Interim Results – Replacement

 

RNS Announcement: The information communicated in this announcement contains inside information for the purposes of Article 7 of Regulation 596/2014.

 

 

WH Ireland Group plc

 

(“WH Ireland” or the “Company”)

Interim Results for the 12 Months ended 30 November 2017

·      Group revenue increased by 12.3% to £28.6m;

·      Operating profit before exceptional items: £0.4m;

·      Corporate & Institutional Broking revenue increased by 32% to £10m;

·      Private Wealth Management discretionary assets increased by 10.7% to £1,125m; and

·      Total Group recurring revenue increased to £13.2m (46% of total revenue).

Chairman’s statement
The past 12 months were challenging but ultimately beneficial to the creation of the modern, advice driven financial services company that we are confident will further enhance our offering to our clients. At the beginning of the year we announced the successful sale of our freehold premises in Manchester, we have moved our retail operational platform to SEI and consolidated our institutional platform on Pershing. These actions, whilst not without their initial issues, have created a more robust control environment for the Company to proceed confidently to growing both business divisions.

Regulatory change and its impact is disproportionately felt by smaller companies such as ourselves. We can report that thorough MiFID ii preparation was undertaken during 2017, involving all disciplines across the Company, resulting in both businesses being very well prepared for the 3 January 2018 MiFID ii implementation. The Corporate and Institutional Broking division has received many plaudits from our clients for their clear and concise interpretation of the research distribution rules, which has led to a growing and encouraging number of corporate client enquiries. It is too early to evaluate the impact of MiFID ii upon the division but we are alert to the potential opportunities that may present themselves as a result of this change.

The Private Wealth Management division has achieved much during the past 12 months, although the integration to our new operational platform has created some delays (and extra cost) in our development plans for this division. The major issues are now behind us and we are moving swiftly ahead with our margin improvement programme. To this end, we are introducing a range of model portfolios which will be an appropriate proposition for a number of our smaller clients.

Moving to a consistently profitable Company is the key focus of the senior management team for 2018. To aid this move, members of both business divisions have agreed to contractual changes in their remuneration structure which focusses upon profitability, compliance and culture rather than purely revenue. In addition, we expect a considerable reduction in overall costs in 2018 due to the number and quantum of non-recurring and exceptional costs borne in 2017. The combination of these factors will form the base from which your Company can assuredly move forward in the years ahead.

Finally, I would like to thank all of our staff who have worked extremely hard during 2017 in order for the Company to be in a position to progress confidently and profitably in the future. Whether it be via organic or acquisitive growth, the focus of all in the Company is now very much on upon achieving real growth in both business divisions.

 

Chief Executive Officer’s report
As the Chairman has stated, 2017 was a challenging, yet necessary year in regard to the evolution of the Company. As a direct result of actions taken last year the Company is debt free, had cash balances as of 30 November 2017 of £10.5m, and has a company-wide remuneration structure which aligns all parties to the development of a profitable business. These are all major achievements in their own right, yet they have been achieved during a period when we undertook an essential platform change and prepared and implemented significant regulatory change ahead of MiFID ii.

Both divisions have clear business plans to execute during the next three years. The provision of advice, whether it be to our corporate and institutional clients or our private wealth clients, remains at the core of our business model and a number of growth initiatives are in place across the Company to help broaden our client base. The Corporate and Institutional Broking business has established The Investor Forum, where private companies are introduced to potential professional investors, and in the Private Wealth Management division we are launching internally a ‘Navigator’ range of model portfolios to complement our bespoke discretionary and advisory portfolio service. An external launch will follow in due course. Both initiatives are examples of how we are bringing enhancements to our client focused proposition.

The reorganisation of last year resulted in exceptional costs being incurred primarily within the Private Wealth Management division. These costs will fall away during 2018 and when combined with further cost reduction initiatives and specific organisational change, confidence builds as to the future profitability profile of not just the Private Wealth Management division but also the Group.

