	–	–	91	–	90
Shares options exercised	–	–	–	–	–	–	–
Dividends	–	–	–	–	–	–	–
Balance at 31 March 2018	1,493	5,503	–	229	6,298	–	13,523

 

The nature and purpose of each reserve, whether Consolidated or Company only, is summarised below:

Share premium

The share premium is the amount raised on the issue of shares that is in excess of the nominal value of those shares and is recorded less any direct costs of issue.

Available-for-sale reserve

The available-for-sale reserve reflects gains or losses arising from the change in fair value of available-for-sale financial assets except for impairment losses which are recognised in the statement of comprehensive income. When an available-for-sale asset is impaired or derecognised, the cumulative gain or loss previously recognised in the available-for-sale reserve is transferred to the statement of comprehensive income.

Other reserves

Other reserves comprise a (consolidated) merger reserve of £753k (2016: £753k) and a (consolidated) capital redemption reserve of £229k (2016: £229k).

Retained earnings

Retained earnings reflect; accumulated income, expenses, gains and losses, recognised in the statement of comprehensive income and the statement of recognised income and expense and is net of dividends paid to shareholders. It includes £10k of ESOT reserve.

Treasury shares

Purchases of the Company’s own shares in the market are presented as a deduction from equity, at the amount paid, including transaction costs. That is, treasury shares are shown as a separate class of shareholders’ equity with a debit balance.

Notes to the financial statements

1. General information

WH Ireland Group plc is a public company incorporated in the United Kingdom. The shares of the Company are listed on the Alternative Investment Market (AIM), a market operated by the London Stock Exchange Group plc. The address of its registered office is 24 Martin Lane, London, EC4R 0DR. The Group’s principal activities are described in the Strategic Report on pages 6 to 11 and in note 5.

basis of preparation

The principal accounting policies adopted in the preparation of the consolidated financial statements are set out in note 31.  The policies have been consistently applied to all the years presented, unless otherwise stated. 

The consolidated financial statements are presented in GBP, which is also the Group’s functional currency. Amounts are rounded to the nearest thousand, unless otherwise stated. These financial statements have been prepared in accordance with International Financial Reporting Standards, International Accounting Standards and Interpretations (collectively IFRSs). 

The preparation of financial statements in compliance with adopted IFRS requires the use of certain critical accounting estimates.  It also requires Group management to exercise judgment in applying the Group’s accounting policies. The areas where significant judgments and estimates have been made in preparing the financial statements and their effect are disclosed in note 4.

Basis of measurement

The consolidated financial statements have been prepared on a historical cost basis, except for the following items (refer to individual accounting policies for details):

Financial instruments – fair value through profit or loss

Financial instruments – available for sale

Contingent consideration

Equity settled share-based payment liabilities

2. Adoption of new and revised standards

New standards, amendments and interpretations adopted 

There were no new standards or interpretations effective for the first time from for periods beginning on or after 1 January 2017 that had a significant effect on the Group’s financial statements.

Standards, amendments and interpretations in issue but not yet effective

There are a number of standards and interpretations which have been issued by the International Accounting Standards Board that are effective in future accounting periods that the Group has decided not to adopt early. The most significant of these are:

IFRS 9 Financial Instruments and IFRS 15 Revenue from Contracts with Customers (both mandatorily effective for periods beginning on or after 1 January 2018); and

IFRS 16 Leases (mandatorily effective for periods beginning on or after 1 January 2019).

The Group is able to provide the following information regarding the likely impact of these key new accounting standards:

IFRS 9 Financial Instruments

The Group has identified that the adoption of IFRS 9, which replaces IAS 39 Financial Instruments: Recognition and Measurement from 1 January 2018, will not materially impact its consolidated financial statements. In coming to this judgment the Group has considered two key areas:

Classification and measurement of financial assets

The Group’s financial assets consist of trading assets from its Corporate and Institutional Broking division are currently measured at fair value through profit and loss either held for trading or designated at fair value. This treatment will therefore not change under IFRS 9. However, at year end the Group held £692k in current asset investments and £245k of investments as available-for-sale and other investments,  which will be classified as being at fair value through profit or loss under IFRS9. This will mean that all changes in the fair value up to the point of disposal will be recorded in the consolidated statement of comprehensive income.

2. Adoption of new and revised standards continued

Impairment

The Group will need to apply an expected credit loss model when calculating impairment losses on its trade and other receivables (both current and non-current). In applying IFRS 9 the Group must consider the probability of a default occurring over the contractual life of its trade receivables and contract asset balances on initial recognition of those assets. The Group does not consider that this will result in increased impairment provisions.

Transitions

The standard will be adopted from 1 April 2018 and applied retrospectively by adjusting where necessary, the opening statement of financial position at the date of initial application, with no requirement to restate comparative periods.

IFRS 15 Revenue from Contracts with Customers

This standard will be adopted on its mandatorily effective date, and the standard will be applied on a retrospective basis, recognising the cumulative effect, if, any, of initially applying the standard as an adjustment to the opening balance of retained earnings. The Group will continue to assess individual customer contracts for separate performance obligations to allocate the correct transaction price where necessary and therefore has assessed the impact of the new revenue standard to have no significant effect on the consolidated results.

IFRS 16 Leases

Adoption of IFRS 16 will result in the group recognising right of use assets and lease liabilities for all contracts that are, or contain, a lease. For leases currently classified as operating leases, under current accounting requirements the Group does not recognise related assets or liabilities, and instead spreads the lease payments on a straight-line basis over the lease term, disclosing in its annual financial statements the total commitment.

At 31 March 2018 operating lease commitments amounted to £3.9m. Further work will be carried out in the course of 2018 to determine the right-of-use assets and lease liabilities to be recognised on 1 April 2019, during which the Group’s lease profile is likely to change. Instead of recognising an operating expense for its operating lease payments, the Group will instead recognise interest on its lease liabilities and amortisation on its right-of-use assets.

Disclosure Initiative: Amendments to IAS 7: Statement of Cash Flows: The amendments to IAS 7 are intended to improve information provided to users of financial statement about changes in liabilities arising from an entity’s financing activities. These amendment have not yet been endorsed. 

Classification and Measurement of Share-based Payment Transactions (Amendments to IFRS 2): The amendments, provide clarification on the accounting for:

The effects of vesting and non-vesting conditions on the measurement of cash-settled share-based payments;

Share-based payment transactions with a net settlement feature for withholding tax obligations;

A modification to the terms and conditions of a share-based payment that changes the classification of the transaction from cash-settled to equity-settled.

These amendments have not yet been endorsed.

The Group did not apply early adoption to any of these changes and, due to the number of unknowns because of the length of time before potential compulsory adoption, has not yet ascertained their impact.

 

3. Significant accounting policies

Basis of consolidation

Where the company has control over an investee, it is classified as a subsidiary. The company controls an investee if all three of the following elements are present: power over the investee, exposure to variable returns from the investee, and the ability of the investor to use its power to affect those variable returns. Control is reassessed whenever facts and circumstances indicate that there may be a change in any of these elements of control.

De-facto control exists in situations where the company has the practical ability to direct the relevant activities of the investee without holding the majority of the voting rights. In determining whether de-facto control exists the company considers all relevant facts and circumstances, including:

The size of the company’s voting rights relative to both the size and dispersion of other parties who hold voting rights

Substantive potential voting rights held by the company and by other parties;

Other contractual arrangements;

Historic patterns in voting attendance.

The consolidated financial statements present the results of the company and its subsidiaries (“the Group”) as if they formed a single entity. Intercompany transactions and balances between group companies are therefore eliminated in full. The consolidated financial statements incorporate the results of business combinations using the acquisition method. In the statement of financial position, the acquiree’s identifiable assets, liabilities and contingent liabilities are initially recognised at their fair values at the acquisition date. The results of acquired operations are included in the consolidated statement of comprehensive income from the date on which control is obtained. They are deconsolidated from the date on which control ceases.

In the Company’s accounts, investments in subsidiary undertakings and associates are stated at cost less any provision for impairment. 

Business combinations

All business combinations are accounted for by applying the purchase method. The purchase method involves recognition, at fair value, of all identifiable assets and liabilities, including contingent liabilities, of the subsidiary at the acquisition date, regardless of whether or not they were recorded in the financial statements of the subsidiary prior to acquisition. The cost of business combinations is measured based on the fair value of the equity or debt instruments issued and cash or other consideration paid, plus any directly attributable costs. Any directly attributable costs relating to business combinations after this date are charged to the statement of comprehensive income in the period in which they are incurred.

