Walker Crips Group Annual Report 2018

FY2018 Annual Report · Walker Crips Group

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Growing with our clients to make investment rewarding

Annual Report and Accounts 2018

A technology-driven
financial services
company, founded on
traditional values of
honesty, fairness and
integrity; committed to
the clients we serve.

Through acquisitions,
we can trace our
roots as far back as
the 18th century,
making us one of
the City of London’s
oldest independent
companies.

Strategic report

01 Highlights from our year

04 Walker Crips at a glance

06 Chairman’s Statement

08 CEO’s Statement

10 Our business model

12 Our strategy

14 Principal risks

16 Our people and culture

18 Market opportunity

20 Key performance indicators

Corporate governance

24 Board of Directors

26 Introduction to governance

27 Report by the Directors on corporate

governance matters

31 Audit Committee report

35 Remuneration Committee report

43 Directors’ report

45 Statement of Directors’ responsibilities

Financial statements

48 Independent auditor’s report

53 Consolidated income statement

54 Consolidated statement of comprehensive income

55 Consolidated statement of financial position

56 Consolidated statement of cash flows

57 Consolidated statement of changes in equity

58 Notes to the accounts

78 Company balance sheet

79 Company statement of changes in equity

80 Notes to the Company accounts

89 Notice of Annual General Meeting

95 Form of proxy

97 Officers and professional advisers

01
Strategic report

Walker Crips Group plc
Annual Report and Accounts 2018

Highlights from our year

Our core business has performed steadily throughout the year
with growth in revenue and discretionary and advisory assets
under management, as we continue to meet our financial and
strategic objectives.

Financial highlights

Group annual revenues increased by 4.4% to £30.5m
(2017: £29.2m)

Underlying operating profit, before tax and exceptional items
decreased to £906,000 (2017: £1,102,000 restated)

Reported profit before tax increased to £924,000
(2017: £764,000 restated)

Discretionary and advisory assets under management
increased by 3.1% to a high of £3.3bn (2017: £3.2bn)

Strategic highlights

Non-broking income as a percentage of total income has
increased to 64.1% (2017: 61.8% restated)

Proposed final dividend maintained at 1.29 pence per share
(2017: 1.29 pence per share), bringing total dividends for the
year to 1.87 pence per share (2017: 1.87 pence per share)

Turnover increased for third year in succession

3.3bn

2017: £3.2bn

Discretionary/Advisory AUM (bn)

3.2

3.3

2.3

2.0

1.3

30.5m

2017: £29.2m

Total Income (m)

29.2

30.5

26.2

23.2

20.9

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Strategic report

Walker Crips Group plc
Annual Report and Accounts 2018

Strategic
Report

04 Walker Crips at a glance

06 Chairman’s Statement

08 CEO’s Statement

10 Our business model

12 Our strategy

14 Principal risks

16 Our people and culture

18 Market opportunity

20 Key performance indicators

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Strategic report

Walker Crips Group plc
Annual Report and Accounts 2018

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Strategic report

Walker Crips Group plc
Annual Report and Accounts 2018

Walker Crips at a glance

Walker Crips Group offers quality, trusted investment and wealth
management services to private clients, intermediaries and institutions.

Our divisions

28.14m

Revenue

Where we are

UK OFFICES

London (Group head office)
York
Birmingham
Bristol
Inverness
Lincoln
Newbury
Norwich
Romford
Swansea
Truro
Wymondham

What we believe
Walker Crips strives to deliver great customer
outcomes. We believe the best way to achieve this
is by conducting ourselves with honesty, fairness
and integrity.

Awards
Our ALPHA: r2 Managed Portfolio Service (MPS)
has been awarded 5-star defaqto ratings for
its services.

Key statistics
Key statistics

104 years

32,636

Looking after our clients

Clients across the uk

5.0bn

AUMA

30.5m

Total revenue 2017/18

Top 40
Under 40
2018

Sean Lam, Chief
Executive Officer,
was named one of
Private Asset Managers
(PAM) 2018 50 Most
Influential.

Gary Waite, Walker Crips
Investment Manager
and Portfolio Manager of
ALPHA: r2, was placed in
Private Asset Managers
(PAM) Top 40 Under 40.

2.32m

Revenue

Investment Management
Our Investment Management division provides Bespoke Discretionary and Advisory Management to
private clients, trusts, intermediaries and charities. Walker Crips Investment Management also offers
discretionary fund management to intermediaries through ALPHA: r2, our managed portfolio service.

Stockbrokers
Our Stockbrokers division is a group of highly experienced individuals and teams with whom clients
develop an investment relationship. Clients benefit from a direct and personal communication with
expert brokers, managers and advisers who have built up specialist skills and knowledge to help
clients with their investments. The division offers four investment services so clients may choose how
they wish to work with their own stockbroker; Bespoke Discretionary, Advisory Managed, Advisory
Dealing or Execution-only.

Structured Investments
Our Structured Investments division presents opportunities to intermediaries and their clients to
access pre-packaged (and bespoke) strategies to allow tax-efficient investments for a variety of
different risk and return profiles. It arranges and administers structured investments with a prudent
and sensible approach.

Alternative Investments
Our Alternative Investment team provides innovative services and products for limited groups of
sophisticated clients with specific requirements and eligible investors. Investor Immigration (Tier 1)
Portfolios serves high net worth individuals from outside the UK. Short-term Lending (STL) manages
large direct mandates from institutional investors, giving them exposure to the UK property
financing market.

Wealth Management
Our integrated offering combines advisory
services on investments, pensions protection
and financial planning. Quality financial
planning and investment management
enables clients to plan for their children’s
education, increase their tax efficiency, ensure
they achieve the retirement they want and
prepare for inheritance tax. Businesses and
business owners also benefit from sound
financial planning to encompass pension
and employee benefit schemes, corporate
protection and investments to ensure future
stability and financial wellbeing.

Pensions
Our Pensions division provides pension
administration for Self-Invested Personal
Pensions (SIPP for individuals looking to
control their pension fund investments) and
Small Self-Administered Schemes (SSAS for
Company Directors to build a pension fund for
their retirement and to help with the running
of their business). Our clients have access to
a wide choice of investments and retirement
options, which provide them with investment
flexibility and business efficiencies.

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Strategic report

Walker Crips Group plc
Annual Report and Accounts 2018

Chairman’s Statement

Our core business has performed steadily in 2017/18, with
improvements in our key performance indicators a heartening
signal that the cornerstones of the business continue to
provide the financial stability we have enjoyed for decades.

Overview of 2017/18
In a year dominated by unexpected political
events and by resilience from UK markets, our
core business has performed steadily. Revenue
and Discretionary and Advisory Assets under
Management showed encouraging increases.

Inclusive of exceptional costs, total administrative
expenses in the year were largely flat at £19.6m
compared to £19.7m in 2017. However, underlying
expenses before exceptional items increased by
1.6% to £19.6m compared to £19.3m in 2017,
reflecting inflationary pressures.

The Group has faced two tough years in
terms of the overhaul of our regulatory and
compliance systems, as I described last year,
and the considerable challenges of upgrading
our systems to be compliant with the increased
regulatory requirements of MiFID II1, PRIIPs2,
GDPR3 and SM&CR4. In addition, the year also
saw the relocation of our operations both in
London and in York to new premises. We are very
pleased to have completed these important but
extremely time and labour consuming exercises
and to be able to once again focus first and
foremost on the development of our business.

The proportion of non-broking revenue to total
income also improved to 64.1% as we continue to
make the business less reliant on unpredictable
transaction-based income. The Group’s profit
before tax has increased, although inflation
and pressure on our cost base and margins have
resulted in a reduced adjusted operating profit
when exceptional items are stripped out.

In the year to 31 March 2018 we reported
increased revenues of £30.5m (2017: £29.2m5)
and at the period end, Total Assets under
Management and Administration, a key
metric of performance, was £5.0bn (2017:
£5.2bn) , meeting our target level of £5bn,
with discretionary and advisory assets under
management increasing to £3.3bn (2017: £3.2bn).

Net Revenue in the year has been stable at
£20.5m (2017: £20.4m). In the first six months,
we witnessed results buoyed by improved market
conditions. However, reduced trade volumes
in the second half led to lower than expected
revenue from commission income as uncertainty
over Brexit terms, and a potential trade war,
continued to dampen investor confidence.
The reduced commission was mitigated by an
increase in managed funds interest margins due
to the November 2017 rise in UK Base Rates.

Overall our operating profit before tax and
exceptional items was £906,000, being 17.8%
down on £1,102,0006 in 2017. Exceptional costs this
year are largely offset by exceptional income and
therefore the reported profit before tax has increased
by 20.9% to £924,000 compared to £764,0007
in the prior year. As noted in the table (on page 7)
and fully explained in Note 33, the 2017 prior year
comparatives have been restated following review of
the treatment of certain income and expense items.
The impact of this was to reduce previously reported
2017 profit before tax by £40,000.

Strategy
The delivery of high quality personal investment
advice and strong investment management
capability remains at the core of our business. We
continue to look for opportunities to attract talented
investment managers, either individually or as
teams, who share our culture and commitment to
client service. However, organic growth, through the
expansion of new and improved product offerings,
is a priority. We are constantly looking for ways to
maintain and enhance the service we provide to
clients, delivering a premium personal service. At
the same time, we are redoubling our efforts to
standardise, where it is appropriate to do so, to use
technology to reduce costs and generally to work
more efficiently.

In tandem, we are establishing innovative high
margin alternative investment products and
planning accelerated use of technology to drive
the business forward with significant growth in
the Group’s products and services. The next phase
of development is embodied in a three-pronged
approach to expand our alternative offering,
described more fully in the CEO’s Statement. We are
confident that implementation of this strategy will
provide the springboard for the more consistently
higher levels of profitability that we seek. As we
move to this phase, the improvements in our key
performance indicators is a heartening signal that

the cornerstones of the business continue to provide
the financial stability we have enjoyed for decades.

Dividend
Acknowledging this reduction in the rate of growth
during the year, and also recognising the need for
business investment, the Board is recommending
the maintenance of the prior year level of final
dividend of 1.29 pence per share (2017: 1.29 pence
per share). Combined with the interim dividend
of 0.58 pence per share (2017: 0.58 pence per
share), the total dividend for the year is 1.87 pence
per share (2017: 1.87 pence per share). The final
dividend will be paid on 14 September 2018 to
shareholders on the register at the close of business
on 31 August 2018.

Culture, governance and the Board
By setting the right example at the top, the Board
has prioritised the communication of good conduct
and the appropriate culture across all who represent
the Company.

We expect all personnel to exemplify good culture
and behaviour to achieve good outcomes for clients
and market contacts. Those aspects which need
to be cascaded down throughout the organisation
are identified by implementing a formal process of
measuring and reporting against suitable metrics.
The Executive Directors and senior management,
through daily contact with employees and
associates alike, endeavour to demonstrate strong
leadership and to be inspiring role models while
providing effective supervision.

Directors, account executives and staff
The recent fit-out of our new offices in the City
of London and in York came in under budget and
provides staff and associate advisers with a modern
working environment and space for expansion.

I would like to thank all my fellow Directors,
Investment Managers and Advisers, and members
of our operations team for their hard work and
diligence in assisting in this process.

The Board and in particular the Executive
Directors have undergone another year of
structural change in the governance and
oversight of the business. Rodney FitzGerald, who

1 Markets in Financial Instruments Directive

2 Packaged retail investment and insurance based products
3 General Data Protection Regulation

4 Senior Managers and Certification Regime
5 2017 net revenue has been restated as explained in Note 33.

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Walker Crips Group plc
Annual Report and Accounts 2018

Reconciliation of operating profit to operating profit before exceptional items

Operating profit
Exceptional items
Adjusted operating profit

2018
£000

2017
£000

890,000
16,000
906,000

742,000*
360,000
1,102,000*

*The 2017 operating profit has been restated from £782,000 reported last year to £742,000 as explained in Note 33.

Annual General Meeting
This year’s Annual General Meeting will be
held at Old Change House, 128 Queen Victoria
Street, London EC4V 4BJ on 5 September 2018,
at 11.00 a.m.

Outlook
After a period of considerable challenges across
the Investment and Wealth Management
industry and many regulatory developments and
accomplishments, we are now set for long-term
growth, whilst having maintained our sound
financial footing. As the industry continues to
change and investors absorb global issues in
the form of Brexit, varying economic activity,
threatened and actual trade tariffs and pockets
of geo-political instability, there remains a
lingering uncertainty over markets. We believe
we are well positioned to provide the flexibility
and the advice that clients need at such times;
and to manage their assets in line with their
specific requirements, in the context of improving
technology, further regulation, differing
peer business models and shifting
demographics. We approach the
future with firm self-belief as we
look cautiously to the growth of our
business over the medium term,
driven by our renewed strategy
to create increased shareholder
value as we deliver good
customer outcomes.

D. M. Gelber
Chairman
31 July 2018

has been Chief Executive Officer (CEO) and
Group Finance Director for the last ten years,
playing a pivotal role in the transformation
of the Group from private client stockbrokers
into an integrated investment and wealth
management house, stepped back from his
position as CEO and retained the role of Group
Finance Director as part of a phased retirement.

Sean Lam succeeded Rodney as CEO with his
previous ten years of dual responsibility over
Group operations and technology making him the
ideal person to lead Walker Crips into the future.

Mark Rushton, Chief Investment Officer, assumed
responsibility of the investment management and
stockbroking subsidiary, Walker Crips Stockbrokers
Limited, as CEO. Mark has been instrumental in our
recent growth, attracting a series of new teams
of advisers to the Group since joining in 2012,
which has changed the quality of our revenue
streams and enhanced the processes and culture
throughout the organisation.

We are sorry to report that our Group Compliance
Director, Guy Jackson, has decided to move on
after making a highly effective contribution to
the compliance department. After joining in May
2016, he restructured his team and brought in
new resources in a short space of time to leave the
Group with a much healthier framework to tackle
the increasingly complex burden of regulation.

After four years of expansion, including the
corporate acquisition of Barker Poland Asset
Management LLP in 2015, we are currently
concentrating on successfully delivering the many
continuing initiatives to drive growth and satisfy
increasing regulatory obligations. The Board
is acutely aware of the demands our system
upgrade has placed on our personnel, particularly
the financial, compliance and operational teams
in Romford, where we maintain investment
and increased resources to mitigate the risks
associated with change.