We announced last year that we are changing our year end reporting date to 31 March to help bring us into line with our competitors. As a result of the elimination of duplication of costs, the identification of further specific cost reductions and margin improvement within the Private Wealth Management division we expect to be able to report a significant improvement in profitability for the year to March 2019. Further guidance will be given after the end of the current extended financial period.

For further information please contact:

 

WH Ireland Group plc                                                                                                                   www.whirelandplc.com

Richard Killingbeck, Chief Executive Officer                                                                                 +44(0) 20 7220 1666

 

SPARK Advisory Partners Limited
Mark Brady/Miriam Greenwood	+44(0) 20 3368 3551

 

Consolidated Statements

Comprehensive income – unaudited for the 12 Months ended 30 november 2017

	Note	6 Months ended 30 Nov             2017             (unaudited) £’000	12 Months ended 30 Nov  2017 (unaudited) £’000	6 Months   ended 30 Nov 2016 (unaudited)      £’000	12 Months ended 30 Nov 2016 (audited) £’000
Revenue	2	13,678	28,547	13,461	25,421
Administrative expenses		(15,223)	(30,168)	(14,828)	(28,454)
Operating loss		(1,545)	(1,621)	(1,367)	(3,033)
Operating profit/(loss) before exceptional items		48	423	(155)	(1,253)
Exceptional items     – regulatory fine related		–	–	191	(193)
– MiFID ii		(196)	(196)	–
– restructuring costs		(494)	(643)	(810)	(994)
– Project Discovery		(903)	(1,205)	(593)	(593)
Operating loss after exceptional items		(1,545)	(1,621)	(1,367)	(3,033)
Realised investment gains/(losses)	2	38	47	14	21
Fair value gains/(losses) on investments		22	94	(117)	(155)
Gain on sale of property, plant and equipment		–	343	–	–
Finance income		–	19	3	10
Finance expense	2	(13)	(19)	49	(47)
Profit/(loss) before tax		(1,498)	(1,137)	(1,418)	(3,204)
Tax (expense)/credit		402	366	191	460
Profit/(loss) for the period		(1,096)	(771)	(1,227)	(2,744)
Total comprehensive income		(1,096)	(771)	(1,227)	(2,744)

 

Earnings per share
Basic	6	(3.97)p	(2.79)p	(5.95)p	(10.72)p
Diluted	6	(3.97)p	(2.79)p	(5.95)p	(10.72)p

 

financial position – unaudited As at 30 november 2017

	Note	12 Months ended 30 Nov 2017 (unaudited) £’000	12 Months ended 30 Nov 2016 (audited) £’000
Assets
Non-current assets
Property, plant and equipment	8	1,303	1,207
Goodwill		258	258
Intangible assets		3,491	3,582
Investments	3	343	118
Deferred tax asset		927	807
		6,322	5,972
Current assets
Trade and other receivables		22,035	18,985
Corporation tax receivable		247	–
Assets held for sale	8	–	4,750
Trading investments	3	591	530
Cash and cash equivalents	4	10,502	6,657
		33,375	30,922
Total assets		39,697	36,894

 

Liabilities
Current liabilities
Trade and other payables		(23,062)	(19,848)
Corporation tax payable		–	(52)
Obligations under finance leases		(282)	(282)
Deferred consideration		(2,090)	(1,130)
Borrowings		–	(187)
Provisions for liabilities and charges		(33)	(28)
		(25,467)	(21,527)
Non-current liabilities
Deferred tax liability		(92)	(92)
Obligations under finance leases		(70)	(352)
Accruals and deferred income		(329)	(282)
Borrowings		–	(807)
Deferred consideration		(1,105)	(2,101)
Provisions for liabilities and charges		(35)	(21)
		(1,631)	(3,655)
Total liabilities		(27,098)	(25,182)
Total net assets		12,599	11,712

 