Goodwill arising on a business combination represents the excess of cost over the fair value of the Group’s share of the identifiable net assets acquired and is stated at cost less any accumulated impairment losses.  Goodwill is tested annually for impairment. Any impairment is recognised immediately in the statement of comprehensive income and is not subsequently reversed. Negative goodwill arising on an acquisition is recognised immediately in the statement of comprehensive income. On disposal of a subsidiary the attributable amount of goodwill that has not been subject to impairment is included in the determination of the profit or loss on disposal.

 

Revenue

Revenue is recognised to the extent that it is probable that the economic benefits associated with the transaction will flow into the Group.

Revenue comprises: brokerage commission, investment management fees, corporate finance fees, commission and fees earned from the provision of independent financial advice, interest receivable in the course of ordinary investment management business and rental income and is stated net of VAT and foreign sales tax.

Brokerage commission is recognised when receivable in accordance with the date of the underlying transaction.

Investment management fees are recognised in the period in which the related service is provided.

Corporate finance fees comprise the value of services supplied by the Group. This includes non-cash consideration received in the form of shares, loan notes, warrants or other financial instruments recognised at the fair value on the date of receipt.

Advisory fees are recognised when the relevant transaction is completed and retainer fees are recognised over the length of time of the agreement.

Commission and fees earned from the provision of independent financial advice comprises commission and fees relating to new business written and trail commission earned on existing client business managed by the Group. New business commission and fees are recognised when the relevant transaction is completed and trail commission is recognised over the length of time of the customer policy.

Interest income is accrued on a time basis by reference to the principal outstanding and at the effective interest rate applicable.

Fees contingent upon the outcome of a project are recognised on an accruals basis, when it is reasonably certain that it will be received.

Rental income arises on the letting of property to third parties and is recognised on a straight line basis over the period of the lease.

Segment reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the Chief Executive Officer, who is responsible for allocating resources and assessing performance of the operating segments, and who has been identified as the Board of Directors, comprising both Executive and Non-Executive Directors.

Foreign currencies

Transactions in foreign currencies are translated at the exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated using the exchange rate ruling at the reporting period end date. Exchange differences arising are included in the statement of comprehensive income.

Employee benefits

The Group contributes to employees’ individual money purchase personal pension schemes. The assets of the schemes are held separately from those of the Group in independently administered funds. The amount charged to the statement of comprehensive income represents the contributions payable to the schemes in respect of the period to which they relate.

Short term employee benefits are those that fall due for payment within twelve months of the end of the period in which employees render the related service. The cost of short term benefits is not discounted and is recognised in the period in which the related service is rendered. Short term employee benefits include cash-based incentive schemes and annual bonuses.

Share-based payments

The share option programmes allows Group employees to receive remuneration in the form of equity-settled share-based payments granted by the Company.

The cost of equity-settled transactions with employees is measured by reference to the fair value at the date at which they are granted. The fair value of the options granted is measured using an option valuation model. The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over the period in which the performance or service conditions are fulfilled (the vesting period), ending on the date on which the relevant employees become fully entitled to the award (the vesting date). The cumulative expense recognised for equity settled transactions, at each reporting date until the vesting date, reflects the extent to which the vesting period has expired and the Group’s best estimate of the number of equity instruments that will ultimately vest. The statement of comprehensive income charge or credit for a period represents the movement in cumulative expense recognised at the beginning and end of that period.

Where the terms of an equity-settled award are modified, an incremental value is calculated as the difference between the fair value of the repriced option and the fair value of the original option at the date of re-pricing. This incremental value is then recognised as an expense over the remaining vesting period in addition to the amount recognised in respect of the original option grant.

Where an equity-settled award is cancelled or settled (that is, cancelled with some form of compensation) it is treated as if it had vested on the date of cancellation and any expense not yet recognised for the award is recognised immediately. However, if a new award is substituted for the cancelled award and is designated as a replacement award on the date that it is granted, the cancelled and new awards are treated as if they were a modification of the original award, as described in the previous paragraph. Any compensation paid up to the fair value of the award is accounted for as a deduction from equity. Where an award is cancelled by forfeiture, when the vesting conditions are not satisfied, any costs already recognised are reversed (subject to exceptions for market conditions).

In all instances, the charge/credit is taken to the statement of comprehensive income of the Group or Company by which the individual concerned is employed.

Employee Benefit Trust (EBT)

The cost of purchasing own shares held by the EBT are shown as a deduction against equity.  The proceeds from the sale of own shares held increase equity. Neither the purchase nor sale of own shares leads to a gain or loss being recognised in the consolidated statement of comprehensive income.

Employee Share Ownership Trust (ESOT)

The Company has established an ESOT. The assets and liabilities of this trust comprise shares in the Company and loan balances due to the Company. The Group includes the ESOT within these consolidated Financial Statements and therefore recognises a Treasury shares reserve in respect of the amounts loaned to the ESOT and used to purchase shares in the Company. Any cash received by the ESOT on disposal of the shares it holds, will be used to repay the loan to the Company.

Treasury shares

The costs of purchasing Treasury shares are shown as a deduction against equity. The proceeds from the sale of own shares held increase equity. Neither the purchase nor sale of own shares leads to a gain or loss being recognised in the consolidated statement of comprehensive income.

Income taxes

Income tax on the profit or loss for the periods presented, comprising current tax and deferred tax, is recognised in the statement of comprehensive income except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity.

Current tax is the expected tax payable on the taxable income for the year, using rates enacted or substantively enacted at the reporting period end date and any adjustment to tax payable in respect of previous years.

Deferred tax is provided for temporary differences, at the reporting period end date, between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. The following temporary differences are not provided for;

goodwill which is not deductible for tax purposes;

the initial recognition of assets or liabilities that affect neither accounting nor taxable profit; and

temporary differences relating to investments in subsidiaries to the extent that they will probably not reverse in the foreseeable future.

The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the reporting period end date (note 18).

A deferred tax asset is recognised for all deductible temporary differences and unused tax losses only to the extent that it is probable that future taxable profits will be available against which the assets can be utilised. Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefit will be realised.

Leases

Where assets are financed by leasing agreements that give rights approximating to ownership (finance leases), the assets are treated as if they had been purchased outright. The amount capitalised is the present value of the minimum lease payments payable over the term of the lease. The corresponding leasing commitments are shown as amounts payable to the lessor.  Depreciation on the relevant assets is charged to the statement of comprehensive income over the shorter of estimated useful economic life and the period of the lease.

Lease payments are analysed between principal and interest components so that the interest element of the payment is charged to the statement of comprehensive income over the period of the lease and is calculated so that it represents a constant proportion of the balance of the principal payments outstanding. The principal part reduces the amounts payable to the lessor.

Rentals paid under leases which do not result in the transfer to the Company of substantially all the risks and rewards of ownership (operating leases) are charged against income on a straight line basis over the lease term.

Freehold land and buildings

Freehold land and buildings are carried at the lower of cost  and periodic valuation by a professionally qualified surveyor. 

Freehold land is not depreciated.

Plant and equipment

Plant and equipment is stated at cost less accumulated depreciation and impairment.

Depreciation is calculated, using the straight line method, to write down the cost or revalued amount of plant and equipment over the assets’ expected useful lives, to their residual values, as follows:

Computers, fixtures and fittings                      – 4 to 7 years

Non-financial assets (excluding deferred tax assets)

Measurement

Intangible assets with finite useful lives that are acquired separately are measured, on initial recognition at cost. Following initial recognition, they are carried at cost less accumulated amortisation and any accumulated impairment. The cost of intangible assets acquired in a business combination is their fair value at the date of acquisition.

Intangible assets other than goodwill are amortised over the expected pattern of their consumption of future economic benefits, to write down the cost of the intangible assets to their residual values as follows: 

Client relationships                                            – 20 years

The amortisation period and method for an intangible asset are reviewed at least at each financial year end. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset or its residual value are accounted for by changing the amortisation period or method and treated as changes in accounting.

Impairment
The carrying amounts of the Group’s intangible assets are reviewed when there is an indicator of impairment and the asset’s recoverable amount is estimated.

The recoverable amount is the higher of the asset’s fair value less costs to sell (or net selling price) and its value-in-use. Value-in-use is the discounted present value of estimated future cash inflows expected to arise from the continuing use of the asset and from its disposal at the end of its useful life. Where the recoverable amount of an individual asset cannot be identified, it is calculated for the smallest cash-generating unit (CGU) to which the asset belongs. A CGU is the smallest identifiable group of assets that generates cash inflows independently.