The loyal members of our York operations are now
rejuvenated under a new leadership team, proud
of their new offices and already embarking on
new initiatives for growth.

6 2017 pre exceptional profit has been restated as explained in Note 33.
7 2017 profit before tax has been restated as explained in Note 33.

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Walker Crips Group plc
Annual Report and Accounts 2018

CEO’s Statement

In 2018 we will be driving ahead with a three-pronged strategy to
solidify Walker Crips as a technology-driven financial services firm.

Reflection
If I were to use one word to describe the past
year, it would be “uncertainty”. Uncertainty
has pervaded the economy, politics and our
society. In our industry, uncertainty can be
toxic. We could hunker down and wait it out,
and hope for better times, or we could be on
the front foot and adapt and reshape our
business for the future. More about this below.

The last two years have been challenging,
especially in the face of changing regulations.
Dealing with regulatory changes is par for
the course in our industry, but it was the
deluge of regulations and the enormity of
the regulations, within such a short period
of time, that was exacting. Whilst MiFID II1,
PRIIPs2 and GDPR3 may be behind us, there
is still much follow up work to be done for
them and SM&CR4 comes into force on

9 December 2019. I am pleased to say
that we have successfully navigated

these new regulations.

In the midst of all these changes, substantial
resources were devoted to acquiring new leases
for our Group head office in London and our
office in York which were both expiring.

While dealing with the new regulations, we
invested heavily in staffing, in systems and in
management time toward compliance with
these. Now that they are embedded into the
business, we are focussing on managing our
administrative cost base, continuing building
funds under management, revenue growth and
innovation to improve our profitability.

Three-pronged strategy
We have re-aligned our business growth
strategy into a three-pronged approach:

1. Core Investment Management Business
This is our largest revenue generating division,
providing clients with investment, wealth,
pensions, collectives advice and the creation of
structured investments and structured deposits
for clients, IFAs and counterparties

We will continue to:

 invest in our core business, building
innovative systems that will support
our Investment Managers and Advisers
in providing high quality personal
investment advice

 make this division more robust and more

efficient, increasing revenues and managing
costs thereby improving margins

 seek more good quality investment and
wealth managers, either individually or
as teams

1 Markets in Financial Instruments Directive
2 Packaged retail investment and insurance-based products
3 General Data Protection Regulation
4 Senior Managers and Certification Regime

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Walker Crips Group plc
Annual Report and Accounts 2018

2. Alternative Investments
This subset of our core investment management
division is where we create innovative and higher
margin new business lines.

Our objective is to repurpose the systems
and technology that we have, to support new
business initiatives without incurring significant
capital or staffing expenditure.

3. Software as a Service (SaaS)
This is our new driver. Our systems development
core competency means we create and own
much of our technology, allowing us to build
and integrate many of our systems into one
central platform.

We will be translating some of these systems
into the cloud and from there, commercialising
and providing them to industry participants
who are looking to systematise core
processes such as suitability management
and monitoring.

We plan to offer these services on an OpEx
basis, e.g. per user per month, removing cost
barriers to entry.

Driving Forwards
We are now in an era of dramatic warp-speed
technological change, of digital disruption.
Over the next few years, we will witness
the coming of age of Artificial Intelligence,
Machine Learning, Robo-Advice and other
Cognitive Technologies. We will also witness
the prevalence of Blockchain Technology
disrupting the business of intermediaries,
e.g. banks, brokers and financial advisers.
How we respond as a business will be crucial.

We have always provided high-touch service to
our clients, but in recent years we have moved
toward both high-tech and high-touch, with
technology supporting our ability to provide
services to our clients and to enable us to build
and maintain trust with them. Our vision is to
cement Walker Crips as a technology-driven
financial services firm.

At our core, our desire is to serve our clients,
to deliver good customer outcomes and to
make investment rewarding for them, our
shareholders and our staff. We have served
clients for 104 years, and attribute our
longevity to the dedication and commitment
of our Investment Managers, Wealth and
Pensions Advisors and our staff. But we cannot
continue operating like in years past, we must
Create > Innovate > Rejuvenate > Eliminate >
Repeat.

I am grateful to be working with such good and
committed people, and thank them all for their
service and fortitude. I look forward to their
continued contribution as we innovate in the
interests of our clients and prosper together.

Sean Lam
Chief Executive Officer
31 July 2018

Our three-pronged
strategy for growth

Core Investment/Wealth
Management

Investment Management

Discretionary Advisory

Managed, Advisory,

Execution Only

Discretionary - Bespoke

Portfolio Models (Alpha: r2)

Wealth Management

Pensions Management

BPAM Collectives Investment

Management

Structured Products

Alternative Investments

Tier 1 (Investor) Visa

Short Term Lending

International Equity Arbitrage

Technology Services (SaaS) and
Back Office / Admin Services

To commercialise our platforms,

and provide them as SaaS to

external parties

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Strategic report

Walker Crips Group plc
Annual Report and Accounts 2018

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Strategic report

Walker Crips Group plc
Annual Report and Accounts 2018

Our business model

Walker Crips provides retail clients with a flexible proposition of core
investment services, delivered by Investment Managers and Advisers
focused on achieving good customer outcomes. It also offers select
alternative investment assets and develops technology-driven services
and controls.

We draw on our strengths

to power our business

a m

d t e

artia

Investment and Wealth Management
Our Investment Managers, Wealth Managers and

Stockbrokers work together for clients. We recognise

that understanding each and every client’s knowledge

and experience is vital to achieve a good outcome.

Investment advisers retain their independence to invest

for their customers without the need for a specific

v
i

top-down investment policy.

Working together
to serve
our clients’ needs

M
a
n
a
g
e
m
ent

h
c
a

pro

e rs o nalised ap

u
r

e of integrity

Alternative Investment
Our Investor Visa programme, Short Term Lending

and International Equity Arbitrage offerings

provide an alternative revenue stream for

the business.

Technology
In-house IT systems continue to be developed,

working alongside external provider relationships,

to drive efficiency, contain costs and secure

clients’ data. Our Software as a Service

(SaaS) offering is a key part of our strategy

moving forward.

Clients
Our clients are at the heart of our

business. Each service is tailored to

provide what clients need to achieve

their success.

Our people
Our aim is to motivate and

reward our employees and

self-employed associates

appropriately, encouraging

individual development and

good customer outcomes while

empowering employees to serve

clients and realise their potential.

giate and integra t e

ment

le
l
o
C

e
g
a
n
a
M

n
I

Strong culture of integrity
Our culture promotes the traditional

values of honesty, fairness and integrity

while striving to do the right thing. We

treat our clients in the way they wish to

be served, and in the way we ourselves

would expect to be treated.

Independence
Our corporate independence

means we aren’t limiting services or

simplifying offerings at the expense

of client choice.

and make investment rewarding for
our shareholders

Our investors
We create value for our investors by maintaining a strong

balance sheet and increasing our recurring revenues.
 Core revenue is derived from the fees charged for investment

and wealth management from the services our teams provide

 Additional revenue is produced through transactional

activity and custody charges

 Stability for our investors comes from our aim of

maintaining a strong balance sheet

 We strive to create shareholder value by increasing our

recurring revenues and containing costs to drive profitability

Our clients
Our clients benefit from:
 our expert investment management and wealth

management knowledge

 close investment relationships with dedicated

investment professionals

 ongoing and active decision making and advice on

investment addressing prevailing markets

 service to support the trusted relationship with their

investment manager or adviser

1.87p

Total dividend per share

1.77p

Total earnings per share

30.5m

Revenue

32,636

Total number of clients

5bn

Total funds we manage

Our people
 Our personnel are encouraged to achieve success

through opportunities, contribution and empowerment

 Responsibility and training is given to grow their

Employees with over 10 years of service

knowledge, experience and business

 Decisions are made by individuals for direct

management and advice on clients’ investments

 Controlled oversight is given for investment parameters

of portfolios

Employees with over 20 years of service

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Strategic report

Walker Crips Group plc
Annual Report and Accounts 2018

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Strategic report

Walker Crips Group plc
Annual Report and Accounts 2018

Our strategy

To develop a technology-driven financial services company through
our three-pronged strategy for growth: the core Investment and
Wealth Management business, Alternative Investments, and
Software as a Service.

Our objectives

How it will be achieved and our priorities for 2018/19

What we did in 2017/18

Grow the core Investment

Management and Wealth

Management business

Increase non-broking revenues

and Alternative Investments

Create technology efficiencies

and develop Software as a

Service offerings

 Continue opportunistic growth of Investment Management, leveraging our flexible and appealing

client offering

 Maintain target growth in order to achieve £10bn AUM by 2026
 Grow Wealth Management through hires and increase profitability with efficiencies
 Continue reviewing compliance within the changed regulatory environment

(Markets in Financial Instruments Directive (MiFID II), General Data Protection Regulation (GDPR),
Senior Managers and Certification Regime (SM&CR))

 Ensure support of our broad range of services through robust systems for internal client management

and external client communication and reporting

 Extend the use of the individual Investment Manager models
 Develop the SIPP and SSAS offering of our Pensions division
 Maintain the focused and clear offering to grow profitability of our Barker Poland offering organically
 Enhance the systems supporting our Structured Investments division for future growth
 Maintain Structured Investments market share
 Launch Structured Deposit offering
 Maintain cash and cash equivalents

 Grow assets under management from existing Investor Immigration Programme
 Increase clientele of Investor Immigration Programme through referrals
 Launch new Short Term Lending product into the market
 Continue the closely controlled and low risk activity of the International Equity Arbitrage
 Develop technology to offer existing expertise via efficient channels
 Continue to grow fees versus commission related revenue
 Review fees, charges and tariffs in line with added value for clients
 Prepare for segmented service offering for Discretionary, Advisory Managed and Advisory

Dealing services

 Develop the Discretionary service per Investment Manager alongside the Bespoke service,

for suitable client segments

 Capture the commercial value of selling existing system capability to peer businesses in the industry
 Grow our in-house team of Developers and System Analysts
 Enhance and embed the cycle of the Client Suitability Review programme
 Develop existing technology that can be commercialised as Software as a Service products
 Further develop the ‘Portfolio’ technology for the discretionary service per Investment Manager
 Expand our range of flexible, transparent and impartial services using our capability in technology

to develop: client offering, services, documents, online access and communication
 Use technology to drive further MiFID II system, control and reporting requirements
 Develop compliance monitoring and oversight through technological advances
 Aim to streamline, derisk where appropriate and simplify the overall offering for efficiency

 Transferred in clients from two new Investment Managers
 Added Newbury office to the regional stable of Investment Managers
 Sustained the original £5bn AUMA target whilst addressing the retirement of Investment

Managers and the handover of their clients

 Hired two new Wealth Managers in York
 Successful reorganisation of the Wealth Management senior management team
 Added to the functionality of the suitability, risk and control technology used to

communicate with and advise clients to support Investment Managers

 Maintained cash and cash equivalents at £8.4m

Metric

New revenue generators

3.3bn

Discretionary and Advisory AUM

 Discretionary AUM increased by £163m to £1.5bn
 Non-broking revenues increased from £18.0m to £19.5m
 Alternative Investments continued to perform after a record previous year
 Reviewed the service offering and charges to address the smaller AUM segment of clients

19.5m

Non-broking revenue

using individual Investment Management model portfolios
 Portfolio service for individual Investment Manager models

developed for initial roll-out aimed at smaller AUM client segment (and other suitable clients)

 Further improved the Client Suitability Reviews through additional information requirements
 Delivered our new Annual Management Charge system to accrue fees daily
 Improved and focused the Compliance monitoring function
 Met the MiFID II and GDPR challenges by adapting and developing our internal processes

and monitoring (including Client Suitability Review and Memorandum of Advice)

 Approved new roles for System Analysts and Developers
 Made add-ons to our proprietary system to support the delivery of MiFID II, ranging from
suitability to trade reporting, and including provision of research from selected providers

 Further simplified processes through each incremental addition to the system

New Developer roles approved

7,750

Clients using our portal

14
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Walker Crips Group plc
Annual Report and Accounts 2018

15
Strategic report

Walker Crips Group plc
Annual Report and Accounts 2018

Principal risks

Risks to the business are reviewed monthly and monitored by the
Board-appointed Risk Management Committee in conjunction with
the internal process for management of capital risk.

Risk

How it arises

Mitigation

Client risk/Counterparty risk
Client failure to settle transaction
Risk appetite
Low/Medium

The risk that a client or market counterparty will not meet its obligations to the Group in
accordance with agreed terms resulting in losses. This risk can arise when a client fails to pay
for a purchase of shares or to deliver a certificate of ownership of a stock which has been sold. Also
a similar exposure arises if a market maker fails to complete the same trade through corresponding
payment or stock delivery.

 Daily monitoring of clients’ positions and counterparty exposures and individual trade limits. Credit assessments of

counterparties and treasury policy to avoid concentration risk. Credit risk assessments of banks and custodians, active
monitoring of exposures and use of credit ratings. Using several banks to hold both clients’ and the firm’s money, with
levels being constantly reviewed.

Conduct risk
Customer outcomes
Risk appetite
Zero/Low

Regulatory risk
Risk appetite
Zero/Low

Liquidity risk
Liquidity risk
Risk appetite
Zero/Low

Market Risk

Market Risk
Risk appetite
Zero/Low

Capital adequacy

Capital adequacy
Risk appetite
Zero/Low

Operational risk

Business disruption
Risk appetite
Low/Medium

Cyber fraud
Risk appetite
Low/Medium

Personnel
Risk appetite
Zero/Low

Unchanged

The risk that clients or the wider market suffer detriment as a result of inappropriate
behaviour or actions by staff or business partners. This risk can arise when representatives of
the Group are not given sufficient training or awareness of the highest standards of behaviour
central to the core services of the Company, being honesty, integrity and fairness.

The risk of failure to comply with new or amended regulations incurring fines and causing
reputational detriment. Failure by management to recognise the scope and impact of new or
amended regulations on the business model and resources needed to implement change.