Equity
Share capital	5	1,390	1,309
Share premium		3,157	1,621
Available-for-sale reserve		7	7
Other reserves		982	982
Retained earnings		7,809	8,524
Treasury shares		(746)	(731)
Total equity		12,599	11,712

 

Cash flows – unaudited for the 12 Months ended 30 November 2017

		12 Months ended       30 Nov 2017 (unaudited) £’000	12 Months ended                       30 Nov 2016 (audited) £’000
Operating activities
Profit/(loss) for the period		(771)	(2,744)
Adjustments for
Depreciation, amortisation and impairment		585	475
Finance income		(19)	(10)
Finance expense		19	47
Taxation		(369)	(517)
Gain on sale of property, plant and equipment		(343)	–
Fair value (gain)/losses in investments		(94)	187
Non-cash adjustment for share based payments		56	262
Decrease/(increase) in trade and other receivables		(3,050)	4,327
(Decrease)/increase in trade and other payables		3,275	(4,259)
Decrease in provisions		5	(1,172)
Decrease in trading investments		(61)	1,402
Net cash used in operations		(767)	(2,002)
Income taxes paid		(50)	(236)
Net cash used in operating activities		(817)	(2,238)

 

Investing activities
Proceeds from the sale of property, plant and equipment		5,093	–
Proceeds from the sale of investments		596	581
Interest received		19	10
Acquisition of investments		(727)	(526)
Payment of deferred consideration		–	–
Increase in intangible fixed asset		(105)	(189)
Acquisition of property, plant and equipment		(485)	(878)
Net cash generated from/(used in) investing activities		4,391	(1,002)

 

Financing activities
Proceeds from issue of shares		1,617	1,326
Increase in treasury shares		(15)	–
Repayment of borrowings		(994)	(179)
Repayment of obligations under finance leases		(282)	515
Increase in deferred consideration		(36)	106
Interest paid		(19)	(47)
Net cash generated from/(used in) financing activities		271	1,721
Net increase/(decrease) in cash and cash equivalents		3,845	(1,519)
Cash and cash equivalents at beginning of period		6,657	8,176
Cash and cash equivalents at end of period		10,502	6,657

 

Changes in equity – unaudited for the 12 Months ended 30 November 2017

As at 1 December 2015	Share capital    £’000	Share premium £’000	Available for sale reserve £’000	Other reserves £’000	Retained earnings £’000	Treasury shares £’000	Total equity £’000
Balance at 1 December 2015	1,225	379	7	982	11,006	(731)	12,868
Loss and total comprehensive income for the period	–	–	–	–	(2,744)	–	(2,744)

 

Contributions by and distributions to owners
Recognition of share-based payments	–	–	–	–	205	–	205
Share options exercised	24	228	–	–	–	–	252
Deferred tax on employee share options	–	–	–	–	57	–	57
Capital raise (note 5)	60	1,014	–	–	–	–	1,074
Total contributions by and distributions to owners	84	1,242	–	–	262	–	1,588

 

As at 1 December 2016
Balance at 1 December 2016	1,309	1,621	7	982	8,524	(731)	11,712
Profit and total comprehensive income for the period	–	–	–	–	(771)	–	(771)

 

Contributions by and distributions to owners
Recognition of share-based payments	–	–	–	–	56	–	56
Share options exercised	17	17	–	–	–	(15)	19
Capital raise (note 5)	64	1,591	–	–	–	–	1,583
Total contributions by and distributions to owners	81	1,536	–	–	56	(15)	1,658
Balance at 30 Nov 2017	1,390	3,157	7	982	7,809	(746)	12,599

Notes to the consolidated statements (unaudited)

Basis of preparation

      Statement of compliance

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

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

      The accounting policies adopted by the Group in the preparation of its 2017 interim report are those which the Group currently expects to adopt in its annual financial statements for the period ending 31 March 2018 and are consistent with those disclosed in the annual financial statements for the year ended 30 November 2016.