When the carrying amount of an asset (or CGU) exceeds its recoverable amount, the asset (or CGU) is considered to be impaired and is written down to its recoverable amount. An impairment loss is immediately recognised as an expense. Any subsequent reversal of impairment credited to the statement of comprehensive income shall not cause the carrying amount of the intangible asset to exceed the carrying amount that would have been determined had no impairment been recognised.

Financial assets

Initial recognition

The classification of financial assets at initial recognition depends upon the purpose for which they are acquired and their characteristics. Financial assets are measured initially at their fair value. Financial assets not at fair value through profit or loss include any directly attributable incremental costs of acquisition or issue.

Financial assets classified as available-for-sale

Available-for-sale financial assets are financial assets designated as such on initial recognition or those that do not qualify to be classified in another category. They include equity investments, other than those in subsidiary undertakings and may be in quoted or unquoted entities.

After initial measurement, available-for-sale financial assets are subsequently measured at fair value. In the case of listed investments, the fair value represents the quoted bid price of the investment at the reporting period end date. The fair value of unlisted investments is estimated by reference to similar recent arm’s length transactions.

Unrealised gains and losses are recognised directly in equity in the available-for-sale reserve. When an available-for-sale financial asset is disposed of, the cumulative gain or loss previously recognised in equity is recognised in the statement of comprehensive income in profit on disposal of available-for-sale investments. Losses arising from impairment are recognised in the statement of comprehensive income. Any profit or loss on sale is credited or charged to the statement of comprehensive income.

Other investments

Other investments comprise financial assets designated as fair value through profit or loss and include warrants and quoted investments obtained as a result of a corporate finance transaction.  Warrants are valued by taking the mean of the results from three different methods; Black Scholes with short-term volatility, Black Scholes with longer-term volatility and an Empirical model. Quoted investments are valued at the quoted bid price at the reporting period end date.  Changes in the value of these other investments are recognised directly in the statement of comprehensive income.

Impairment of financial assets

The Group assesses, at each reporting period end date, whether there is objective evidence that a financial asset or a group of financial assets is impaired. In the case of financial assets classified as available-for-sale, a significant or prolonged decline in the fair value of the asset is considered in determining whether the assets are impaired. If any such evidence exists for available-for-sale financial assets, the cumulative loss, less any impairment loss previously recognised is removed from equity and recognised in the statement of comprehensive income.

If, in a subsequent period, the fair value of an asset classified as available-for-sale increases, the loss may not be reversed through the statement of comprehensive income. Any increase after an impairment loss has been recognised is treated as a revaluation and is recognised directly in equity.

Loan receivables

Loan receivables are initially recognised at fair value.  Subsequent to initial recognition, loan notes are measured at amortised cost using the effective interest rate method.

Trade receivables

Trade receivables are measured on initial recognition at fair value. Appropriate allowances for estimated irrecoverable amounts are recognised in the statement of comprehensive income when there is objective evidence that the asset is impaired.

Other investments

Other investments, which relate to short-term principal positions taken on behalf of clients, are recognised and derecognised on trade date. Other investments are measured at fair value which is determined directly by reference to published prices in an active market where available. Gains or losses arising from changes in fair value or disposal of other investments are recognised through the statement of comprehensive income.

Cash and cash equivalents

For the purpose of the cash flow statement, cash and cash equivalents comprise cash and bank balances and short-term highly liquid investments with an original maturity of three months or less.

Financial liabilities

Bank loans and loan notes are initially recognised as financial liabilities at the fair value of the consideration received.  Subsequent to initial recognition, bank loans and loan notes are measured at amortised cost using the effective interest rate method.

Trade payables

Trade payables principally comprise amounts outstanding for trade purchases and ongoing costs. The Directors consider that the carrying amount of trade payables approximates to their fair value.

Provisions

A provision is recognised when a present legal or constructive obligation has arisen as a result of a past event and it is probable that an outflow of economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.

Deferred consideration

Deferred consideration is recognised at the discounted present value of amounts payable.  Subsequent to initial recognition, it is rebased over the period in which the consideration is payable, with the unwinding of the discount being taken to the statement of comprehensive income.

4. Critical accounting judgements and key sources of estimation and uncertainty
The preparation of financial statements in accordance with IFRS requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses.  Actual results may differ from these estimates.

There are no significant accounting judgements relevant to the application of these policies.

Estimates and judgements are continually evaluated and are based on historical experience and other factors, including reasonable expectations of future events.  The estimates and judgements 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:

Investments

The fair values of investments that are not traded in an active market are determined by using valuation techniques.  The Group uses its judgement to select a variety of methods that are mainly based on market conditions existing at the reporting period end date.  In the case of warrants, the fair value is estimated using established valuation models. 

Share-based payments

The calculation of the fair value of equity-settled share-based awards and the resulting charge to the statement of comprehensive income require assumptions to be made regarding future events and market conditions.  These assumptions include the future volatility of the Company’s share price, future dividend yield and the rate at which awards will lapse or be forfeited.  These assumptions are then applied to a recognised valuation model in order to calculate the fair value of the awards.  The assumptions made are based on relevant historical data, where available, and take into account any knowledge of future market expectations.  The fair value attributed to the awards and hence the charge made to the statement of comprehensive income could be materially affected should different assumptions be made to those applied by the Group.  Details of these assumptions are set out in note 30.

Amortisation and impairment of non-financial assets

As noted above, the Group estimates the useful economic lives of intangible assets, in order to calculate the appropriate amortisation charge.  This is done by the Directors using their knowledge of the markets and business conditions that generated the asset, together with their judgement of how these will change in the foreseeable future. 

Where an indicator of impairment exists, value in use calculations are performed to determine the appropriate carrying value of the asset. The value in use calculation requires the Directors to estimate the future cash flows expected to arise for the CGU and a suitable discount rate in order to calculate present value. Where the actual future cash flows are less than expected, a material impairment loss may arise.

 

5. Segment information
The Group has two operating segments, Wealth Management and Corporate and Institutional Broking.

The Wealth Management division offers investment management advice and services to individuals and contains our Wealth Planning 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 (Nomad) 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 or the Isle of Man. Each reportable segment has a segment manager who is directly accountable to and maintains regular contact with the Chief Executive Officer. 

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

Most of the Group’s revenue originates within the UK with a non-material element originating overseas.

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

£’000	WM	CIB	Head Office	Other Group Companies*	Group
16 months ended 31 March 2018
Revenue	23,529	11,779	–	1,108	36,416
Direct costs	(19,650)	(8,554)	(370)	(675)	(29,249)
Contribution	3,879	3,225	(370)	433	7,167
Indirect costs	(8,079)	(3,189)	–	–	(11,268)
Segment result	(4,200)	36	(370)	433	(4,101)
Executive Board cost	328	328	(872)	216	–
Investment gains	–	16	–	343	359
Fair value gains on investments	–	31	–	–	31
Finance income	–	–	2	19	21
Finance expense	(17)	(6)	–	(1)	(24)
(Loss)/profit before tax	(3,889)	405	(1,240)	1,010	(3,714)
Tax	877	(16)	78	(170)	769
(Loss)/profit for the year	(3,012)	389	(1,162)	840	(2,945)

 

 

* Other Group Companies are referenced in note 15.

 

5. Segment information continued

£’000	WM	CIB	Head Office	Other Group Companies	Group
12 Months ended 30 November 2016
Revenue	17,091	7,581	–	749	25,421
Direct costs	(13,001)	(6,066)	(819)	(578)	(20,464)
Contribution	4,090	1,515	(819)	171	4,957
Indirect costs	(5,731)	(2,259)	–	–	(7,990)
Segment result	(1,641)	(744)	(819)	171	(3,033)
Executive Board cost	300	300	(725)	125	–
Investment gains/(losses)	29	(8)	–	–	21
Fair value losses on investments	–	(155)	–	–	(155)
Finance income	8	–	–	2	10
Finance expense	(21)	(8)	–	(18)	(47)
(Loss)/profit before tax	(1,325)	(615)	(1,544)	280	(3,204)
Tax	218	122	109	11	460
(Loss)/profit for the year	(1,107)	(493)	(1,435)	291	(2,744)

 

 

Segment assets and segment liabilities are reviewed by the Chief Executive Officer in a consolidated statement of financial position.  Accordingly this information is replicated in the Group Consolidated Statement of Financial Position on page 28.  As no measure of assets or liabilities for individual segments is reviewed regularly by the Chief Executive Officer, no disclosure of total assets or liabilities has been made.