 Clear and balanced financial promotions, suitable investment advice and complaints management. Board oversight,
development of staff and training, strong corporate governance with defined roles, ensuring the tone from the top
sets a fair, positive and ethical culture.

 Board oversight, development of staff and training, strong corporate governance with defined roles, recovery plan,

monitoring the Group’s performance relative to competitors, compliance monitoring programme, regulatory development
oversight, documented policy and procedures and regular contact with regulators. Peer comparison and communication,
increased compliance personnel and early gap analyses conducted.

The risk that the Group is unable to meet its payment obligations associated with its
financial liabilities as they fall due. This risk can arise in the stockbroking subsidiary where large
amounts of trade values are being settled daily and can lead to a funding requirement due to a
delay in market delivery or late settlement by clients.

 Contingency funding plan, cash flow forecasting, experienced management team monitoring settlement performance,

maintenance of cash surplus buffer, ability to raise an overdraft facility and liquid financial trading book can be
realised. Group entities settle intercompany balances regularly and are not reliant on intra Group funding.

Unchanged

The risk of losses arising as a result of exposure to market movements in the price of
financial instruments, including foreign exchange. This risk can arise when the Group’s
proprietary trading book positions incur losses on negative price movements.

 Portfolio size and transaction limits are low and monitored. Speculative investments are not permitted.

The risk that the Group’s business strategy and plans for growth are not sustainable on the
existing regulatory capital base. This risk can arise when new acquisitions, products or initiatives
are embarked upon without sufficient reference to impact on regulatory capital adequacy.

 Capital adequacy surplus is maintained well in excess of regulatory requirements. Material surplus cash balances are
always carried. Ongoing review of regulatory capital through an Individual Capital Adequacy Assessment Process.
New initiatives are examined and stress tested prior to implementation.

The risk that an internal or external event causes failure of the core business activities or
IT systems supporting them. This risk can arise when the business fails to effectively control
or administer the operating systems at the heart of the business, fails to manage its resource
requirements properly or maintains inadequate security arrangements.

 Business and information system recovery plans are approved, tested and maintained. Data incident log records and
analyses all unforeseen events to prevent recurrence. Insurance cover in place for certain causations e.g. financial
crime and consequential loss.

The risk of fraudulent action by external parties maliciously breaching the Group’s internal
systems. This risk can arise from failure to implement sufficient controls over security access to all
IT systems.

 Senior management oversight, encryption and protection software installed, prevention procedures, segregation of duties
between front and back office, system authority and payment limits and system access controls and heightened employee
awareness based on experience to match the greater risk presented by recent threats reported in the sector.

The risk of losing key staff who are the drivers of significant components of the business.
This risk can arise on the failure to reward individuals with challenging performance targets and
competitive levels of financial compensation.

 Succession and contingency planning, appropriate compensation levels and share incentive schemes to reward and
retain staff. Investment in staff through training, key man insurance cover and contractual restrictive covenants.

Unchanged

Increased

Unchanged

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Strategic report

Walker Crips Group plc
Annual Report and Accounts 2018

17
Strategic report

Walker Crips Group plc
Annual Report and Accounts 2018

Our people and culture

We are proud of our history, and our cultural values of teamwork,
honesty, integrity, fairness and client focus represent the Group’s DNA
upon which our organisation has flourished.

reassignment or disability. Walker Crips supports
women in their career progression, with three
women being promoted to senior roles over
the year.

The Social Responsibility and Safety Committee
consists of two subsidiary Company Directors
and other senior managers. The Committee
makes recommendations to the Board on social,
environmental and community issues. While
the Group is a financial services organisation
whose primary responsibility is to maximise
investment returns to clients, there are non-
financial considerations which may affect the
long-term value of the subsidiary companies,
and close attention is paid to minimising their
environmental impact.

The health and safety of our employees is
critical to our success, and environmental
considerations go hand in hand with
maintaining a safe and healthy workplace.
By participating in the Cycle to Work scheme,
we enable employees to reduce their carbon
footprints and improve their overall health.
Providing a safe and welcoming work
environment is key to developing motivated,
healthy and happy personnel.

People and culture
In 2017/18 we invested in new premises for
our London and York offices, providing an
environment conducive for client engagements
and fit for modern purpose. The offices were
designed to improve workflow and maximise
collegiate collaborations, to promote ideas
generation and innovation.

We understand the importance of giving back
to the communities who support us throughout
the UK. Walker Crips employees take part in and
sponsor charity sporting events throughout the
year, including the London Marathon, Great
City Race, Merlin MS Centre fun run and Invesco
Perpetual Challenge. Over the year, several
Walker Crips offices undertook new community
sponsorships of local sporting teams.

Walker Crips is proud to have 75 employees
who have worked with us for over ten years,
and 31 employees who have been with us for
more than 20 years. The experience and the
deep understanding of our business these staff
members provide is invaluable.

We are committed to the principle of equality
and equal opportunities in employment. We
are opposed to any form of less favourable
treatment or financial reward through direct
or indirect discrimination, harassment,
victimisation to employees or job applicants
on the grounds of age, race, religion or belief,
marriage or civil partnership, pregnancy or
maternity, sex, sexual orientation, gender

Group statistics

278

33%

Number of personnel

Percentage of female personnel

2,304

Total number of years’ service

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Strategic report

Walker Crips Group plc
Annual Report and Accounts 2018

Market opportunity

We maintain our position as an integrated Investment Management
and Wealth Management business for high net worth and mass affluent
clients. With our own culture of individual client service and our appeal
of independence, flexibility and integrity, we continue to focus on
achieving the right customer outcomes across our service offering.

2017/18 year in review
During the first nine months of the period, volatility
had declined despite challenging global events;
however it reared its head in the first quarter
of 2018. Global equities were shaken by higher
than expected inflation data and rising market
interest rates in the US debt markets, which
touched 2.95% on the 10 Year Treasury for the
first time since 2014. After a relatively straight rise
in markets, with low volatility, many investors had
become complacent and as this unwound the
market correction was rapid, although in reality
overdue. It was blamed on quantitative trading
algorithms and a realisation that interest rates
were likely to rise.

Market volatility returned during short-lived
periods of equity market correction on the back of
nervousness and uncertainty across global macro
and geopolitical backdrops, as the realities of
fresh UK and world orders emerged. The market
retreated from a mid-January peak of 7,778.64
by almost 9% to 7,092.43 in early February, and
dropped a further 2.5% to 6,888.69 in the last
week of March 2018.

In the US, employment and wage growth
figures were stronger than anticipated, raising
concerns that inflation could be about to rise. The
‘Goldilocks’ inflation of not too much and not too
little appears to have been holding sway, but there
is still a likelihood of a drift to higher interest rates.
Political tensions in global trade rose during the
year, partly as a result of Donald Trump’s stated
policy to “make America great again”.

The UK equity market seemed to ride the result
of the snap UK General Election on 8 June 2017
with relative ease after a period of dampened
market activity. This was sustained until the reality
of a Conservative government propped up by
the Democratic Unionist Party emerged after a
resurgent Labour party made significant gains,
leaving the Conservatives in a far weaker position
going into Brexit negotiations. Brexit induced
uncertainty remains, and the UK must adjust
the way it trades with both the EU and the rest
of the world. It is likely that this will translate into
periods of market volatility and potential declines
in investment assets. Whilst transaction activity

may be affected positively or negatively, as might
commission income, the system for daily accruing
of annual management charges, introduced in
January 2018, will smooth the potential volatility
of these charges.

UK inflation (CPIH) rose from 2.3% in March
2017 to a recent high of 2.8% for September,
October and November 2017, sparking talk of
potential small interest rate hikes to come, but
has since retreated to 2.3% for March 2018.
Gilts have been reflecting these inflation shifts
as well as political and economic changes. This
has accompanied the perception of an increased
likelihood of a normalisation of rates, with the UK
10 year Gilt yield having moved in a range from
lows of 0.98% in March 2017 and just below
1% in September 2017, to a high of 1.68% in
February 2018 and finishing the period at 1.41%.
Sterling followed suit from lows of USD 1.25 in
April 2017 strengthening in 2017 before rising
further in early 2018 to just over USD 1.40 in
March 2018. (Source: Bloomberg.)

The MSCI IMI UK Liquid Real Estate Index has
returned approximately 3.84% during the year,
reflecting the uncertainty emanating from the
Brexit vote. Although there are many participants
who believe the market is high, property remains a
relatively low return asset for portfolio diversification
and income production over the long term.

Our position in the market
We continue to forge an integrated Investment
Management and Wealth Management business
for high net worth and mass affluent clients
from bases in London, York, Birmingham and our
regional offices, including the most recent addition
in Newbury.

Discretionary and Advisory Assets Under
Management (AUM) in 2017/18 have remained
stable. Whilst there are clear demographic
pressures on the traditional private client
groupings, we see continued AUM growth
opportunities from the more recent changes of
pensions legislation, and from ongoing referrals
and introductions from clients and intermediaries.
According to surveyed firms within a recent
Compeer Survey, the Wealth Management

Mark Rushton, Chief Investment Officer

19
Strategic report

Walker Crips Group plc
Annual Report and Accounts 2018

industry has reached an all time high of £957bn
as at the end of 2017. The key will be providing
a scalable offering while maintaining a high level
of service.

transfers. With all these forces in play, the industry’s
period of change and modernisation in recent years
is likely to continue, having already accelerated over
the last five years.

We maintain our culture and the appeal of
independence, flexibility and integrity, alongside
our Associate model, with a focus on achieving
the right customer outcomes. We compete with
our peers and larger institutions, by continuing to
provide Advisory services alongside Discretionary
and Managed services. Larger competitors
limit the service they offer to clients in order to
simplify their offering, at the expense of client
choice. Demand for advice is increasing as clients
are challenged by the vagaries of UK tax, the
changing regulatory environment and economic
circumstances that are difficult to chart; and
many wish to save time through a holistic service.
Whilst addressing continuing regulatory pressures,
we also continue to develop our in-house IT and
systems and seek to develop revenue streams
that constitute an increasing percentage of
fees, adding complementary businesses without
detracting from our investment management and
wealth management offerings.

With the achievement of MiFID II and its ongoing
obligations, and the additional controls and oversight
regarding GDPR and other regulatory changes to
come (e.g. the Senior Managers and Certification
Regime), the barriers to entry are ever tougher.
In the traditional broad wealth management
industry, we expect further consolidation as a result
of the need for scalability and the high quantum
of regulatory and technology development costs.
Although robo-advice and challenger entrants with
apparently simple and focused business lines have
been encouraged, they have not gained as much
traction in UK as predicted and they are finding the
challenge of meeting the suitability requirements
both expensive and inhibitive for their potential
growth in market share.

Geo-political change, continuing regulatory
requirements, technological developments and a
challenging investment environment will be amongst
the key challenges during the year ahead.

GBP/USD

30 Mar 18
1.4034

29 Sep 17
1.3395

29 Jun 17
1.2989

29 Dec 17
1.3524

31 Mar 17
1.2542

1 April 2017

31 March 2018

FTSE 100 Index

30 Jun 17
7350.32

29 Dec 17
7687.77

31 Mar 17
7322.92

29 Sep 17
7372.76

29 Mar 18
7056.61

1 April 2017

31 March 2018

The year ahead
The degree of uncertainty in 2017 continues to
pervade the economic, geopolitical and UK/EU
political stability in 2018. UK Brexit negotiators
continue to address a challenging future, with
negotiations destined to be extended. The
future is likely to present further volatility and the
potential for specific market declines.

With significant political, economic and regional
conflict risk in the future, a suitably constructed
investment stance makes good sense, with
income generating assets and compounding
helping to outperform inflation over the
medium term.

Challenges and concerns across the industry
include: rising cost/income pressures; increasing
and costly regulation; costs of technology,
innovation and defending against the threat
of cyber attack; reputational threats; market
volatility; and changing client demand from
demographic shifts and generational asset

UK Wealth Management
industry in 2017

6.78bn

UK Wealth Management Industry Revenue

UK 10 YEAR GILTS (YIELD%)

549bn

Discretionary assets under management

957bn

UK Wealth Management Industry
Investment Assets

31 Mar 17
1.139

29 Sep 17
1.365

29 Mar 18
1.350

29 Dec 17
1.190

30 Jun 17
1.257

Source: Compeer Survey June 2018

1 April 2017

31 March 2018

20
Strategic report

Walker Crips Group plc
Annual Report and Accounts 2018

Key performance indicators

The Group’s strategy continues to deliver results and progress.
Performance in 2018 is set out below with data from preceding
years. Year-on-year data is presented on a consistent basis providing
measurable indicators. The Board will continue to monitor these
KPIs regularly.

30.5m

2017: £29.2m

Revenue
(m)

0.91m

2017: £1.10m1

20.5m

2017: £20.4m1

Operating profit before exceptional
items (m)

Gross profit
(m)

29.2

30.5

26.1

1.101

0.91

0.65

20.41

20.5

17.6

Growth in Discretionary and Advisory
AUMA has led to an increase in Revenue
of 4.5% as a result of increased fees and
commission income.

A decrease of 17.8% in Operating Profit before
Exceptional Items has come despite record
revenues, which have been outpaced by the
growth in commission payable and higher
administrative expenses.

Gross profit has remained stable.

5.0bn

2017: 5.2bn

Growth in total assets
(AUMA) (bn)

5.2

5.0

4.1

Administration

Advisory

Discretionary

Breakdown of total assets
(AUMA) (bn)

5.2

5.0

2.020

1.685

1.880

1.802

1.351

1.514

4.1

1.835

1.250

1.029

3.3bn

2017: 3.2bn

Discretionary/ advisory AUM
(bn)

3.2

3.3

2.3

Decrease of 4% in Total Assets has come
from outflows of execution only assets,
market decreases in asset values, offset
by growth in discretionary AUM from
new hires.

The AUMA decrease has derived from:
Administration down 17%; Advisory down 4%;
and Discretionary up 12%. Non-Discretionary
(i.e. Administration and Advisory AUM) taken
together, decreased by 11%.

Discretionary and Advisory AUM, taken
together, grew by 3% from inflows of
new discretionary assets offset by market
decreases in asset values.