      The financial information for the period ended 30 November 2017 does not constitute the Company’s statutory accounts. The statutory accounts for the year ended 30 November 2016 have been delivered to the Registrar of Companies in England and Wales. The auditor has reported on those accounts. Its report was unqualified, did not draw attention to any matters by way of emphasis, and did not contain a statement under Section 498(2) or 498(3) of the Companies Act 2006. The financial information for the half year ended 31 May 2017 and 30 November 2017 is unaudited.

      The AIM Rules for Companies do not require IAS 34 “Interim Financial Reporting” to be applied; therefore it has not been used in the preparation of this interim report.

      Going concern

      The financial statements of the Group have been prepared on a going concern basis. In making this assessment, the Directors have prepared detailed financial forecasts for the period to March 2019 which consider the funding and capital position of the Group. Those forecasts make assumptions in respect of future trading conditions, notably the economic environment and its impact on the Group’s revenues and costs. In addition to this, the nature of the Group’s business is such that there can be considerable variation in the timing of cash inflows. The forecasts take into account foreseeable downside risks, based on the information that is available to the Directors at the time of the approval of these financial statements.

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

      The Directors most recently renewed the Group’s 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.

     

      2. Segmental reporting

      The Group has two operating segments

      The Private Wealth Management division offers investment management advice and services to individuals and contains the Group’s Wealth Planning business, giving advice on and acting as intermediary for a range of financial products. The Corporate & Institutional Broking division provides corporate finance and corporate broking advice and services to companies and acts as Nominated Adviser to clients listed on AIM. It also contains the Group’s 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.

      The segment “Other Group companies” includes WH Ireland Group plc, WHIreland (IOM) Limited, Readycount Limited and Stockholm Investments Limited.

      All segments 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 CEO.

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

2. Segmental reporting continued

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

6 months ended 30 november 2017	Private Wealth Management £’000	Corporate & Institutional Broking £’000	Head Office £’000	Other Group companies £’000	Group £’000
Revenue	8,532	4,727	–	419	13,678
Segment result	(1,982)	212	–	244	(1,526)
Executive Board cost	127	127	(337)	83	–
Gain on sale of property, plant and equipment	–	–	–	(19)	(19)
Realised investment gains	–	38	–	–	38
Fair value gains/(losses) on investments	–	22	–	–	22
Finance income	–	–	–	–	–
Finance expense	(10)	(3)	–	–	(13)
(Loss)/profit before tax	(1,865)	396	(337)	308	(1,498)
Tax income/(expense)	535	(72)	–	(60)	402
(Loss)/profit for the period	(1,330)	324	(337)	248	(1,096)

 

12 months ended 30 november 2017	Private Wealth Management £’000	Corporate & Institutional Broking £’000	Head Office £’000	Other Group companies £’000	Group £’000
Revenue	17,709	10,007	–	831	28,547
Segment result	(3,001)	928	–	453	(1,620)
Executive Board cost	306	306	(773)	161	–
Gain on sale of property, plant and equipment	–	–	–	343	343
Realised investment gains	–	47	–	–	47
Fair value gains/(losses) on investments	–	94	–	–	94
Finance income	–	–	–	19	19
Finance expense	(14)	(5)	–	(1)	(20)
(Loss)/profit before tax	(2,709)	1,370	(773)	975	(1,137)
Tax income/(expense)	970	(342)	–	(262)	366
(Loss)/profit for the period	(1,739)	1,028	(773)	713	(771)

 

6 months ended 30 november 2016 (unaudited)	Private Wealth Management £’000	Corporate & Institutional Broking £’000	Head Office £’000	Other Group companies £’000	Group £’000
Revenue	8,561	4,457	–	443	13,461
Segment result	(730)	283	(819)	(101)	(1,367)
Executive Board cost	114	114	(269)	41	–
Realised investment gains	29	(15)	–	–	14
Fair value gains/(losses) on investments	(30)	(87)	–	–	(117)
Finance income	2	–	–	1	3
Finance expense	61	(4)	–	(8)	49
(Loss)/profit before tax	(554)	291	(1,088)	(67)	(1,418)
Tax income/(expense)	74	(43)	109	51	191
(Loss)/profit for the period	(480)	248	(979)	(16)	(1,227)