The accounting policies of the operating segments are the same as those described in the summary of significant accounting policies.

 

 

6. Operating (loss)/profit

	16 Months ended        31 Mar 2018	12 Months ended        30 Nov 2016
Group	£’000	£’000
Operating (loss)/profit is stated after charging/(crediting):
Depreciation of property, plant and equipment	218	282
Amortisation of intangibles	263	193
Operating lease rentals – property	851	419
Employee benefit expense (note 7)	23,741	17,803
Restructuring and non-recurring legal and regulatory costs	2,506	1,780
Other administrative expenses	12,798	7,881
Auditors’ remuneration:
Audit of these financial statements	25	18
Amounts payable to the principal auditors and their associates in respect of:
– audit of financial statements of subsidiaries pursuant to legislation	70	47
– audit related assurance services	45	31
Total	40,517	28,454

 

Other administrative expenses are incurred in the ordinary course of the business and do not include any non-recurring items.

 

 

7. Employee benefit expense

	16 months ended        31 Mar 2018	12 months ended        30 Nov 2016
Group	£’000	£’000
Wages and salaries	13,961	11,317
Bonuses	4,161	2,422
Social security costs	2,520	1,579
Other pension costs	552	402
	21,194	15,720
Non salaried staff	2,492	1,878
	23,686	17,598
Share options granted to employees (note 30)	55	205
	23,741	17,803

 

 

The average number of persons (including Directors) employed during the year was:

 

	16 months ended         31 Mar 2018	12 months ended        30 Nov 2016
Executive and senior management	12	9
Corporate Broking	28	29
Wealth Management	76	78
Support staff	74	86
Salaried staff	190	202
Non salaried staff	11	15
Total	201	217

 

 

Non salaried staff are commission-only brokers and therefore do not receive a salary.

The total amount paid to Directors in the period, including social security costs was £1.0m (2016: £0.6m). Full details of Directors’ remuneration, including that of the highest paid Director, are disclosed in the Remuneration Report on page 21 of these financial statements.

8. Finance income and expense

	16 months ended 31 Mar  2018	12 months ended        30 Nov 2016
Group	£’000	£’000
Bank interest receivable	21	10
Other interest	–	–
Finance income	21	10
Interest payable on bank loans	–	18
Interest payable on finance leases	22	28
Other interest	2	1
Finance expense	24	47

 

 

 

9. Tax expense

	16 months ended 31 Mar 2018	12 months ended        30 Nov 2016
Group	£’000	£’000
Current tax expense:
United Kingdom corporation tax at 19.25% (2016: 20.00%)	–	–
Adjustment in respect of prior years	–	26
Total current tax	–	26
Deferred tax expense (note 18):
Current year	(27)	(553)
Effect of change in tax rate	3	94
Adjustments in respect of prior years	–	(27)
Total deferred tax	(24)	(486)
Total tax in the statement of comprehensive income	(24)	(460)
Equity items:
Deferred tax current year credit	(36)	57
Total tax in the statement of equity	(36)	57

 

 

The tax expense for the year and the amount calculated by applying the standard United Kingdom corporation tax rate of 19.25% (2016: 20.00%) to profit before tax can be reconciled as follows:

 

 

	16 months ended 31 Mar 2018	12 months ended        30 Nov 2016
Group	£’000	£’000
(Loss) before tax	(2,946)	(3,204)
Tax expense using the United Kingdom corporation tax rate of 19.25% (2016: 20.00%)	(567)	(641)
Other expenses not tax deductible	97	78
Income not chargeable to tax	(324)	(1)
Impact of share options	26	(17)
Group relief	–	–
Adjustments in respect of prior years	(73)	(1)
Difference in overseas tax rates	(20)	28
Effect of other tax rates/credits	92	94
Total tax credit in the statement of comprehensive income	(769)	(460)

 

 

10. Dividends

No dividend is proposed in respect of 2018 (2016: none).

11. Earnings per share (EPS)

Basic 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 (note 28).

Diluted EPS is the basic EPS, adjusted for the effect of the conversion into fully paid shares of the weighted average number of all employee share options outstanding during the year. In a year when the company presents positive earnings attributable to ordinary shareholders, antidilutive 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:

	16 months ended 31 Mar 2018	12 months ended 30 Nov 2016
Group	£’000	£’000
Weighted average number of shares in issue during the period	27,874	25,590
Effect of dilutive share options	1,356	1,042
	29,230	26,632
	£’000	£’000
Earnings attributable to ordinary shareholders	(2,945)	(2,744)
Basic EPS	(10.08)p	(10.72)p
Diluted EPS	(10.08)p	(10.72)p

 

Share options are anti dilutive as they reduce the stated loss per share.

 

12. Property, plant and equipment

£’000	Freehold Property	Computers, fixtures and fittings	Total
Group
Cost
At 30 November 2015	6,394	3,463	9,857
Additions	–	878	878
At 30 November 2016	6,394	4,341	10,735
Additions	–	589	589
Disposals	(6,394)	–	(6,394)
At 31 March 2018	–	4,930	4,930
Depreciation and impairment
At 30 November 2015	1,644	2,852	4,496
Charge for the year	–	282	282
At 30 November 2016	1,644	3,134	4,778
Charge for the year	–	522	522
Adjustment on disposal	(1,644)	–	(1,644)
At 31 March 2018	–	3,656	3,656
Net book values
At 31 March 2018	–	1,274	1,274
At 30 November 2016	4,750	1,207	5,957
At 30 November 2015	4,750	611	5,361

 

The freehold property was being actively marketed for sale and was subsequently sold on 23 January 2017 for £5.27m.  Accordingly, at 30 November 2016, it had been reclassified to current assets, as held for sale.  The proceeds of the sale were used to fully repay the loan secured on it. Bank borrowings secured on freehold property were £0.994m as at 30 November 2016 (note 23).

 

 

 

At 31 March 2018, the carrying value of the freehold property on a historical cost basis less accumulated depreciation amounted to £Nil (2016: £5,431,016).

At 31 March 2018, the carrying value of property, plant and equipment held under finance leases amounted to £563,040               (2016: £844,560). 

	Computers, fixtures and fittings
Company	£‘000
Cost
At 30 November 2015	33
Additions	–
At 30 November 2016	33
Additions	–
At 31 March 2018	33
Depreciation and impairment
At 30 November 2015	17
Charge for the year	6
At 30 November 2016	23
Charge for the period	8
At 31 March 2018	31
Net book values
At 31 March 2018	2
At 30 November 2016	10
At 30 November 2015	16

 

13. Goodwill

£’000	16 months ended 31 Mar 2018	12 months ended 30 Nov 2016
Group
Beginning of year	258	258
Impairment	–	–
End of year	258	258

 

 

Impairment tests for goodwill
Goodwill of the Group is allocated to the following CGU (Cash Generating Unit):

 

	Stockholm Investments Ltd
	£’000
At 30 November 2015	258
Impairment	–
At 30 November 2016	258
Impairment	–
At 31 March 2018	258

 

 

The Group tests at least annually for goodwill impairment. The recoverable amount of a CGU is determined based on value-in-use calculations as it is considered to be higher than its fair value less costs to sell. These calculations use pre-tax cash flows based on financial budgets prepared by management covering a three year period and then extrapolated for the remaining useful economic life based on relevant estimated growth rates of 3% for revenue (2016: 3%) and 0% for costs (2016:0%). This is then adjusted for the anticipated wind-down in the client books acquired at 5% per annum. This net cash flow is then discounted by an appropriate cost of capital of 5% (2016: 5%) in order to estimate their present value.

The key assumptions for the value-in-use calculations are those regarding the discount rate, growth rates and expected changes to revenues and costs in the period. Management has made these assumptions based on past experience and future expectations in the light of anticipated market conditions, combined with the actions taken during this and last year to streamline the Group’s operations whilst maximising revenue potential.

Where the value-in-use exceeds the carrying value of the goodwill asset, it has been concluded that no impairment is necessary. However, where this is not the case, goodwill is written down to the net present value of cash flows at the reporting period end date.

Sensitivity analysis shows that the client wind-down variable is now the key component of the outcome of the recoverable amount of Stockholm Investments Limited, the remaining CGU. This has been set at 5% per annum based on the historic movement in the client book. However, if this were to grow to a wind-down of 6% per annum, the recoverable amount after five years would be nil.