1 Amounts have been restated and are explained further in Note 33.

21
Strategic report

Walker Crips Group plc
Annual Report and Accounts 2018

2017: 3

New revenue generators
(number)

1.87p

2017: 1.87p

Total dividends
(Pence per share)

1.87

1.85

Two new revenue generators were hired in the
Investment Management division contributing
to the increase in Discretionary AUM. A further
two revenues generators were hired as part of an
expansion in the Wealth Management division.

The maintenance of Total Dividend reflects
the reduction in this year’s rate of growth and
prudent use of available reserves.

134,980

2017: 136,997

Transaction volume
(number)

64.1%

2017: 61.8%1

Non-broking income
proportion (%)

136,997

134,980

61.8

61.81

64.1

134,961

In the first half, transaction volume continued
along the same more favourable trajectory as
in the second half of 2017, but has been more
muted in the second half of 2018, checked at
various times by the implementation of MiFID II
and bouts of Brexit driven uncertainty, and
consequently finishing lower than last year.

1 Amounts have been restated and are explained further in Note 33.

The non-broking income percentage
increased strongly during the year driven by
Discretionary asset inflow, with Management
fees growing by 12%.

For the Company’s
viability statement,
see page 29.

This Strategic report
has been approved and
signed on behalf of
the Board.

Sean Lam
Chief Executive Officer
31 July 2018

David Gelber
Chairman
31 July 2018

22
Corporate governance

Walker Crips Group plc
Annual Report and Accounts 2018

Corporate
Governance

24 Board of Directors

26 Introduction to governance

27 Report by the Directors on corporate

governance matters

31 Audit Committee report

35 Remuneration Committee report

43 Directors’ report

45 Statement of Directors’

responsibilities

24
Corporate governance

Walker Crips Group plc
Annual Report and Accounts 2018

Board of Directors

EXECUTIVE DIRECTORS

1 | Sean Lam FCPA (Aust.), Chartered FCSI
Chief Executive Officer

2 | Rodney FitzGerald FCA
Group Finance Director

C M R i

Sean is a passionate technologist and innovator
and has made it his quest to ‘engineer out
complexities’. He graduated in 1991 with a
Bachelor of Commerce from the University of
Western Australia majoring in accounting and
finance. He was Head of Internal Audit with
Phillip Securities in Singapore. In 1995, he was
appointed Head of Operations and in the same
year he attained his professional qualification as
a CPA. In 1999, Walker Crips Group appointed
Sean to the Board as Development Director, with
overall responsibility for systems development
and technology. In 2004, he was made Chief
Operating Officer, and in 2007, Group Managing
Director and Chief Technology Officer. Sean is a
Fellow of CPA Australia, a member of its European
Council from 2010 - 2015, and President of its
European Region in 2012 and 2013. He is also a
Chartered Fellow of the Chartered Institute for
Securities & Investment. Sean was appointed
Group Chief Executive Officer in September 2017.

Rodney FitzGerald serves as Group Finance Director
of Walker Crips Group plc. He is a mathematics
graduate of Leeds University and qualified as a
Chartered Accountant in 1979 with Hays Allan &
Co. After holding senior financial positions outside
the financial services sector, he joined independent
stockbrokers T C Coombs & Co. in 1987 and was
appointed to the Board in 1989. More recently, he
was Finance Director of MeesPierson ICS Limited,
now ABN AMRO Clearing, before joining the
Board of Walker Crips Group as Finance Director in
1999. He was appointed Chief Executive Officer in
January 2007. Rodney retired from the CEO role in
September 2017.

3 | Mark Rushton
Chief Investment Officer

Mark Rushton graduated in 1984 with an MA
in Law from Downing College, Cambridge
University. Before joining the Walker Crips
Group Board in 2012, Mark’s previous role had
been at BNP Paribas where he was Head of
Offering for UK Wealth Management, before
which he lead corporate development at Fortis.
Prior to 2007, he held senior roles at Cazenove
Capital Management, UBS and Mitsubishi UFJ
Trust International. Mark was appointed CEO
of Walker Crips Stockbrokers in September
2017 which he combines with his current Chief
Investment Officer role.

25
Corporate governance

Walker Crips Group plc
Annual Report and Accounts 2018

NON-EXECUTIVE DIRECTORS

4 | David Gelber
Chairman

A N R

David Gelber has served as Non-Executive
Independent Chairman of the Board of Walker
Crips Group plc since May 2007. He served as
Group Chief Operating Officer of ICAP plc from
1994 to 2005 and previously held the position of
Chief Operating Officer of HSBC Global Markets.
Prior to joining HSBC he held senior trading
positions at Citibank, Chemical Bank and J P
Morgan. He currently serves as a Non-Executive
Director of IPGL Ltd, an investment holding
company, DDCAP Ltd, an arranger of Islam-
compliant financial transactions, Extoix LLP, a
Frontier Market investment boutique and Amadeo
Air Four PLC, a closed-end fund investing in aircraft
leasing. His previous directorships include Globeop
Financial Services and eSeclending LLC in Boston.

5 | Martin Wright
Senior Independent Director, Non-Executive

A N R

Martin Wright was appointed to the Board in
July 1996 as a Non-Executive Director and was
recently appointed Chairman of the Remuneration
Committee. He is a Partner of Charles Russell
Speechlys LLP (Solicitors) where he is a member of
the Partnership Council. Martin is a member of the
Law Society. He is also a Non-Executive Director of
a number of private companies.

6 | Clive Bouch FCA
Non-Executive Director

A N R

Clive Bouch was appointed to the Board in
March 2017 and chairs the Audit Committee as
well as being a member of the Nomination and
Remuneration Committees. He currently serves as
an independent Non-Executive Director of Invesco
UK Limited where he chairs the Audit and Risk
Committees, the Steamship Mutual Insurance
London and Bermuda Protection & Indemnity
Clubs where he is a member of the Claims, Finance
& Nomination and Audit & Risk Committees, and
The Ardonagh Group where he chairs the Audit
Committee. Previously he was a partner in Arthur
Andersen and then Deloitte where he provided
audit and advisory services to companies in the
financial services industry, latterly specialising in
the asset management, insurance and pension
sectors. He is a Fellow of the Institute of Chartered
Accountants in England and Wales, Fellow of the
Chartered Institute for Securities & Investment and
a Chartered Insurance Practitioner.

7 | Hua Min Lim
Non-Executive Director

N R

Mr. Hua Min Lim is the Executive Chairman of
PhillipCapital Group of Companies and was also
appointed Chairman of IFS Capital Limited on
20 May 2003. He began his career holding senior
positions in the Stock Exchange of Singapore and
the Securities Research Institute. He has served
on a number of Committees and sub-Committees
of the Stock Exchange of Singapore. In 1997, he
was appointed Chairman of the Stock Exchange
of Singapore (SES) Review Committee, which is
responsible for devising a conceptual framework to
make Singapore’s capital markets more globalised,
competitive and robust. For this service, he was
awarded the Public Service Medal (PBM) in 1999
by the Singapore Government. In 2014, he was
also awarded ‘IBF Distinguished Fellow’ (Securities
& Futures), the highest certification mark bestowed
by The Institute of Banking and Finance on industry
captains who are the epitome of professional
stature, integrity and achievement. Mr. Lim joined
the Walker Crips Group Board in March 1993.

KEY | BOARD COMMITTEES

A Audit Committee
C Compliance Committee
M Management Committee
N Nomination Committee
R Remuneration Committee
Ri Risk Management Committee

26
Corporate governance

Walker Crips Group plc
Annual Report and Accounts 2018

Introduction to governance

Dear shareholder,
The Board is committed to setting and achieving the highest standards of
good corporate governance which is critical to the delivery of our business
strategy to provide value to the Group’s stakeholders. Walker Crips is
governed and managed in the context of the principles of the 2016 UK
Corporate Governance Code, available to view at www.frc.org.uk.

An ongoing evaluation of the effectiveness of the Board and Audit
Committee has been conducted as well as its structure, competencies
and experience. We have arranged training for those areas where we
need to improve, and by working together we are already dealing
with the challenges. With a focus on strategy planning and improving
Management Information we are developing our culture throughout
the organisation.

The Board is responsible to shareholders for the overall management
and oversight of the Group and for its long-term success. In particular,
the Board is responsible for agreeing the Group’s strategy, monitoring
financial performance, setting and monitoring the Group’s risk appetite
and maintaining an effective system of internal controls.

There have been several critical Regulatory projects during the last
financial year with the implementation of the The Markets in Financial
Instrument Directive (MiFID II), General Data Protection Regulations
(GDPR) and commencement of the Senior Management and Certification
Regime (SM&CR). MiFID II will ensure improved transparency, particularly
on costs and charges and client reporting.

A major systems upgrade has been completed during the year and will
enable us to better serve our clients in a transparent and professional
manner appropriate to their needs and investment objectives.
We continue our focus on culture and behaviour in line with good
principles of conduct. The Financial Conduct Authority (FCA) Principles
for Businesses remain our most important benchmarks and we strive to
conduct our business with integrity and put client interests at the heart of
everything we do.

I can confirm that all Non-Executive Directors being proposed for
re-election at the Annual General Meeting continue to be effective and
demonstrate commitment to their role.

The Audit Committee, now Chaired by Clive Bouch, has met six times
during the year to discuss and review our published results and oversee
the results and reports of the compliance function as well as the internal
and external audit functions.

I continue to maintain frequent contact with the executive directors
outside the Board meetings and I am in regular dialogue with the Chief
Executive, who updates me with developments on current projects and
progress towards our objectives. I am also in regular discussion regarding
Board issues with our Senior Independent Director, Martin Wright, as
well as his fellow non-executive Director, Lim Hua Min, who resides in
Singapore but has held a stake in the business for over 30 years.

D. M. Gelber
Chairman
31 July 2018

27
Corporate governance

Walker Crips Group plc
Annual Report and Accounts 2018

Report by the Directors on corporate governance matters
year ended 31 March 2018

The Company is committed to the Principles of Good Governance set
out in the 2016 UK Corporate Governance Code (the Code). Further
explanation of how the principles have been applied is also set out below
and, in connection with Directors’ remuneration, in the Remuneration
Committee Report.

Compliance
The Company has been in compliance with the Code’s principles and
provisions throughout the year ended 31 March 2018 except as follows:

 Contrary to code B.1.1 the Chairman, David Gelber, Senior Independent

Director, Martin Wright and our Singapore-based Non-Executive
Director, Lim Hua Min, who is also a significant shareholder, have all
served on the Board for more than nine years. The Board reviews their
contribution every year and is satisfied that they remain independent.
This is evidenced by the objectivity and critical detachment that
underpin their continued provision of constructive challenge and
support to Executive Directors and management. David Gelber, Martin
Wright and Lim Hua Min will, therefore, be put forward for re-election at
the Annual General Meeting on 5 September 2018. Robert Elliott retired
from the Board on 6 September 2017.

 Contrary to code D1.1, the Group did not, during the year, have malus
and clawback provisions in place to be able to recover or withhold
variable pay from/to the Executive Directors. This has been addressed
since the year end and relevant documentation is now in place for all
Executive Directors except Guy Jackson who has now left.

 Contrary to code D.2.1, the Company Chairman (D. M. Gelber) chaired
the Remuneration Committee during the year because he is considered
to be independent by the Board for the reasons stated above. Since
the end of the year our Senior Independent Director, M. J. Wright, has
assumed the role of Chairman of this committee.

The Board of Directors
At year end, the Board of Directors consisted of four Executive and four
Non-Executive Directors. The full Board meets regularly throughout
the year.

The Board is provided with appropriate information to enable it to
discharge its duties. It has a formal schedule of matters reserved to

it for decision making, including, inter alia, developing the future
direction of the Group’s business, agreeing policies and procedures,
approving material transactions, business risk reviews, budgets and
borrowings and monitoring the Group’s progress. Decisions delegated
to management are not specifically listed but are limited to £50,000 in
value where financial commitments are necessary in the daily course of
business and £100,000 in value for investment and capital projects. All
subsidiary Boards of Directors and other management or operational
committees include at least one Main Board Executive Director who
serves as the link between operational decision making between the
Board and management.

Certain Executive and Non-Executive Directors of the plc Company are
also Directors of the Boards of the main operating subsidiary companies
which conduct regulated investment business, thereby playing an active
part in decision making and control at an operating level.

The roles of Chairman and Chief Executive, currently occupied by
D. M. Gelber and S. K. W. Lam (from 6 September 2017 following
R. A. FitzGerald’s retirement from the post of Chief Executive
Officer) respectively, are separated and the Board includes Non-
Executive Directors, of whom D. M. Gelber, R. A. Elliott FCA (retired
on 6 September 2017), C. Bouch FCA and M. J. Wright are regarded
as independent, and the remaining Directors believe they provide an
objective viewpoint.

The Board has three established Committees: the Audit Committee,
the Nomination Committee and the Remuneration Committee. The
Risk Management Committee and the Compliance Committee provide
operational input to Board meetings.

All Non-Executive Directors are being offered for re-election at the Annual
General Meeting where appropriate.

A satisfactory evaluation of the effectiveness of the Board, its Directors
and Audit Committee has been conducted and reviewed. This entailed an
evaluation of the summarised results of a widely used questionnaire.

During the year, the Directors, in their capacity as members of the Board/
appropriate Committee, attended the following number of meetings:

Number of meetings

D. M. Gelber (Non-Executive Chairman, Remuneration Committee Chair)
R. A. FitzGerald (Chief Executive until 6 September 2017)
S. K. W. Lam (Chief Executive from 6 September 2017)
H. M. Lim
M. J. Wright (Non-Executive Senior Independent Director)
R. A. Elliott (Non-Executive Audit Committee Joint Chair from 18 May to 6 September 2017)
M. J. W. Rushton
C. Bouch (Non-Executive Audit Committee Joint Chair, appointed 18 May 2017 until
6 September 2017 and Chair from 6 September 2017 onwards)
G. J. B. Jackson (resigned 23 July 2018)

1 By invitation.

2 As Company Secretary.

Remuneration
Committee

Board

Audit
Committee

Nomination
Committee

6
6
6
0
6
3
6

6
6

2
21
n/a
2
2
n/a
n/a

2
n/a

6
61
31
n/a
6
3
n/a

6
62

1
n/a
n/a
1
1
1
n/a

1
n/a

28
Corporate governance

Walker Crips Group plc
Annual Report and Accounts 2018

Report by the Directors on corporate governance matters continued
year ended 31 March 2018

Diversity and inclusion
In support of Lord Davies’s recommendations on Board diversity,
including the key issue of gender diversity, particularly given our present
Group Board composition, I am pleased to announce that during the
financial year we were able to promote internally two females to the
subsidiary boards. Wendy Eastwood was promoted to Managing Director
of Ebor Trustees Limited and Valentina Kang was promoted to Head of
Compliance and a board director of Walker Crips Stockbrokers Limited.
The Board recognises the governance benefits that breadth of perspective
and diverse traits deliver. We remain committed to promote talented
individuals as executives both internally and through recruitment with
our whole-hearted encouragement supported by accessible training and
regular open communication between Directors and staff.