 

2. Segmental reporting continued

12 month ended 30 november 2016 (audited)	Private Wealth Management £’000	Corporate & Institutional Broking £’000	Head Office £’000	Other Group companies £’000	Group £’000
REVENUE	17,091	7,581	–	749	25,421
Segment result	(1,641)	(744)	(819)	171	(3,033)
Executive Board cost	300	300	(725)	125	–
Realised investment gains/(losses)	29	(8)	–	–	21
Fair value gains/(losses) on investments	–	(155)	–	–	(155)
Finance income	8	–	–	2	10
Finance expense	(21)	(8)	–	(18)	(47)
Profit/(loss) before tax	(1,325)	(615)	(1,544)	280	(3,204)
Tax expense	218	122	109	11	460
(Loss)/profit for the year	(1,107)	(493)	(1,435)	291	(2,744)

 

 

3. Investments

		12 Months ended                            30 Nov 2017  £’000	12 Months ended 30 Nov 2016 (audited) £’000
Available for sale investments
Fair value: unquoted		48	40
Total		48	40

 

Other investments
Fair value: quoted	97	4
Fair value: warrants	198	74
Total	295	78
Total investments	343	118

 

      Quoted and unquoted investments include equity investments other than those in subsidiary undertakings.  Warrants may be received during the ordinary course of business; there is no cash consideration associated with the acquisition.            

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

		12 Months ended 30 Nov 2017 £’000	12 Months ended 30 Nov 2016 (audited) £’000
Trading Investments
Listed investments		591	530
Total		591	530

 

      Investments are measured at fair value, which is determined directly by reference to published prices in an active market where available.

4. Cash, cash equivalents and bank overdrafts

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

      Cash and cash equivalents represent the Group’s 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 30 November 2017 was £19.7m (30 November 2016: £130.6m). This decrease reflects the effect of the transfer of assets to SEI (Europe) Ltd.

5. Share capital

      The total number of authorised ordinary shares is 34.5 million shares of 5p each (30 November 2017 and 30 November 2016: 34.5 million). The total number of issued ordinary shares is 27.8 million shares of 5p each (30 November 2016: 26.2million and 30 November 2015: 24.5 million).

      On 6 December 2016, WHIreland Group plc placed 1,287,240 ordinary shares from its authorised share capital at an issue price of 123p.

6. Earnings per share

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

      Diluted EPS is the basic EPS, adjusted for the effect of conversion into fully paid shares of the weighted average number of all dilutive employee share options outstanding during the period. At 30 November 2017: nil (30 November 2016: nil) options were excluded from the EPS calculation as they were anti-dilutive. In a period when the company presents positive earnings attributable to ordinary shareholders, anti-dilutive options represent options issued where the exercise price is greater than the average market price for the period.

      Reconciliation of the earnings and weighted average number of shares used in the calculations are set out below.

	12 Months ended 30 Nov 2017 ‘000	Year ended 30 Nov 2016 (audited) ‘000
Weighted average number of shares in issue during the period	27,638	25,590
Effect of dilutive share options	1,356	1,042
	28,994	26,632

 

	£’000	£’000
Earnings attributable to ordinary shareholders	(771)	(2,744)

 

Basic eps
Continuing operations	(2.79)p	(10.72)p

 

Diluted eps
Continuing operations	(2.79)p	(10.72)p

 

7. Dividends

      No interim dividend has been paid or proposed in respect of the current financial year (2016: nil).

8.  events after the reporting period

      On 23 January 2018 the Company announced a placing of 2,000,000 ordinary shares from its authorised share capital at an issue price of £1.20. This is subject to approval at a General Meeting of the Company to be held on 9 February 2018.