14. Intangible assets

	Client relationships
Group	£’000
Cost
At 30 November 2015	4,286
Additions	189
At 30 November 2016	4,475
Additions	106
At 31 March 2018	4,581
Amortisation
At 30 November 2015	700
Charge for the year	193
At 30 November 2016	893
Charge for the period	263
At 31 March 2018	1,156
Net book values
At 31 March 2018	3,425
At 30 November 2016	3,582
At 30 November 2015	3,586

 

The addition to client relationships relates to the purchase of client books within WH Ireland Limited and are valued at the estimated discounted amount payable (note 25).  There is no impairment charge in either reporting period.

15. Subsidiaries

	16 months ended 31 Mar 2018	12 months ended 30 Nov 2016
Company	£’000	£’000
Beginning of year/period	5,035	1,711
Additions	4,515	3,324
Impairment	–	–
End of year/period	9,550	5,035

 

Investments in subsidiaries are stated at cost less impairment.

The Group raised £1.6m on 6 December 2016 and £2.4m on 14 February 2018 by way of placings to existing shareholders, for general corporate purposes.  The additions in the year relate to additional subscriptions for shares in WH Ireland Limited, a wholly owned subsidiary, in December 2016, March and September 2017 and February 2018. 

The Company’s subsidiaries, all of which are included in the consolidated financial statements, are presented below:

Subsidiary	Country of incorporation	Principal activity	Class of shares	Proportion held by Group	Proportion held by Company
WH Ireland Limited	England & Wales	WM and CIB	Ordinary	100%	100%
WH Ireland (IOM) Limited	Isle of Man	WM	Ordinary	100%	100%
WH Ireland (Financial Services) Limited	England & Wales	Dormant	Ordinary	100%	–
Readycount Limited	England & Wales	Property	Ordinary	100%	100%
Stockholm Investments Limited	England & Wales	Investment  consultancy	Ordinary	100%	100%
ARE Business and Professional Limited	England & Wales	Dormant	Ordinary	100%	–
SRS Business and Professional Limited	England & Wales	Dormant	Ordinary	100%	–
WH Ireland Nominees Limited	England & Wales	Nominee	Ordinary	100%	–
WH Ireland Trustee Limited	England & Wales	Trustee	Ordinary	100%	–
Fitel Nominees Limited	England & Wales	Nominee	Ordinary	100%	–

 

 

The registered office address of WH Ireland (IOM) Limited is St George’s Tower, Hope Street, Douglas, Isle of Man, IM1 1HR.

The registered office of all other of the companies listed above is 24 Martin Lane, London, EC4R 0DR.

 

16. Investments

Group

£’000	Quoted	Unquoted	Total
Available-for-sale investments
At 30 November 2015	–	40	40
Fair value loss	–	–	–
At 30 November 2016	–	40	40
Fair value (loss)/gain	–	8	8
At 31 March 2018	–	48	48

 

 

£’000	Quoted	Warrants	Total
Other investments
At 30 November 2015	140	180	320
Additions	404	122	526
Fair value loss	(33)	(154)	(187)
Disposals	(507)	(74)	(581)
At 30 November 2016	4	74	78
Additions	–	171	171
Fair value loss	(2)	(14)	(16)
Disposals	(1)	(35)	(36)
At 31 March 2018	1	196	197
Total investments at 31 March 2018	1	244	245
Total investments at 30 November 2016	4	114	118

 

 

Available-for-sale investments include equity investments other than those in subsidiary undertakings. Available-for-sale investments are measured at fair value with fair value gains and losses recognised in the statement of comprehensive income.

Other investments, in the main, comprise financial assets designated as fair value through profit or loss and include warrants and equity investments.  Financial assets designated as ‘fair value through profit or loss’ are measured at fair value with fair value gains and losses recognised directly in the statement of comprehensive income.

Warrants may be received during the ordinary course of business and are designated as fair value through profit or loss.  There is no cash consideration associated with the acquisition.

Fair value, in the case of quoted investments, represents the bid price at the reporting period end 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.

 

 

17. Subordinated Loan

	16 months ended 31 Mar 2018	Year ended 30 Nov 2016
Company	£’000	£’000
Beginning of year	960	850
Additions	25	110
End of year	985	960

 

 

This interest free, subordinated loan was originally issued to WH Ireland (IOM) Limited on 31 March 2014 and has been increased in line with the needs of the subsidiary.  Whilst payment can be requested giving six months’ notice, there is no intention to do this within the next twelve months; accordingly the loan has been classified as non-current.

18. Deferred tax assets and liabilities

Deferred tax is provided for temporary differences, at the reporting period end date, between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes using a tax rate of 19.25% (2016: 20.00%). A deferred tax asset is recognised for all deductible temporary differences and unutilised tax losses only to the extent that it is probable that future taxable profits will be available against which the assets can be utilised. Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefit will be realised.

Deferred tax assets and liabilities are attributable to the following:

 

	Deferred tax assets		Deferred tax liabilities
	2018	2016	2018	2016
Group	£’000	£’000	£’000	£’000
Property, plant and equipment	110	75	–	(92)
Intangible assets	147	165	–	–
Share Options	81	140	–	–
Losses	824	411	–	–
Available-for-sale investments	–	–	–	–
Provisions	35	16	–	–
	1,197	807	–	(92)

 

 

	Deferred tax assets		Deferred tax liabilities
	2018	2016	2018	2016
Company	£’000	£’000	£’000	£’000
Share options	81	141	–	–
	81	141	–	–

 

 

 

 

 

 

 

18. Deferred tax assets and liabilities continued

Movements in deferred tax are shown below:

 

£’000	At 30 Nov 2015	Recognised income statement	Recognised in equity	At 30 Nov 2016	Recognised income statement	Recognised in equity	At 31 Mar 2018
Group
Property, plant and equipment	(57)	40	–	(17)	127	–	110
Intangible assets	191	(26)	–	165	(18)	–	147
Share options	73	11	57	141	(24)	(36)	81
Available-for-sale investments	(3)	3	–	–	–	–	–
Provisions	(31)	47	–	16	19	–	35
Tax losses	–	411	–	411	413	–	824
	173	486	57	716	517	(36)	1,197

 

 

 

£’000	At 30 Nov 2015	Recognised income statement	Recognised in equity	At 30 Nov 2016	Recognised income statement	Recognised in equity	At 31 Mar 2018
Company
Share options	73	11	57	141	(24)	(36)	81
Property, plant and equipment	–	–	–	–	–	–	–
	73	11	57	141	(24)	(36)	81

 

 

19. Trade and other receivables

	Group		Company
	31 Mar 2018	30 Nov 2016	31 Mar 2018	30 Nov 2016
	£’000	£’000	£’000	£’000
Trade receivables	12,991	15,690	–	–
Amounts due from Group companies	–	–	2,298	4,710
Other receivables	3,077	418	53	10
Prepayments and accrued income	1,271	2,877	7	–
	17,339	18,985	2,358	4,720

 

 

Trade receivables that relate to market transactions are considered to be past due once the date for settlement has passed. Fees and charges owed by clients are generally considered to be past due where they remain unpaid five working days after the relevant billing date. At 31 March 2018, trade receivables (net of provisions for impairment and doubtful debts) comprised the following:

	Group		Company
	31 Mar 2018	30 Nov 2016	31 Mar 2018	30 Nov 2016
	£’000	£’000	£’000	£’000
Not past due	11,672	14,527	–	–
Up to 5 days past due	–	51	–	–
From 6 to 15 days past due	–	1	–	–
From 16 to 30 days past due	259	331	–	–
From 31 to 45 days past due	53	258	–	–
More than 45 days past due	1,007	522	–	–
	12,991	15,690		–

 

 

Trade receivables that are not past due, or are past due but not impaired, principally relate to market transactions.  The date of settlement of market transactions is set at the time that the relevant sale or purchase order is placed with the market. It is expected that in the normal course of business, certain transactions may not have completed by the settlement date. For example, a shortage of stock in the market may result in an extended settlement period, in which case the order remains outstanding until the required quantity of stock has become available. Such balances that remain outstanding after the settlement date are classified as past due, as appropriate, in the table above, but the extended settlement period does not have an adverse effect on the credit quality of the balances, particularly as the related cash or stock to which the balances relate are retained by the Group and/or the Company until settlement occurs.