Nomination Committee
The Committee consists of D. M. Gelber, M. J. Wright, R. A. Elliott (retired
on 6 September 2017), C.Bouch and H. M. Lim. It considers and makes
recommendations to the Board for the appointment of Directors. The
Chairman, D. M. Gelber, has no other significant commitments which
affect his ability to carry out his role effectively. When considering possible
candidates, the Committee evaluates their skill, knowledge, experience
and, in the case of Non-Executives, their independence and other
commitments. The structure of the Board and its collective experience and
skill set are assessed on the appointment or departure of any Director.

The Nomination Committee met several times during the year to
discuss the succession arrangements following Rodney FitzGerald’s
decision to retire as the Group Chief Executive and to consider and make
arrangements for Sean Lam’s appointment as his successor.

Audit Committee
During the year, the Audit Committee consisted of M. J. Wright,
D. M. Gelber, C. Bouch and R. A. Elliott. R. A. Elliott chaired the Committee
and subsequently joint chaired the Committee with C. Bouch from
18 May 2017 until his retirement from the Plc board on 6 September
2017. C. Bouch was appointed sole chair from 6 September 2017. The
Committee’s terms of reference include reviewing the annual compliance
plan and reports from the risk based compliance monitoring programme,
external audit, reviewing the internal audit plan, effectiveness and
independence, assessing the effectiveness of the Company’s internal
control procedures and the reporting of results. The Chief Executive,
attends these meetings by invitation as does the Group Finance Director.

The Company’s internal and external auditors and the Executive Directors
may, and do, attend Committee meetings by invitation. The Committee
has an ‘in camera’ discussion with BDO LLP, the external auditors at least
once a year without Executive Directors being present, to ensure that
there are no unresolved issues of concern. The Audit Committee met six
times during the course of the year. The external auditor discloses the level
of fees received in respect of the various services provided to the firm in
addition to the statutory audit and has confirmed to the Audit Committee
that the level of non-audit fees has not affected its independence. A policy
relating to the non statutory auditors undertakings has been agreed
with the Audit Committee and filed on the Group’s website.The Audit
Committee’s policy is to use the most appropriate advisers for non-audit
work, taking account of the need to maintain independence.

In August 2010, the Audit Committee approved the outsourcing of the
Internal Audit function to a leading firm of auditors, Smith & Williamson,
whose experience in the financial services sector provides the Board with
additional assurance that an adequate control framework is in place.

As explained further in the Audit Committee report, the external and
internal audit function is monitored for effectiveness.

Remuneration Committee
The Remuneration Committee consists of M. J. Wright, H. M. Lim,
C. Bouch and its Chairman, D. M. Gelber. The Committee is responsible
for agreeing the remuneration of the Executive Directors and other key
personnel of the Company. The full Board is responsible for agreeing the
remuneration of the Non-Executive Directors. The Chief Executive attends
certain parts of meetings of the Remuneration Committee by invitation.
Further details of the Company’s policies on Directors’ remuneration,
service contracts and share options are given in the Remuneration
Committee report.

A staff profit share scheme which enables all employees to share directly in
the prosperity of the Group has been in operation for several years. Profit
before tax for the current year eligible for this bonus calculation has fallen
below the minimum threshold and, accordingly, an amount of £34,000
(2017: £nil) has been allocated to the scheme for the year being reported.
An employee Share Incentive Plan incentivises employees to join with the
Company in making regular joint purchases of shares in the Company to
be held in trust for a minimum of three years.

Non-Executive Directors
Re-election of Non-Executive Directors is subject to shareholders’ approval.
The terms and conditions of appointment of Non-Executive Directors, as
well as the terms of reference for the Audit, Remuneration, Nomination,
Risk Management and Compliance Committees, are available for
inspection by any person at the Company’s London head office during
normal business hours and at the Annual General Meeting.

Executive Directors
Executive Directors have service contracts of varying lengths, but
maximum compensation for loss of office is limited to 12 months’ salary
in all instances.

Directors’ emoluments are disclosed in the Remuneration Committee
report.

Risk Management Committee
The Risk Management Committee (RMC) was formed on 7 July 2015
and replaced the Business Risk Panel. Attendees are selected based on
experience and their skill set which complements other members of the
RMC for optimal risk management.

The members of the Group Board and subsidiary boards are responsible
for ensuring that adequate systems and controls are in place and that the
businesses operate in accordance with all relevant legal and regulatory
requirements. The members of the Group and subsidiary boards are
responsible for the day to day management of each entity.

The objectives of the RMC is to assist the Group and subsidiary boards in
fulfilling its corporate governance oversight responsibilities by evaluating,
reviewing and reporting on:
 risk appetite, strategy and tolerance, including integration with the

Group’s culture, values and behaviour;

 the operation of risk management frameworks in the effective

mitigation of strategic, operational and external risks.

The Risk Management Committee ensures that all new initiatives,
projects and products are formally assessed and evaluated for the
degree of risk exposure and regulatory capital impact to the Group, so
enabling strategies for the elimination, mitigation or avoidance of risk to
be formulated.

Each year the Board conducts a robust assessment of the principal risks
facing the Group, including those that threaten its business model, future
performance, solvency and liquidity.

29
Corporate governance

Walker Crips Group plc
Annual Report and Accounts 2018

Compliance Committee
The Compliance Committee ensures the Group is in compliance with all
regulatory and legal matters and considers rule updates and guidance
notes from the FCA, Financial Ombudsman Service, Financial Services
Compensation Scheme and other UK regulatory bodies.

The Committee is also responsible for interpreting new rules, guidance
notes and regulations disseminated by the FCA and other European
regulatory bodies. In the current financial year, the firm was very busy
with the project management and implementation of the MiFID II,
GDPR and SM&CR.

The Committee also ensures all Compliance policy, procedures and
guidance are adequately and properly implemented.

Relations with shareholders
The Board recognises the importance of communications with
shareholders. The Chairman’s and Chief Executive’s Statements in this
Report and Accounts include a detailed review of the business and future
developments.

The Chairman and Chief Executive are in frequent contact with the
major shareholders, the Lim family, with important factors arising
from these discussions communicated to the Board immediately or by
discussion at the subsequent Board meeting.

The Board uses the Annual General Meeting to communicate with
private and institutional investors and welcomes their participation. The
Chairman aims to ensure that all of the Directors are available at Annual
General Meetings to answer questions. The proxy votes cast on each
resolution proposed at general meetings are disclosed at those meetings.

Shareholders wishing to make contact directly with the Board
should email the Group Finance Director and Company Secretary,
Rodney FitzGerald.

Internal control
The Board acknowledges its responsibility for the Group’s system of
internal control and has formalised the process for its review of internal
control (including financial, operational and compliance controls as well
as risk management) and defining the scope and frequency of reports
to be received, both by the Board and the Audit Committee. There is an
ongoing process for identifying, evaluating and managing the significant
risks faced by the Company and Group. This process has been in
operation throughout the year ended 31 March 2018 and up to the date
of approval of the Annual Report and Accounts and is regularly reviewed
by the Board and the Board is satisfied that it accords with the relevant
guidance. Due to the relatively small size of the Company and Group
there is a simple organisational and reporting structure. Financial results
and other information are regularly reported to the Board throughout
the year.

During the year, reviews of revenue and expense recognition controls
identified three incorrect treatments which have resulted in prior year
adjustments shown in Note 33 of these financial statements. Our
auditors also identified a technical accounting error that has persisted
for several years regarding the treatment in the Company only balance
sheet of the ownership interest in BPAM, which has been corrected
as explained in Note 53. Underlying causes have been reviewed and
relevant procedures strengthened to mitigate the risk of recurrence.

The Directors have reviewed the effectiveness of the Company’s system
of internal control by conducting an annual assessment of control
objectives after dialogue with relevant senior managers, control in
practice and their effectiveness and consider that the controls and

procedures established are appropriate for the Company and Group.
However, any system of internal control can only provide reasonable, not
absolute, assurance against material misstatement or loss.

The Group operates under a system of internal financial controls which
have been developed and refined to meet its current and future needs.

These include but are not limited to:
 the organisational structure and the delegation of authorities to

operational management;

 procedures for the review and authorisation of capital investments;
 budgets and forecasts which are reviewed by the Board;
 the reporting and review of financial results and other operating

information;

 accounting and financial reporting policies to ensure the consistency,

integrity and accuracy of the Group’s accounting records; and

 financial and operating controls and procedures which are in place
throughout the organisation and monitored through various means
including routine and special reviews by both the external and
internal auditors.

Prospects
Although the Group has been profitable during a period of significant
growth in Revenue and Assets under management since 2012, the
Directors consider the business is underperforming and not delivering
satisfactory risk adjusted returns to shareholders. During the year a full
strategic review was undertaken to address this following the change in
leadership and a renewed strategy has been approved.

The renewed strategy is three pronged, building on the existing core
businesses of investment management and higher margin alternatives,
underpinned by both improved technology and a focus on cost control as
well as revenue growth to achieve the desired improvement in margins
and profitability. Importantly, drawing on our CEO’s core technology
competencies and explained further in his report on page 8, the strategy
includes the new strategic imperative to develop ‘Software as a Service’ as
a substantive business serving the financial services sector.

Given a period of time is needed to develop and embed the renewed
strategic initiatives, current projections anticipate the first significant
improvement in profitability emerging later in 2018/19. This also follows a
period of consolidation and renewal after the investment in and focus on
the substantial regulatory change agenda of recent years.

The Directors have confidence in the longer-term prospects for the
Group, as evidenced by the recent commitment to five and ten year
leases on our new York and London properties, and use five year
projections for business planning cycles, the Internal Capital Adequacy
Assessment Process (ICAAP) and stress testing. However, for the
purposes of the viability statement the Directors continue to consider
the three-year period remains appropriate. This period is aligned with
that over which the Directors expect the new strategy to make an
impact and also takes into account the unpredictability inherent in
the financial sector. In particular, although reducing, volume sensitive
commissions remain a material proportion of the Group’s income, the
Directors do not plan to revise the three-year viability statement period
in future but will keep it under review as the new strategy takes effect
and income sources evolve.

Viability statement
For the reasons explained above, for the purposes of the viability
statement the Directors have assessed the outlook of the Company
over three years, a period longer than the 12 months underpinning the
‘Going concern’ statement in accordance with the 2016 UK Corporate
Governance Code.

30
Corporate governance

Walker Crips Group plc
Annual Report and Accounts 2018

Report by the Directors on corporate governance matters continued
year ended 31 March 2018

Going concern
The Group continues to maintain a robust financial position. Having
conducted detailed cash flow and working capital projections and
appropriate stress-testing on liquidity, profitability and regulatory capital,
taking account of possible adverse changes in trading performance, the
Board is satisfied the Group is well placed to manage its business risks
adequately. The Board is also satisfied that it will be able to operate within
the level of its current financing arrangements and regulatory capital
limits imposed by the regulator, the Financial Conduct Authority (FCA).
Accordingly, the Board continues to adopt the going concern basis for the
preparation of the financial statements.

The assessment has relied on the latest annual budget, the Group’s ICAAP
which looks at risks, five-year forecasts and the prospects of the business
in the context of ensuring there is sufficient regulatory capital to meet
the strategic growth plans of the business; and evaluation of the Group’s
principal risks and uncertainties, including those that would threaten its
business model, future performance or solvency.

As a matter of good practice, and as part of the ICAAP process, the firm
performs a variety of stress tests. Two Group stress tests are performed
through discussions with senior management, after considering the
principal risks and uncertainties faced by the Group. The stress points
include the impact on revenues of a severe fall in global markets causing
a reduction in commission and fee income of 20% and 15% respectively
and the loss of major clients causing a reduction in total revenue of 10%,
two exposures prevalent in the financial sector.

The stress tests enable the Board to:
 model a variety of external and internal events that affect financial

projections, identifying the potential impact of stress events on income,
costs, cash flow and capital; and

 assess the effectiveness of management actions that may be taken

to mitigate the impact of the stress events which include reduction of
expenditure and, if required, dividends. The current business model of
the Group is resilient and there is sufficient regulatory capital to survive
a range of severe but plausible scenarios.

A reverse stress test allows the Board to assess scenarios and
circumstances that would render its business model unviable, thereby
identifying potential business vulnerabilities and ensuring the development
of potential mitigating actions and invocation of recovery plans.
During the year the Group has continued to evaluate the potential risks
and opportunities of the UK leaving the European Union. Although there
is limited clarity to the outcome and implications of negotiations, there
is no reason to believe that any potential impact on clients, our business
or the wider investment management sector will cause the Group to
cease to be viable over the long term. The Board will continue to monitor
developments and take necessary action as the risks and implications are
more fully disclosed and understood.

Taking account of the current financial position, strategic plans, principal
risks and the Board’s assessment of the Group’s prospects, the Directors
have a reasonable expectation that the Group will be able to continue in
operation and meet its liabilities as they fall due over a period of at least
three years.

31
Corporate governance

Walker Crips Group plc
Annual Report and Accounts 2018

Audit Committee report
year ended 31 March 2018

Composition and constitution
The Board through its Nomination Committee reviews the composition
of the Audit Committee (the Committee). New appointments are made
by the Board based upon the recommendations of the Nomination
Committee following consultation with the Committee Chairman.

The Committee will comprise at least two independent Non-Executive
Directors with appropriate experience. The current members of the
Committee are the independent Non-Executive Directors Clive Bouch, David
Gelber and Martin Wright. As reported last year, Robert Elliott stepped down
from the Board and Audit Committee at the last Annual General Meeting.

The Board is satisfied that Clive Bouch, being a Chartered Accountant,
has relevant financial experience and competence in accounting
and auditing and that all members are financially literate and have
experience of corporate financial matters. The Board is also satisfied that
the experience of the members as a whole means the Committee has
competence relevant to the sectors in which the Group operates.

David Gelber and Martin Wright have been Non-Executive Directors
since 2007 and 1996 respectively. Notwithstanding these tenures, for
the reasons explained on page 27, the Board considers them to remain
independent. David also chairs the Board, but given the relatively small
size of the Group and particularly his extensive broking and financial
services experience, the Nomination Committee remains of the view it is
appropriate that in accordance with C.3.1 of the 2016 Code he should
continue as member of the Audit Committee.

The Committee’s Terms of Reference, which have been reviewed and
updated, are available on the Company’s website at www.wcgplc.co.uk.

Main responsibilities of the Committee
The Committee assists the Board in its oversight of the:
integrity and quality of financial reporting and disclosure;
a.
b. selection and application of accounting policies and practices;
c.

f.
g.
h.

adequacy and effectiveness of the risk management systems and
internal control environment;
Group’s compliance with legal and regulatory requirements relevant
to financial reporting and accounting;
appointment/reappointment, independence and performance of
the external auditor, including the quality and effectiveness of the
external audit;
integrity of significant financial returns to regulators;
effectiveness of internal audit;
arrangements by which staff of the Group may, in confidence, raise
concerns about possible improprieties in matters of financial reporting
or other matters, and

i. other issues the Board may request the Committee’s opinion on.

Meetings
There were six formal meetings of the Audit Committee during 2017/18.
The Committee members’ meeting attendances are set out in the Report
by the Directors on corporate governance matters on page 27.

The Committee maintains a formal agenda of items that are to be
considered at each Committee meeting and within the annual audit cycle,
to ensure that its work is in line with the requirements of the 2016 Code
and all areas of its remit are addressed. The items to be reviewed are
agreed by the Committee Chairman on behalf of his fellow members. Each
member has the right to require reports on additional matters of interest.

The Chief Executive and Finance Director normally attend Committee
meetings. At the Committee’s request, other senior management

are invited to present reports as relevant to enable the Committee to
discharge its duties. The internal and external auditors are both invited to
and do attend all meetings.

Committee activities
The work of the Committee during the year to 31 March 2018, fell into
three main areas:

1. Accounting and financial reporting
The Committee reviewed the:
a. annual and interim financial statements;
b. significant financial reporting policy disclosures and judgements;
c.

the appropriateness of the preparation of the financial statements on
a going concern basis;
long-term viability statement prior to Board approval; and
Annual Report to consider whether, taken as a whole, it is fair,
balanced and understandable and provides information relevant to
shareholders’ assessment of the Group’s performance, business model
and strategy.

d.
e.

2. Internal controls
The Committee:
a.

monitored the integrity and effectiveness of the Company’s internal
financial controls by reference to summaries of business risk and
mitigating controls, and reports and presentations from internal
audit, external audit, other subject matter specialists and heads of
compliance and risk;
assessed the scope and effectiveness of the systems established to
identify, manage, and monitor financial and non-financial risk;
reviewed the Group’s whistleblowing policy and conduct risk
framework and policy;
monitored and reviewed the plans, work, resources and effectiveness
of the internal audit function together with its recommendations
and management’s responses to its proposals;
received progress reports and challenged management on the
Group’s preparations for MiFID II and GDPR;
reviewed actions taken in response to reports on internal controls
in order to address any weaknesses identified, with particular focus
during the year on data protection, closing the books process and
new revenue recognition procedures and controls; and
reviewed management’s report on the root cause of the failure
in financial reporting controls which gave rise to the prior year
adjusting items disclosed in Note 33 and 52, and the actions taken
to strengthen procedures and the control environment to mitigate
risk of recurrence.

3. External audit
The Committee:
a.

reviewed BDO LLP’s (BDO) audit approach, scope of work to be carried
out and audit findings;

approved a new non-audit services policy:

b. reviewed the auditor’s independence and objectivity;
c.
d. considered the effectiveness of the external audit; and
e.

discussed the findings of the FRC’s 2017/18 report on its audit quality
inspection with the engagement partner.

When reviewing the preparation, content and presentation of the Annual
Report the Committee considers, and challenges management on and to
take account of, the matters raised in the FRC’s letter to Audit Committee
Chairs and Finance Directors. There have been no interactions between
the Company and the FRC during the period.

32
Corporate governance

Walker Crips Group plc
Annual Report and Accounts 2018

Audit Committee report continued
year ended 31 March 2018

External auditor
BDO was appointed at the AGM held on 3 August 2016 following
a competitive tender and the audit of the 31 March 2018 financial
statements is their second year as the Group’s auditor. The Committee
intend to conduct an audit tender process again before the tenth
anniversary of BDO’s appointment.

BDO reports to the Committee on its actions taken to comply with
professional and regulatory requirements to ensure its independence.
During the year the Committee updated the policy for the engagement of
external auditors to perform non-audit work. The new policy sets out more
rigorous controls to ensure the external auditor’s independence is not
impaired and is published on the Company’s website www.wcgplc.co.uk.
BDO also conducts a review of the interim half-year statement of the
Group, provides reports to the Financial Conduct Authority in respect
of client assets and is engaged to undertake an AAF 01/06 review,
being an assurance report on internal controls of the Group as a service
organisation. The Committee considers BDO is best placed to perform
this work in view of their independence, competencies and knowledge
acquired through the external audit engagement and resulting
efficiencies. No other services have been provided. Details of external
audit and non-audit fees are disclosed in Note 9 on page 66 of the notes
to the financial statements.

The performance of the external auditor is monitored on an ongoing
basis and takes account BDO’s knowledge of our sector, quality and
experience of the individuals assigned, level of engagement, effectiveness
of communication, feedback from management and Committee
members and published findings of the FRC’s audit quality inspection
reviews. As part of the Committee’s deliberations on audit quality and
effectiveness, the Chair of the Committee meets with the external
audit partner to discuss this important matter and share feedback. The
Committee is satisfied that BDO has performed an effective audit.

The Committee reviews specific reports and best practice suggestions
presented by the external auditor. The Committee discusses and
acts upon the external auditor’s comments relating to internal
financial control and on the preparation of the financial statements.
The Committee reports any issues directly to the Board after each
meeting. The Committee also meets with the external auditor without
management being present at least once a year. The statutory audits
have not resulted in any significant control issues that would require
material adjustment to the accounts.

Internal audit
The provision of internal audit activities continues to be outsourced to
Smith & Williamson LLP (S&W).

The internal audit function reports directly to the Committee. The internal
audit plan and scope of work is reviewed and approved by the Committee
each year after being appraised by management. The annual budget is
agreed between the Committee Chairman and Chief Financial Officer
having regard to the planned scope of work.

The internal audit reports and their proposals are presented to the
Committee. Management’s comments are tabulated and suggested
actions debated. Issues arising are followed through.

During the year internal audit conducted reviews addressing the
effectiveness of governance and committee structures, data protection,
cyber security and integrity of regulatory returns. The focus for internal
audit’s work in the coming year includes protection of client assets,
business continuity risk, suitability and financial crime. To support the
effectiveness of assurance coverage across the second and third lines of
defence, internal audit now present a three year rolling plan.

The Committee also monitors any other services that S&W provide
to ensure the integrity and independence of the Group’s third line of
defence is not compromised.

The Committee monitors the effectiveness of the internal audit
service provided by S&W. The particular focus is on competence and
capabilities, subject matter expertise, timely reporting and the quality of
communication and recommendations. During the year S&W transitioned
partner responsibility for leading their service, which the Committee
consider was performed effectively. The Committee is satisfied with the
service provided by S&W and will continue with the arrangements.

Going concern and longer-term viability statement
Disclosures regarding the adoption of the going concern basis of
financial statement preparation and the Directors’ viability statement
are found on pages 29 and 62. In considering these disclosures the
Committee reviewed the Group’s strategic priorities, projections for
the forthcoming year and medium term, current business performance
against those projections, the stress scenarios set out in the Group’s
ICAAP, current financial resources and capital expenditure plans. The
Committee sought improvements in the disclosures regarding prospects
for the Group and the linkage to the period selected for the Viability
Statement. The Committee challenged the reasons for the period
adopted and the consideration given to any key assumptions and
dependencies. The Committee noted in particular that:
 the Group is embarking on a renewed strategy as described in the

Chairman’s and CEO’s Reports;

 the projections include provisions for additional expenditure by

management for planned initiatives to support the renewed strategy;
 the payment of an interim and final dividend from the Group’s surplus
cash resources and distributable reserves has been and continues to be
a key financial objective of the Board;

 92% of the Group’s regulatory financial resources at 31 March

2018 are held in cash or cash equivalents and there are no material
restrictions on accessing or utilising required liquidity throughout the
Group, including for the proposed final dividend in respect of the year;

 the Group’s regulatory capital at 31 March 2018 was 188% of its
regulatory capital requirement and all regulated entities within the
Group held capital in excess of their solo regulatory requirements;

 the Group has entered into two new 10 year property leases;
 the Group had no structural debt obligations or critical dependencies on

overdraft working capital funding;

 an intraday credit line is made available by our principal bankers

to enable daily net settlement of market transactions in an
orderly fashion;

 ICAAP stress scenarios demonstrate management actions to

mitigate the impact of significant sensitivities such as the loss of key
revenue producers, significant falls in markets, a large rogue trade, an
operational failure, losses from fraud or cyber attack. In certain cases
a key impact in such stress situations is the potential reduction or
elimination of dividend payments;

 management continue to have reasonable basis to conclude any

obligation to HMRC as provided for and disclosed in Note 24 on page
75 will be recovered in full from Liontrust Asset Management plc;
 financial commitment and estimated future cash consideration

obligations as disclosed in Notes 29 and 34 on pages 76 and 77 are
planned for; and

 management’s assessment of the contingent liabilities disclosed in

Note 31 is that no obligation will arise.

33
Corporate governance

Walker Crips Group plc
Annual Report and Accounts 2018

Financial reporting and significant financial judgements
The main areas considered by the Committee are set out below:

Matter considered

Action

Impairment of goodwill and intangible assets
The Consolidated Statement of Financial Position includes goodwill
of £4.4m and client lists of £7.8m. These balances arise on business
combinations or hiring of individuals or teams of investment managers.

The goodwill arose on, and has been allocated to, the acquisitions of
London York £2.9m and Barker Poland Asset Management £1.49m, which
continue as identifiable cash-generating units (CGUs). The year-end
unamortised value of client lists attributed to these CGUs are £nil and
£2.8m respectively, with the remaining balance being attributable to
individuals or teams of investment managers hired.

HMRC liability re: payments to former fund managers
As disclosed in previous interim and annual reports, HMRC assessed
the Company as liable for Income Tax, National Insurance and
interest in respect of payments made by the purchaser of Walker
Crips Asset Managers Limited following its sale in 2012. Under the
Sale and Purchase Agreement the purchaser and/or fund managers
were considered liable for any such obligations. In these financial
statements full provision for the total estimated amounts due
to HMRC of £2.0m has been made (see Note 24), together with
recognition of an asset for the recovery the same amount from the
purchaser included in other debtors as this recovery is considered
virtually certain.

Provisions
The financial statements include provisions and liabilities in respect
of dilapidations (£0.65m), old outstanding legal cases, customer
complaints or claims (£0.46m). These amounts are estimated with
varying degrees of certainty.

Exceptional items
The Group classifies certain material items as exceptional to allow a
clearer understanding of the underlying trading performance of the
business. In 2017/18 these amounted to charges of £0.016m and in
2016/17 they were £0.36m (see Note 7 on page 65).

New accounting standards
New accounting standards IFRS 9 and IFRS 15 will apply to the Group’s
results for the year end 31 March 2019. IFRS 16 will apply to the Group’s
financial statements for the year end 31 March 2020.

Management assess any impairment of goodwill by comparing the
book value of assets attributable to the CGUs to the higher of their
fair value less cost to sell or value-in-use. The Committee reviewed
management’s papers supporting the conclusion there was no
impairment, with particular challenge regarding the assumptions used
and adequacy of the disclosures (see Note 14). The Committee also
considered the procedures performed by the external auditors (see the
independent auditor’s report on page 50).

The values attributed to client lists are amortised over their estimated
useful lives, being periods between 3 and 20 years. Management
assess any further indicators of impairment by reference to the
continuing value of Assets Under Management and Administration,
peer comparisons, the loss of senior investment managers, the loss
rate of clients, and other causes of possible outflows. The Committee
reviewed management’s supporting papers in respect of indicators
of impairment and amortisation periods and as there have been
no impairment triggers identified, no impairment review of these
intangible assets is required. The Committee also considered the
procedures performed by the external auditors (see the independent
auditor’s report on page 49).

The Committee reviewed the paper prepared by management in
support of the accounting treatment. This included the rationale for
the quantum of the liability and the reasons why the recovery from
the purchaser is assessed as virtually certain, the latter also reflecting
written confirmation from the purchaser that they will meet the liability
that falls due in full and assessment of their credit standing.

The Committee noted that the obligation and recovery are netted
within administrative expenses rather than being recorded gross as
expenditure and income respectively and challenged whether this
is appropriate. Management considered that such grossing up would
not provide meaningful information and that the matter is adequately
disclosed in the financial statements. This explanation was accepted.

The Committee considered management’s determination of the
amounts provided and concluded they were reasonable based upon
the information available.

The Committee also considered the procedures followed by the
external auditors and their findings, including those in respect of
provisions for client claims (see independent auditor’s report on
page 49).

The Committee requested, received and considered explanations from
management setting out the description of items that would fall to
be exceptional (see page 65), the reasons for the treatment of each
item classified as exceptional in the year, and the proposed disclosures,
including the reconciliations provided in the Chairman’s Statement,
challenging these to ensure clarity.

The Committee reviewed with management the approach to determine
the impact and application of these standards including disclosures
made in these financial statements. The Committee also considered the
work of external auditors and was satisfied with the conclusions and
related disclosures.