The Group has recognised an allowance for doubtful debts of 100% against all receivables over 365 days because historical experience has been that receivables beyond 365 days are not recoverable. Allowances against doubtful debts are recognised against trade receivables between 30 days and 365 days based on estimated irrecoverable amounts determined by reference to past default experience of the counterparty and an analysis of the counterparty’s current financial position. At 31 March 2018, £436k (30 November 2016: £309k) of the Group’s trade receivable balances were impaired and provided for.

The maximum exposure to credit risk, before any collateral held as security, is the carrying value of each class of receivable set out above. Collateral held against trade receivables comprises cash or marketable securities to which the Group has an unconditional right to realise for the purposes of clients’ obligations. All such marketable securities must be held in the Group’s nominee, Fitel Nominees Limited, and must be marked to market daily. The fair value of collateral held at the reporting period end date was £34.5m (30 November 2016: £90.8m).

The Group did not need to exercise its right to realise any collateral during the year under review.

The Directors consider that the carrying amounts of trade and other receivables approximate their fair value.

19. Trade and other receivables continued

Movements in impairment provisions were as follows:

£’000	Group		Company
	31 Mar 2018	30 Nov 2016	31 Mar 2018	30 Nov 2016
At 30 November 2016	309	180	–	–
Amount released from provision due to recovery	(72)	(312)	–	–
Amounts written off, previously fully provided	–	(94)	–	–
Amount charged to the statement of comprehensive income	199	535	–	–
At 31 March 2018	436	309	–	–

 

 

The carrying value of trade and other receivable balances are denominated in the following currencies:

	Group		Company
	31 Mar 2018	30 Nov 2016	31 Mar 2018	30 Nov 2016
	£’000	£’000	£’000	£’000
Sterling	17,339	18,515	2,358	4,720
Euro	–	110	–	–
US Dollar	–	130	–	–
Other	–	230	–	–
	17,339	18,985	2.358	4,720

 

20. Other investments

£’000	Group		Company
	31 Mar 2018	30 Nov 2016	31 Mar 2018	30 Nov 2016
Current asset investment	692	530	–	–

 

These represent short-term principal positions and are held at market value. No tax was payable at that value.

21. Cash and cash equivalents

£’000	Group		Company
	31 Mar 2018	30 Nov 2016	31 Mar 2018	30 Nov 2016
Cash and cash equivalents	7,277	6,657	–	–

 

 

For the purposes of the cash flow statement, 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.

Money held on behalf of clients is not included in the statement of financial position. Client money at 31 March 2018 for the Group was £Nil (2016: £131k). There is no client money held in the Company (2016: £nil).

22. Trade and other payables

	Group		Company
	31 Mar 2018	30 Nov 2016	31 Mar 2018	30 Nov 2016
	£’000	£’000	£’000	£’000
Trade payables	11,615	14,844	155	–
Amounts due to Group companies	–	–	–	1,879
Other payables	339	1,483	–	25
Tax and social security	771	554	–	–
Accruals and deferred income	3,019	2,967	39	32
	15,744	19,848	194	1,936

 

The Directors consider that the carrying amounts of trade and other payables approximate their fair value.

23. Borrowings

	Group		Company
	31 Mar 2018	30 Nov 2016	31 Mar 2018	30 Nov 2016
	£’000	£’000	£’000	£’000
Bank loans	–	994	–	994

 

The Company had a £3m property loan with the Bank of Scotland, repayable over twenty years at 1.25% above base rate. The loan was drawn down on 4 February 2002. The Bank had a floating charge over the assets of the other trading subsidiaries of the Group.

The loan was repaid in full on 24 January 2017, following the sale of the property on which it was secured.

Bank loans are repayable as follows:

 

	Group		Company
	31 Mar 2018	30 Nov 2016	31 Mar 2018	30 Nov 2016
	£’000	£’000	£’000	£’000
Within one year	–	187	–	187
Within two to five years	–	728	–	728
After five years	–	79	–	79
	–	994	–	994

 

 

24. Provisions

 

£’000	IFA clawback provision	Complaints provision	Total
Group
At 1 December 2016	21	28	49
Provided during the year	14	5	19
Utilised during the year	–	–	–
At 31 Mar 2018	35	33	68

 

 

 

	31 Mar 2018	30 Nov 2016
	£’000	£’000
Provisions included in current liabilities	33	28
Provisions included in non-current liabilities	35	21
	68	49

 

 

The IFA clawback provision relates to any policy cancellations and the resultant potential repayment of past independent financial advisory commission earned, relating mainly to products such as pensions and insurance.

The complaints provision relates to any complaints which may result in cash outflows falling below the relevant insurance excess. The expected period of settlement of the outstanding complaints provision is six months from the year end.

25. Deferred consideration
Deferred consideration represents the amounts payable over a three year period from September 2016 to October 2019, for certain client relationships (note 14).

£’000	Client relationships
Group
At 30 November 2016	3,231
Additions during the year:
Intangible assets (note 14)	106
Charged to Statement of Comprehensive Income	181
Paid during the year	(1,216)
At 31 March 2018	2,302

 

 

	31 Mar 2018	30 Nov 2016
	£’000	£’000
Included in current liabilities	1,179	1,130
Included in non-current liabilities	1,123	2,101
	2,302	3,231

 

26. Financial risk management

The fair value of all of the Group’s and the Company’s financial assets and liabilities approximated its carrying value at the reporting period end date.  The carrying amount of non-current financial instruments, including floating interest rate borrowing, is not significantly different from the fair value of these instruments based on discounted cash flows.

The significant methods and assumptions used in estimating fair values of financial instruments are summarised below:

Available-for-sale financial assets

Available-for-sale financial assets include equity investments, other than those in subsidiary undertakings. In the case of listed investments, the fair value represents the quoted bid price at the reporting period end date. The fair value of unlisted investments is estimated by reference to recent arm’s length transactions.

Other investments

Other investments include warrants and equity investments, categorised as fair value through profit or loss.  In the case of listed investments, the fair value represents the quoted bid price at the reporting period end date. The fair value of unlisted investments is estimated by reference to recent arm’s length transactions. In the case of warrants, the fair value is estimated using established valuation models.

Trade receivables and payables

The carrying value less impairment provision of trade receivables and payables is assumed to approximate their fair values due to their short-term nature.

Borrowings

Borrowings are measured at amortised cost using the effective interest rate method.

The tables below summarise the Group’s main financial instruments by financial asset type:

		31 March 2018
£’000	Loans and other receivables	Amortised cost	Held at fair value as available-for-sale assets	Fair value through profit or loss	Total
Group
Financial assets
Available-for-sale investments	–	–	48	–	48
Other investments	–	–	692	198	890
Trade and other receivables	17,339	–	–	–	17,339
Cash and cash equivalents	–	7,277	–	–	7,277
Financial liabilities
Trade and other payables	–	11,994	–	–	11,994
Finance leases	–	282	–	–	282
Deferred consideration	–	2,302	–	–	2,302

 

 

 

£’000	30 November 2016
	Amortised cost	Held at fair value as available-for-sale assets	Fair value through profit or loss	Total
Group
Financial assets
Available-for-sale investments	–	40	–	40
Other investments	–	530	78	608
Trade receivables	17,812	–	–	17,812
Cash and cash equivalents	6,657	–	–	6,657
Financial assets
Trade and other payables	16,327	–	–	16,327
Finance leases	634	–	–	634
Borrowings	994	–	–	994
Deferred consideration	3,231	–	–	3,231

 

The tables below summarise the Company’s main financial instruments by financial asset type:

 

	31 March 2018
£’000	Amortised cost	Held at fair value as available-for-sale assets	Fair value through profit or loss	Total
Company
Financial assets
Subordinated Loan	985	–	–	985
Group balances	2,298	–	–	2,298
Financial liabilities
Trade and other payables	155	–	–	155
Borrowings	–	–	–	–

 

 

 

	30 November 2016
£’000	Amortised cost	Held at fair value as available-for-sale assets	Fair value through profit or loss	Total
Company
Financial assets
Subordinated Loan	960	–	–	960
Group balances	4,710	–	–	4,710
Financial liabilities
Trade and other payables	1,904	–	–	1,904
Borrowings	994	–	–	994

 

 

Risks

The main risks arising from the Group’s financial instruments are credit risk, liquidity risk and market risk.  Market risk comprises currency risk, interest rate risk and other price risk. The Directors review and agree policies for managing each of these risks which are summarised below:

Credit risk
Credit risk is the risk that clients or other counterparties to a financial instrument will cause a financial loss by failing to meet their obligations. Credit risk relates, in the main, to the Group’s trading and investment activities and is the risk that third parties fail to pay amounts as they fall due. Formal credit procedures include approval of client limits, approval of material trades, collateral in place for trading clients and chasing of overdue accounts. Additionally, risk assessments are performed on banks and custodians.