34
Corporate governance

Walker Crips Group plc
Annual Report and Accounts 2018

Audit Committee report continued
year ended 31 March 2018

Performance evaluation
Since the last report, Committee members have maintained and developed their knowledge and awareness through a combination of self-reading,
practical experience, receiving presentations and/or undertaking formal CISI modules on technical accounting matters including IFRS 9, 15 and 16
as well as important industry developments and regulation including MiFID II, GDPR and SM&CR. The Committee monitors its competencies and
performance throughout the year and has continued to operate effectively. The next formal evaluation will be undertaken this autumn based on
feedback to a questionnaire distributed to the Committee members and others who regularly attend the Committee meetings.

Approval
This report in its entirety has been approved by the Committee and the Board of Directors and signed on its behalf by:

C. Bouch FCA
Chairman
31 July 2018

35
Corporate governance

Walker Crips Group plc
Annual Report and Accounts 2018

Remuneration Committee report
year ended 31 March 2018

Remuneration report – introduction
This is the Remuneration Committee report for the year ended 31 March
2018. It sets out the remuneration policy and remuneration details for
both the Executive and Non-Executive Directors of the Company. It has
been prepared in accordance with Schedule 8 of The Large and Medium-
sized Companies and Groups (Accounts and Reports) Regulations 2008 as
amended in August 2013 (referred to below as Schedule 8).

Annual statement from the Chairman of the
Remuneration Committee
This has been a further year of consolidation for the Group, as we
continued to overall our regulatory and compliance systems. Our senior
management team has remained stable and basic salaries were increased
marginally. Directors’ bonuses have been paid to certain Directors based
on Group or divisional profitability, as set out on page 36.

The report is split into two main areas:
 the statement by the Chairman of the Remuneration Committee

set out opposite; and

 the Annual report

The Annual report on remuneration provides details on remuneration in
the period. The Policy report was approved by the shareholders at the
2017 Annual General Meeting for a period of three years and is therefore
not being put to the shareholders at this year’s AGM. The policy was
developed in conjunction with the introduction of a new package for the
incoming Chief Executive. The policy is available for inspection on pages
40 to 44 of the Annual Report for 2017 on the Company’s website at
www.wcgplc.co.uk.

A resolution to approve the Annual report on remuneration will be put to
this year’s Annual General Meeting to be held on 5 September 2018.

The Companies Act 2006 requires the auditor to report to the
shareholders on certain parts of the Directors’ remuneration report and
to state whether, in their opinion, those parts of the report to be audited
have been properly prepared in accordance with Schedule 8. The parts of
the Annual report on remuneration that are subject to audit are indicated
in that report. The statement by the Chairman of the Remuneration
Committee and the extract of Policy report are not subject to audit.

On 6 September 2017, our Chief Executive Officer, Rodney Fitzgerald,
entered a period of phased retirement set to conclude in September
2019. His successor, Sean Lam, assumed his new responsibilities the same
day. The Committee took the opportunity to make several amendments
to his service contract, including an increase in basic salary from
£168,000 to £220,000 p.a. at a level of remuneration in line with relevant
market comparators. A revised bonus scheme was also introduced to give
Mr Lam the opportunity to earn a bonus up to a maximum of 100% basic
salary, subject to achievement of performance targets, linked growth
in profitability, efficient use of capital, growth in the share price, and
achievement of strategic objectives of the Group, with 40% of the bonus
as a minimum being deferred for a period of three to seven years.

Since the year end date, the Group has also introduced further
amendments to all Executive Directors’ contracts (except Compliance
Director Guy Jackson, who has resigned) to ensure full compliance with
malus and clawback requirements, as described in the 2016 UK Corporate
Governance Code D1.1, enabling the Company to recover or withhold
variable pay from/to the Executive Directors.

No material remuneration policy changes were made in the year to
31 March 2018. As noted last year, having made further progress
in implementing Group strategy and enhancing our systems, the
Remuneration Committee continues to monitor the Company’s
remuneration arrangements to ensure that it maintains appropriate
measures and processes for annual and long-term incentives.

M. J. Wright
Remuneration Committee Chairman
31 July 2018

36
Corporate governance

Walker Crips Group plc
Annual Report and Accounts 2018

Remuneration Committee report continued
year ended 31 March 2018

Annual report on remuneration – subject to advisory vote by shareholders at the 2018 AGM
This part of the report has been prepared in accordance with Part 3 of Schedule 8 and Listing Rule 9.8.6. In accordance with the regulations, the annual
remuneration report will be put to an advisory shareholder vote at the 2018 AGM.

Remuneration for the year ended 31 March 2018 (audited information)
The table below sets out the remuneration received by the Directors in relation to performance in the year to 31 March 2018 together with prior
year comparisons. To aid transparency to our shareholders, a single figure for the total remuneration due, or which will become due, to each Director
is disclosed.

Fees/basic
salary
£

Taxable
benefits
£

Personal
pension
contributions
£

Bonus taken
as pension
contribution
£

Bonus
£

Long Term
Incentive
Plan
£

Total
bonus
£

Share incentive
plan matching
share
contribution
£

Name of Director

Executive
R. A. FitzGerald

S. K. W. Lam

G. J. B. Jackson1

M. J. W. Rushton

Non-Executive
H. M. Lim

C. Bouch2

M. J. Wright3

D. M. Gelber

R. A. Elliott4

Total

Year

2018
2017

134,311
168,621

197,867
168,621

100,000
91,307

155,295
155,295

–
–

38,570
146

–
–

42,559
41,930

9,549
27,778

3,108
3,126

1,664
1,819

2,988
2,711

2,276
2,486

13,431
16,862

19,787
16,862

49,800
45,625

10,870
10,870

8,000
5,710

15,120
5,710

–
–

8,000
5,710

– 15,120
5,710
–

–
–

–
10,000

–
–

59,852
86,657

– 59,852 12,287
–
–

86,657

1,800
1,800

1,650
1,800

1,800
1,800

Total
£

160,650
196,119

236,238
194,812

154,438
151,443

242,380
257,108

–
–

1,350
–

39,920
146

–
–

1,800
1,800

900
1,800

–
–

44,359
43,730

10,449
29,578

678,151
653,698

10,036
10,142

93,888
90,219

82,972
98,077

– 82,972 12,287
–

10,000 108,077

11,100
10,800

888,434
872,936

Executives can elect to sacrifice fixed or variable remuneration into a pension scheme of their choice.

1 G. J. B. Jackson resigned on 23 July 2018.

2 C. Bouch appointed 31 March 2017.

3 Charles Russell Speechlys LLP received fees of £27,255 for the services of M. J. Wright who is a Partner.

4 R. A. Elliott retired 6 September 2017.

Annual bonus for the year ended 31 March 2018
The Group operates a profit sharing pool from which the Executive Directors may receive a discretionary bonus linked to performance which is
described on page 38. The Chief Executive Officer’s new bonus arrangements have been described in the Committee Chairman’s opening statement
to this report. In addition, the Chief Investment Officer, Mark Rushton, received a performance bonus linked to the profitability of the divisions
under his responsibility at a rate between 10-20% of divisional profit before tax. All bonuses are paid in cash with no deferred component, although
arrangements are now in place for future bonuses payable to the Chief Executive and the Chief Investment Officer to be awarded partly in shares
deferred from sale for three years.

Based on the Group’s results and profitability, the Committee has awarded modest discretionary annual bonuses payable in cash to the Executive
Directors.

Outstanding share awards
There were no share options outstanding and not vested at 31 March 2018 and 31 March 2017.

Deferred bonus
Deferred bonus arrangements have been put in place for Sean Lam upon becoming CEO. No awards have been made during the year.

37
Corporate governance

Walker Crips Group plc
Annual Report and Accounts 2018

Directors’ shareholding and share interests (audited information)
The interests of the Directors and their connected persons in the share capital of the Company are shown in the table below.

Director

R. A. FitzGerald
S. K. W. Lam
M. J. W. Rushton
G. J. B. Jackson (resigned 23 July 2018)
D. M. Gelber
C. Bouch
M. J. Wright

Beneficially
owned at
31 March
2017

Beneficially
owned at
31 March
2018

Beneficially
owned at
30 June
2018

295,617
444,727
118,480
8,790
143,898
10,500
16,129

306,491
485,319
128,913
16,961
155,935
16,733
16,129

308,959
487,787
131,383
16,961
158,405
19,201
16,129

Share Incentive Plan (SIP)
All employees of the Group are eligible to participate in the SIP following three months of service. Employees may use funds from their gross salary
up to a maximum of 10% of their gross salary in regular monthly payments (being not less than £10 and not greater than £150) to acquire Ordinary
Shares in the Company (Partnership Shares). Partnership Shares are acquired monthly. For every Partnership Share purchased, the employee receives
one matching share. All shares to date awarded under this scheme have been purchased in the market by the Trustees and it is the intention of the
Board to continue this policy in the year to March 2019.

A total of 754,838 (2017: 718,920) new Ordinary Shares were issued to the 118 employees who participated in the SIP during the year. At 31 March
2018, 3,277,993 shares were held in the SIP on their behalf. There were no forfeited shares not allocated to any specific employee.

Matching shares awarded to Directors and held under the SIP are as follows:

Director

R. A. FitzGerald
S. K. W. Lam
M. J. W. Rushton
G. J. B Jackson (resigned 23 July 2018)
D. M. Gelber
M. J. Wright
C. Bouch

31 March
2017

31 March
2018

23,723
37,915
20,244
4,395
38,152
–
–

27,943
20,023
24,464
8,225
42,372
–
3,086

Material contracts with Directors
Other related parties include Charles Russell Speechlys, in which M. J. Wright, Non-Executive Director, is a Partner. Charles Russell Speechlys provides
certain legal services to the Group on normal commercial terms and the amount paid and expensed during the year was £195,000 (2017: £324,000).

In addition, commission of £7,169 (2017: £8,562) was earned by the Group from Phillip Securities (HK) Limited (a Phillip Brokerage Pte Limited
company, where H. M. Lim is a shareholder) having dealt on standard commercial terms. Additionally, some custody services are provided by Phillip
Securities Pte Ltd (in Singapore where H. M. Lim is a Director), again all on standard commercial terms.

Total pension entitlements
There are no defined-benefit Company pension schemes in operation. The Company contributes a percentage of the Executive Directors’ basic salaries
into personal pension arrangements of their choice. In addition, salary sacrifice may be exercised in favour of additional pension contributions.

38
Corporate governance

Walker Crips Group plc
Annual Report and Accounts 2018

Remuneration Committee report continued
year ended 31 March 2018

Death-in-service benefits
Executive Directors are eligible for death-in-service benefit cover which is equal to four times the Director’s fixed remuneration.

Payments within the year to past Directors
There have been no disclosable payments made to Directors after they have left office during the year.

Loss of office payments
There were no loss of office payments made in the year ended 31 March 2018 (2017: £58,000). The prior period payments were made to
David Hetherton in relation to his retirement in November 2016.

Percentage increase in the remuneration of the Chief Executive

Chief Executive
– salary of Rodney FitzGerald until 6 September 2017
– salary of Sean Lam from 6 September 2017
– bonus of Rodney FitzGerald
– bonus of Sean Lam

Average per employee (£)
– salary
– bonus

2017
£

2018
£

72,992
95,628
5,710
5,710

72,992
124,767
8,000
15,120

Change

nil
30.5%
40.1%
164.8%

35,074
5,234

36,770
6,104

4.8%
16.6%

The table above shows the movement in salary and annual bonus for the Chief Executive between the current and previous financial year, with
both years time-apportioned to enable proper comparison, compared to that of the average employee. During the year Sean Lam replaced Rodney
FitzGerald as Chief Executive effective 6 September 2017. The Committee has chosen this comparator and it feels that the comparison of basic salary
provides a more appropriate reflection of the earnings of the average worker than the movement in the Group’s total wage bill, which is distorted by
movements in the number of employees. More junior staff receive a base salary and, in some cases, pension contributions. As such a comparison of the
movement in benefits for the Chief Executive and the average employee was not considered to be meaningful and has not been included.

Performance graph
The graph below shows a comparison between the Company’s total shareholder return (TSR) performance compared with the companies in the FTSE
Small Cap Index. The graph compares the value, at 31 March 2018, of £100 invested in Walker Crips Group plc on 31 March 2009 with the value of
£100 invested over the same period in the FTSE Small Cap Index. This Index has been chosen to give a comparison with the average returns that
shareholders could have received by investing in a range of other small UK public companies.

Total shareholder return compared to FTSE Small Cap Index

450

400

350

300

250

200

150

100

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

WCG Plc TSR (£)

FTSE Small Cap Index (£)

39
Corporate governance

Walker Crips Group plc
Annual Report and Accounts 2018

The table below shows the total remuneration figure for the Chief Executive during each of those financial years. The total remuneration figure includes
the annual bonus which was awarded based on performance in those years. No long-term incentive awards were made to the highest paid Executive
Director during the period.

Year ended 31 March

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

Total remuneration

£175,420 £193,807 £199,592 £174,512 £267,934 £186,769 £187,176 £189,264 £196,119 £203,453

Relative importance of the spend on pay
The table below shows the movement in spend on staff costs versus that in dividends.

Staff costs1
Dividends paid

1 Amounts have been restated and are explained further in Note 33.

2017
£000

12,108
716

2018
£000

12,236
786

Increase

1.1%
9.8%

Remuneration Committee governance
The Remuneration Committee is governed by formal terms of reference agreed by the Board. The terms of reference were reviewed during the year to
ensure they continued to accurately reflect the remit of the Committee. The terms of reference of the Remuneration Committee can be viewed on the
Company’s website. All of the Committee members are independent Non-Executive Directors.

The members of the Committee during the last financial year and their attendance at the meetings of the Committee are shown in the Report by
the Directors on corporate governance matters. The Remuneration Committee consists of three non-Executive Directors, David Gelber (Chairman),
Martin Wright (Senior Independent Director) and Clive Bouch (Chair of Audit Committee).

None of the Remuneration Committee members has any personal financial interests (other than as shareholders), conflicts of interest arising from cross
directorships or day-to-day involvement in running the business. The Remuneration Committee determines the individual remuneration packages of
each Executive Director. The Chief Executive (Sean Lam and previously Rodney Fitzgerald) attends meetings by invitation and assists the Committee in
its deliberations, except when issues relating to his own remuneration are discussed. No Directors are involved in deciding their own remuneration. The
Committee can call for external reports and assistance (from current advisors PricewaterhouseCoopers). Independent legal advice may be sought by
the Committee as required.