The maximum exposure to credit risk at the end of the reporting period is equal to the statement of financial position figure.  Impairment policy and information on collateral held against trade receivables can be found in note 19.  There were no other past due, impaired or unsecured debtors.

Financial assets that are neither past due nor impaired in respect of trade receivables relate mainly to bonds, equity and gilt trades quoted on a recognised exchange, are matched in the market, and are either traded on a cash against documents basis or against a client’s portfolio.

The credit risk on liquid funds, cash and cash equivalents is limited due to deposits being held at the Group’s main bank with a credit rating of “A”, assigned by Standard and Poor’s.

There has been no change to the Group’s exposure to credit risk or the manner in which it manages and measures the risk during the period.

Liquidity risk
Liquidity risk is the risk that obligations associated with financial liabilities will not be met. The Group monitors its risk to a shortage of funds by considering the maturity of both its financial investments and financial assets (for example, trade receivables) and projected cash flows from operations. 

The Group’s objective is to maintain the continuity of funding through the use of bank facilities where necessary, which are reviewed annually with the Group’s Banker, the Bank of Scotland. Items considered are limits in place with counterparties which the bank are required to guarantee, payment facility limits, as well as the need for any additional borrowings.

The Directors most recently renewed the Group’s main banking facilities in February 2015. As an evergreen facility there is no requirement to update the agreement annually, although a formal review of facilities is undertaken at least annually.

 

 

The table below summarises the maturity profile of the Group’s financial liabilities based on contractual undiscounted payments:

 

	At 31 March 2018
£’000	Payable within 1 year	Payable in 2 to 5 years	Payable after more than 5 years	Total contractual payments
Group
Trade and other payables	11,954	–	–	11,954
Finance leases	299	–	–	299
Borrowings	–	–	–	–
Accruals	3,019	439	–	3,458
Deferred consideration	1,216	1,216	–	2,432
Other financial liabilities	27	21		48
	16,515	1,676		18,191

 

 

	At 30 November 2016
	Payable within 1 year	Payable in 2 to 5 years	Payable after more than 5 years	Total contractual payments
Group	£‘000	£‘000	£‘000	£‘000
Trade and other payables	16,327	–	–	16,327
Finance leases	299	373	–	672
Borrowings	202	790	85	1,077
Accruals	2,657	282	–	2,939
Deferred consideration	1,181	2,361	–	3,542
Other financial liabilities	28	21	–	49
	20,694	3,827	85	24,606

 

The table below summarises the maturity profile of the Company’s financial liabilities based on contractual undiscounted payments:

 

	At 31 March 2018
£’000	Payable within 1 year	Payable in 2 to 5 years	Payable after more than 5 years	Total contractual payments
Company
Trade and other payables	155	–	–	155
Accruals	39	–	–	39
Borrowings	–	–	–	–
	194	–	–	194

 

 

	At 30 November 2016
£’000	Payable within 1 year	Payable in 2 to 5 years	Payable after more than 5 years	Total contractual payments
Company
Trade and other payables	1,936	–	–	1,936
Accruals	32	–	–	32
Borrowings	202	790	85	1,077
	2,170	790	85	3,045

 

 

Market Risk
Currency risk
Currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates.  The Group’s maximum exposure to currency risks is not significant and therefore sensitivity analysis has not been performed.

Interest rate risk
The Group’s exposure to the risk of changes in market interest rates relates to the Group’s amount of interest receivable on cash deposits. The maximum exposure for interest is not significant.

Other price risk
Other price risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices (other than those arising from interest rate risk or currency risk) whether those changes are caused by factors specific to the individual financial instrument or its issuer or factors affecting all similar financial instruments traded in the market. The Group manages other price risk by monitoring the value of its financial instruments on a monthly basis and reporting these to the Directors and Senior Management. The Group has disposed of a number of its investments during the course of the year, which has helped mitigate risk. However, the risk of deterioration in prices remains high whilst the market continues to be volatile. The risk of future losses is limited to the fair value of investments as at the year end of £245k (2016: £118k).

Fair value measurement recognised in the statement of financial position
The following table provides an analysis of financial instruments that are measured subsequent to initial recognition at fair value, grouped into Levels 1 to 3 based on the degree to which the fair value is observable:

Level 1 at fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets and liabilities;

Level 2 fair value measurements are those derived from inputs other than the quoted price included within Level 1 that are observable for the asset or a liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and

Level 3 fair value measurements are those derived from formal valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs).

	At 31 March 2018
£’000	Level 1	Level 2	Level 3	Total
Financial investments available for sale
Unquoted equities	–	–	48	48
Financial instruments designated at fair value through profit and loss
Quoted equities	1	–	–	1
Other investments	–	–	196	196
Total	1	–	244	245

 

 

	At 30 November 2016
	Level 1	Level 2	Level 3	Total
	£‘000	£‘000	£‘000	£‘000
Financial investments available for sale
Unquoted equities	–	–	40	40
Financial instruments designated at fair value through profit and loss
Quoted equities	4	–	–	4
Other investments	–	–	74	74
Total	4	–	114	118

 

There were no transfers between levels in either financial year.

 

£’000	Unquoted equities	Other investments
Balance at 30 November 2015	40	180
Total gains or losses in statement of comprehensive income	–	(154)
Purchases	–	122
Settlements	–	(74)
Transfer out	–	–
Transfer in	–	–
Balance at 30 November 2016	40	74
Total gains or losses in statement of comprehensive income	8	(14)
Purchases	–	172
Settlements	–	–
Transfer out	–	(34)
Transfer in	–	–
Balance at 31 March 2018	48	198

 

 

27. Capital management

The capital of the Group comprises share capital, share premium, retained earnings and other reserves. The total capital at 31 March 2018 amounted to £12.9m for the Group (2016: £11.8m) and £13.5m for the Company (2016: £8.7m). The primary objective of the Group’s capital management is to ensure that it maintains a strong capital structure in order to support the development of its business, to maximise shareholder value and to provide benefits for its other stakeholders.

These objectives are met by managing the level of debt and setting dividends paid to shareholders at a level appropriate to the performance of the business.

Certain activities of the Group are regulated by the FCA which is the statutory regulator for financial services business and has responsibility for policy, monitoring and discipline for the financial services industry. The FCA requires the Group’s resources to be adequate, that is, sufficient in terms of quantity, quality and availability, in relation to its regulated activities.

The Group monitors capital on a daily basis by measuring movements in the Group regulatory capital requirement and through its Internal Capital Adequacy Assessment Process (ICAAP). Compliance with FCA regulatory requirements was maintained during the year and the Group is satisfied that there is and will be, sufficient capital to meet these regulatory requirements for the foreseeable future.

28. Treasury shares

	Period ended 31 Mar 2018	Year ended 30 Nov 2016
Group	£’000	£’000
At 30 November	731	731
Additions	15	–
At 31 March	746	731

 

At 31 March 2018 no shares in the Company were held in Treasury (2016: nil shares). At 31 March 2018 no shares in the Company were held in the EBT (2016: nil shares) and the ESOT held 2,289,500 shares (2016: 1,989,500), reflecting the issue of 300,000 shares at a nominal value of 5p per share. This represents 6.66% of the called up share capital (2016: 8%). 

29. Employee Benefit Trusts (EBT)

The WH Ireland EBT was established in October 1998 and the WH Ireland Group plc Employee Share Ownership Trust (ESOT) was established in October 2011, both for the purpose of holding and distributing shares in the Company for the benefit of the employees. All costs of the EBT and ESOT are borne by the Company or its subsidiary WH Ireland Limited. 

Joint Ownership Arrangements (the ‘JOE Agreements’) are in place in relation to 1,989,500 shares between the trustees of the ESOT and a number of employees including RW Killingbeck and DJ Cowland (the ‘Employees’).   Under the JOE Agreements, the option for the Employees to acquire the interest that the trustees of the ESOT has in the jointly owned shares, lapses when an employee is deemed to be a Bad Leaver. If an Employee ceases to be an employee of the Group, other than in the event of critical illness or death, the Employee is deemed to be a Bad Leaver.

The shares carry dividend and voting rights, although these have been waived by all parties to the JOE Agreements. Due to the consolidation of the ESOT into the Group accounts, these shares are shown in Treasury (note 28). Due to the nature of these arrangements, the options contained in the JOE Agreements are accounted for as share based payments (note 30).

30. Share-based payments

The Group had three schemes for the granting of non-transferable options to employees during the reporting period; the approved Company Share Ownership Plan (CSOP) and two Save as You Earn Schemes (SAYE 2 and SAYE 3). In addition, options are held in the ESOT (note 29). Details of these schemes can be found in the Remuneration Report on pages 20 to 23.  SAYE 2 matured during the period.

Movements in the number of share options outstanding that were issued post 7 November 2002 and their related weighted average exercise prices (WAEP) are as follows:

	31 March 2018
	CSOP		ESOT		SAYE 2		SAYE 3		ESOT
	Options	WAEP	Options	WAEP	Options	WAEP	Options	WAEP	Options	WAEP
Outstanding at beginning of year	235,522	66.23p	1,650,000	78.14p	–	–	827,490	82.00p	329,500	92.50p
Granted	–	–	–	–	–	–	–	–	300,000	92.50p
Expired/forfeited	–	–	–	–	–	–	(32,926)	82.00p	–	–
Exercised	(71,933)	105.00p	–	–	–	–	–	–	–	–
Outstanding at end of year	163,589	66.23p	1,650,000	78.14p	–	–	794,564	82.00p	629,500	92.50p
Exercisable at end of year	163,589	66.23p	1,500,000	78.14p	–	–	–	–	–	–

 

 

	30 November 2016
	CSOP		ESOT		SAYE 2		SAYE 3		ESOT
	Options	WAEP	Options	WAEP	Options	WAEP	Options	WAEP	Options	WAEP
Outstanding at beginning of year	380,816	65.62p	1,650,000	78.14p*	371,831	49.20p	–	–	–	–
Granted	–	–	–	–	–	–	881,268	82.00p	339,500	92.50p
Expired/forfeited	(20,294)	84.50p	–	–	(29,998)	49.20p	(53,778)	82.00p	(10,000)	92.50p
Exercised	(125,000)	61.40p	–	–	(341,833)	49.20p	–	–	–	–
Outstanding at end of year	235,522	66.23p	1,650,000	78.14p	–	–	827,490	82.00p	329,500	92.50p
Exercisable at end of year	235,522	66.23p	1,500,000	78.14p	–	–	–	–	–	–

he weighted average exercise price for the 1,500,000 share options may vary if certain performance conditions are met.

The pricing models used to value these options and their inputs are as follows:

	31 March 2018
	CSOP	ESOT	SAYE 2	SAYE 3	ESOT
Pricing model	Black Scholes	Monte Carlo	Black Scholes	Black Scholes	N/A
Date of grant	02/11/11-24/05/12	28/10/13-13/04/16	0/05/13	18/05/16	30/05/17
Share price at grant(p)	56.5-83.0	74.5-114.5	60.0	92.0	125.0
Exercise price (p)	57.0-84.5	0.0-114.5	49.2	82.00	0.0
Expected volatility (%)	32.6332-33.2130	43.0000-37.0000	41.6919	28.0000	N/A
Expected life (years)	5	5	3	3	3
Risk-free rate (%)	1.2993-0.7999	0.8000-1.9300	0.3106	0.5400	N/A
Expected dividend yield (%)	0.00	0.67-2.19	0.83	2.00	N/A

 

 

	30 November 2016
	CSOP	ESOT	SAYE 2	SAYE 3
Pricing model	Black Scholes	Monte Carlo	Black Scholes	Black Scholes
Date of grant	02/11/11-24/05/12	28/10/13-13/04/16	01/05/13	18/05/16
Share price at grant(p)	56.5-83.0	74.5-114.5	60.0	92.0
Exercise price (p)	57.0-84.5	0.0-114.5	49.2	82.0
Expected volatility (%)	32.6332-33.2130	40.0000-37.0000	41.6919	28.0000
Expected life (years)	5	5	3	3
Risk-free rate (%)	1.2993-0.7999	0.8000-1.9300	0.3106	0.5400
Expected dividend yield (%)	0.00	0.67-2.19	0.83	0.00

 

 

The weighted average share price, at the date of exercise, of the options exercised during the period to 31 March 2018 was 125p. 

The volatility of the Company’s share price was estimated as the standard deviations of daily historical continuously compounded returns over a period commensurate with the expected life of the option, back from the date of grant and annualised by the factor of the square root of 252, assuming 252 trading days per year (2016: 252 trading days).  For options granted in 2004, volatilities were calculated back to the date of the Group’s flotation in July 2000.

Awards granted on 30 May 2017 are economically equivalent to shares with dividend rights. Therefore the fair value has been taken as the closing share price on the date of grant £1.25

The risk-free rate is the yield to maturity on the date of grant of a UK Gilt Strip, with term to maturity equal to the life of the option.

The Group recognised a total net debit of £55k during the year (2016: £205k), relating to share-based payment transactions.

31. Leasing commitments

Finance leases

The net carrying value of these assets at 31 March 2018 was £563,040 (2016: £844,560).

Group	Minimum Lease payments
	Capital	Interest	2018	2016
The present value of future lease                    payments are analysed as:	£‘000	£‘000	£’000	£’000
Within one year	282	17	299	299
Greater than one year but less than five years	–	–	–	373
Total minimum lease payments	282	17	299	672
Less finance charge			(17)	(38)
Present value of minimum lease payments			282	634

 

 

£’000	31 Mar 2018	30 Nov 2016
Group
Disclosed as:
Current finance lease payable	282	282
Non-current finance lease payable	–	352
Total finance lease payable	282	634

 

 

Operating lease commitments

The future aggregate minimum lease payments under non-cancellable operating leases are as follows:

	Group		Company
£’000	31 Mar 2018	30 Nov 2016	31 Mar 2018	30 Nov 2016
Not later than one year	611	420	–	–
Later than one year and not later than five years	2,253	1,418	–	–
Later than five years	993	714	–	–
	3,857	2,552	–	–

 

Operating lease payments represent rentals payable for office premises and equipment. Leases are negotiated for an average of six years. The leases do not contain provisions for contingent rental payments, purchase options or escalation charges and do not impose restrictions beyond the property or equipment to which they relate.

32. Capital commitments

There were no capital commitments for the Group or the Company as at 31 March 2018 (2016: £nil)

33. Related party transactions

Group
Services rendered to related parties were on the Group’s normal trading terms in an arms’ length transaction.  Amounts outstanding are unsecured and will be settled in accordance with normal credit terms. No guarantees have been given or received. No provision (2016: £nil) has been made for impaired receivables in respect of the amounts owed by related parties.

Key management personnel include Executive and Non-Executive Directors of WH Ireland Group plc and all its subsidiaries. They are able to undertake transactions in stocks and shares in the ordinary course of the Group’s business, for their own account and are charged for this service, as with any other client. The transactions are not material to the Group in the context of its operations, but may result in cash balances on the Directors’ client accounts owing to or from the Group at any one point in time. The charges made to these individuals and the cash balances owing from/due to them are disclosed in the table below. There are no other material contracts between the Group and the Directors.

The following table sets out the transactions which have been entered into during the year together with any amounts outstanding:

£’000		Services rendered to related parties	Purchases/services from   related parties	Amounts owed to related parties
Key management personnel	2018	7	–	–
	2016	5	–	35
Other related parties	2018	–	27	5
	2016	–	–	–

 

The total compensation of key management personnel is shown below:

£’000	16 months ended 31 Mar 2018	Year ended 30 Nov 2016
Short-term employee benefits	1,946	1,557
Post-employment benefits	82	65
Termination benefits	41	70
Share-based payment	19	102
	2,088	1,794

 

Company
The Parent Company receives interest from subsidiaries in the normal course of business. Total interest received during the year was £2k (2016: £18k). In addition, the Parent Company received a management charge of £575k (2016: £406k) from its subsidiary WH Ireland Limited.  WH Ireland Limited also charged the Parent Company £25k (2016: £20k) for broker services.

Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation. The captions in the primary statements of the Parent Company include amounts attributable to subsidiaries. These amounts have been disclosed in aggregate in the notes 19 and 22 and in detail in the following table:

 

	Amounts owed by related parties		Amounts owed to related parties
£’000	2018	2016	2018	2016
Readycount Limited	4,157	4,234	–	–
WH Ireland (IOM) Limited	106	67	–	–
Stockholm Investments Limited	410	409	–	–
WH Ireland Limited	–	–	2,473	1,862
WH Ireland Trustee Limited	–	–	17	17
	4,673	4,710	2,490	1,879