The Committee reviews the remuneration policy for senior employees below the Board, as well as the policy on pay and conditions of employees
throughout the Group. These are considered when determining Executive Directors’ remuneration.

During the period, the Committee met formally twice and a number of issues were considered and discussed, including but not limited to:

 remuneration policy for Executive Directors, including structure and performance criteria for the annual divisional and bonus pool arrangements;
 determination of remuneration, in particular for the new Chief Executive Officer from 6 September 2017;
 approval of compensation arrangements;
 determination of annual incentive payable to Executive Directors in respect of the year to 31 March 2018;
 oversight of remuneration arrangements for senior Executives;
 review of the Company’s Pillar 3 remuneration disclosures; and
 review of the Committee’s terms of reference.

External directorships
None of the Executive Directors held external directorships during the current and prior year.

How the remuneration policy will be applied for the year from 1 April 2018 onwards
The base salary review in 2018 resulted in a decision to award no increase to the salaries of the Executives. The salaries of Sean Lam and Rodney
FitzGerald were adjusted to reflect their new roles from 6 September 2017.

S. K. W. Lam
R. A. FitzGerald
M. J. W. Rushton
G. J. B Jackson1 (resigned 23 July 2018)

1 Excludes salary taken as pension.

Salary as at
31 March
2017

Salary as at
31 March
2018

£168,621
£168,621
£155,295
£91,307

£220,000
£100,000
£155,295
£100,000

40
Corporate governance

Walker Crips Group plc
Annual Report and Accounts 2018

Remuneration Committee report continued
year ended 31 March 2018

Fees for the Chairman and Non-Executive Directors
The Company’s approach to setting Non-Executive Directors’ fees is detailed in the Policy report. These fees are reviewed periodically by the Board. A
summary of current fees for Non-Executive Directors is as follows:

Chairman
Senior Independent Director
Audit Committee Chairman (C. Bouch)

Year ended
31 March
2018

£42,559
£27,255
£38,570

D. M. Gelber was appointed as Non-Executive Chairman of the Company by a letter agreement dated 11 May 2007 for a term commencing on 11 May
2007 of not less than two years and thereafter terminable by either party on at least six months’ notice in writing or otherwise in accordance with the
Company’s Articles of Association. His remuneration is now a fee of £42,559 p.a. plus reimbursement of expenses incurred on behalf of the Company,
plus a contribution by the Company to his share incentive plan.

M. J. Wright, Senior Independent Director, has a letter of appointment dated 9 July 2000 and accepted on 10 July 2000 for a term of not less than two years
commencing on 9 July 2000 and terminable by either party on not less than three months’ notice in writing or otherwise in accordance with the Company’s
Articles of Association. His fees are now £27,255 plus VAT p.a. plus expenses. His fees are payable to Charles Russell Speechlys quarterly in arrears.

H. M. Lim has no formal service agreement with and receives no remuneration from the Company.

R. A. Elliott, Co-Chairman of the Audit Committee, was appointed as a Non-Executive Director on 11 April 2005 by a letter agreement with a right for
him to resign immediately in accordance with the Company’s Articles of Association. Mr Elliott retired from the Board on 6 September 2017.

C. Bouch was appointed as a Non-Executive Director and later as Joint Chairman of the Audit Committee by a letter agreement dated 24 March
2017 for a term commencing on 31 March 2017 of not less than three years, save that the appointment is terminable by either party on at least
three months’ notice in writing or otherwise in accordance with the Company’s Articles of Association. His remuneration is a fee of £38,570 p.a. plus
reimbursement of other specific expenses incurred on behalf of the Company.

The fees were reviewed by the Board and an increase of 2.0% was agreed effective 1 April 2018.

Directors’ contracts are available for inspection at the Annual General Meeting or on appointment at our London head office.

LTIP for the Chief Investment Officer
The Company has presented details of the LTIP arrangements for the Chief Investment Officer. These were set out in the financial statements for the
year to 31 March 2012. They are summarised briefly in the Policy report below.

Statement of shareholder voting
At last year’s AGM, the Directors’ remuneration report received the following proxy votes from shareholders:

2017 AGM

Votes in favour
Votes cast against
Abstentions

Number

Percentage

14,499,768
20,000
28,000

99.7%
0.1%
0.2%

The Directors’ remuneration policy was approved by shareholders at the Annual General Meeting on 6 September 2017. The policy is available for
inspection on pages 40 to 44 of the Annual Report for 2017 on the Company’s website at www.wcgplc.co.uk.

2017 AGM

Votes in favour
Votes cast against
Abstentions

Number

Percentage

14,499,768
20,000
28,000

99.7%
0.1%
0.2%

Scope
 The Remuneration Committee (the Committee) determines the Group’s policy on the remuneration of the Executive Directors and other members

of executive management including employees designated as code staff under the FCA remuneration Code. The Committee’s terms of reference are
available on the Group’s website.

41
Corporate governance

Walker Crips Group plc
Annual Report and Accounts 2018

Fees policy for the Board Chairman and other Non-Executive Directors
The Board as a whole will determine the remuneration of the Non-Executive Directors, with Non-Executive Directors exempting themselves from
discussions and voting.

The Committee takes into account the following objectives in determining the Directors’ remuneration policy:
 This policy has been designed to support the delivery of WCG strategic business objectives and corporate values, by attracting, retaining and

motivating talented Directors and senior management of the calibre to manage the business successfully

 To reward and motivate good and above average performance
 To comply with the requirements of the FCA Remuneration Code after taking account of disapplication of parts of the Code determined by

proportionality guidelines set by the FCA

Key principles
 To adopt a structure of fixed and variable remuneration that will take account of Group performance and will motivate Directors and staff to develop

and expand the business responsibly

 To avoid creating incentives for excessive risk taking that exceeds tolerated risk levels of WCG or its risk appetite
 To adopt only incentive plans that align with the Group’s business strategy
 To make proportionate fixed and variable awards that are governed by this policy which should not prevent WCG from meeting its capital

requirements and consolidating its capital base

 To ensure that all types of remuneration arrangement operated by WCG outlined in this policy are regularly reviewed
 Where appropriate to reward exceptional contribution with specific arrangements
 To apply consistency with the general remuneration culture prevalent throughout the Group
 To ensure that WCG does not pay variable remuneration through vehicles that facilitate avoidance of local regulation

The following tables summarise the components and policy for Directors’ remuneration packages.

Element

SALARY

Purpose and link to strategy

Operation

Maximum opportunity

Performance conditions

Reviewed annually, effective
1 July. Agreed when results
for the previous year have
been finalized.

Reflect the value of the
individual and their role.
Reflect skills, experience over
time. Provide an appropriate
level of basic fixed income
avoiding excessive risk
arising from over reliance on
variable income.

Annual increases are
normally in line with
those provided to
the wider employee
population unless
there is a change in
the Director’s role
or responsibility or
there is a significant
divergence from
market comparatives
of similar executive
directorship roles

Except in the case of the
Chief Executive there is
no maximum, but the
Committee will exercise
its discretion responsibly
having regard to the
interests of shareholders.

The Chief Executive’s
discretionary bonus is
capped at a maximum
of 100% of basic salary.

N/A.

Specific awards agreed on an individual
basis consistent with the key principles.
A general discretionary award taken
from the pool will be allocated based on
performance measured over the financial
year, including achievement of specific
strategic-based objectives and upon profit
before tax of the Group for the WCG plc
Executive Board. The pool consists of 5%
of Group profit before tax in excess of
£956,214 and 15% above profit for the
year in excess of £1,373,032. The Chief
Investment Officer receives a bonus of
between 10% and a maximum of 20% of
his division’s profit before tax.

The Chief Executive must meet the
following criteria which may vary from year
to year: profitability growth, new initiatives,
efficient use of capital, achieve strategic
objectives, liquidity and growth in share
price, compliance with high standards of
conduct, risk and regulation.

BONUS

Incentivise annual
delivery of financial and
operational goals.

Relatively high potential
rewards for achieving
demanding targets for Group
profit before tax which is
based on the Board-approved
strategy for increasing profit
and shareholder value.

A discretionary bonus may
be awarded to the Chief
Executive on achievement
of stretching performance
targets and fulfillment of
certain behavioural and
numeric criteria.

Determined after results for the
financial year are signed off with
Group profit before tax being a
primary metric. A discretionary
bonus up to 15% of profits is
pooled for allocation to the
Executive Directors, other than
the Chief Investment Officer.

The Chief Investment Officer
under his contract is entitled to
an annual bonus based on the
profit for the year of his areas
of responsibility.

42
Corporate governance

Walker Crips Group plc
Annual Report and Accounts 2018

Element

Purpose and link to strategy

Operation

Maximum opportunity

Performance conditions

There is no maximum
opportunity.

Performance measured over ten years
with an award of 5% of the growth in the
value of core businesses of Walker Crips
Stockbrokers Limited.

LONG TERM
INCENTIVE
PLAN (LTIP)

Aligned to main strategic
objective. Based on
subsidiary’s measurable key
statistics (e.g. NAV growth).

An LTIP is currently in existence
for one Executive Director, the
CIO, Mark Rushton. Further LTIP
awards will not be made to
the current Executive Directors
unless separately approved by
shareholders but may be granted
to new Executive Directors.

Opportunity to defer growth
share award in subsidiary and
obtain future matching share
award in Parent, which vests
after four years.

Options vest after four years
and for a further 4 years. They
can be exercised over an eight
year period. There are terms
to allow for the recovery and
for withholding of the LTIP.
Terms are in place to allow
the application of malus and
clawback under the Codes
more effectively.

PENSION

Provide modest retirement
benefits. Opportunity for
Executive to contribute to
their own retirement plan.

Contribution to pension scheme
of Executive’s choice. HMRC-
approved salary sacrifice
arrangement.

N/A.

Monthly employer
contribution of 5-10%
of base salary. Salary
sacrifice for employee
contribution

OTHER
BENEFITS

Provide additional
fringe benefit.

Life Assurance – four times
basic salary.

Continuous upon
recruitment.

N/A.

Non-Executive Directors

FEES

Reflects the skills and
experience brought by the
Director and their role.

Medical Insurance for family
to age 24. Permanent Health
Insurance.

Participation in Company Share
Incentive Scheme.

Fees consist of a base Board
fee and fees for Chairmanship
of Committees. Account is
taken of practice adopted by
similar-sized organisations and
time commitment

BENEFITS

Provide market-related
benefits to Non-Executive
Directors.

Benefits include reimbursement
of expenditure incurred in
connection with their duties.

Approval
This report was approved by the Board of Directors on 31 July 2018.

Signed on its behalf by:

M. J. Wright
Remuneration Committee Chairman
31 July 2018

N/A.

Fees are reviewed
annually but not
necessarily increased.
Increases are normally
in line with inflation.

Reasonable costs.

N/A.

43
Corporate governance

Walker Crips Group plc
Annual Report and Accounts 2018

Directors’ report
for the year ended 31 March 2018

The Directors present their annual report on the affairs of the Group,
together with the financial statements and Auditor’s Report, for the year
ended 31 March 2018.

grounds of age, disability, gender reassignment, race, religion or belief,
sex, sexual orientation, marriage and civil partnership, maternity and
pregnancy and for the elimination of discrimination in pay between men
and women who do the same work

Results and dividends
Results, distributions and retained profits are as follows:

Retained earnings at 1 April1
Profit for the year after taxation
Dividends paid

2018
£000

11,163
745
(786)

Restated
2017
£000

11,304
575
(716)

Retained earnings at 31 March

11,122

11,163

1 Amounts have been restated and are explained further in Note 33.

The Directors recommend a final dividend of 1.29 pence per Ordinary
Share to be paid on 14 September 2018 to Ordinary Shareholders on the
register on 31 August 2018.

Capital structure
Details of the Company’s share capital are shown in Note 25. The
Company has one class of ordinary share which carries no right to fixed
income. Each share carries the right to one vote at general meetings of
the Company.

There are no specific restrictions on the size of a holding nor on the
transfer of shares, which are both governed by the general provisions of
the Articles of Association and prevailing legislation. The Directors are not
aware of any agreements between holders of the Company’s shares that
may result in restrictions on the transfer of securities or on voting rights.

Where shares have been issued as consideration for new clients to
investment advisers upon commencement with the Company, these
shares are restricted from sale for periods of four to six years.

No person has any special rights of control over the Company’s share
capital and all issued shares are fully paid.

With regard to the appointment and replacement of Directors, the
Company is governed by its Articles of Association, the UK Corporate
Governance Code, the Companies Acts and related legislation.
The Articles themselves may be amended by special resolution of
the shareholders.

Brief biographies of the Directors eligible and standing for election at the
Annual General Meeting are set out on pages 24 and 25.

Ethical responsibility
Our clients specify any ethical preferences that they have when we construct
their investment portfolios or make individual recommendations. We
actively support the professional institutes and trade associations of which
we are members to promote a strong ethical code of conduct.

Employment policy
We are committed to the principle of equality and equal opportunities in
employment. We are opposed to any form of less favourable treatment
or financial reward through direct or indirect discrimination, harassment,
victimisation to employees or job applicants on the grounds of age, race,
religion or belief, marriage or civil partnership, pregnancy or maternity, sex,
sexual orientation, gender reassignment or disability.

We recognise our obligations under the Equality Act 2010 and The Codes
of Practice published by the Equality and Human Rights Commission and
the European Commission for the elimination of discrimination on the

Health and safety policy
The Board has a policy of adopting procedures, appropriate to its activities,
to monitor, maintain and, where relevant, improve health and safety
standards to safeguard the Group’s staff.

None of the Company’s activities involve any significant health and
safety risks. During the year there were no injuries, illnesses or dangerous
occurrences which needed to be reported under the Reporting of Injuries,
Diseases and Dangerous Occurrences Regulations 1995.

Eligible employees can benefit from the Group’s permanent health
insurance scheme in the event of long-term illness preventing them from
carrying out their function.

Insurance and indemnification of Directors
The Company has put in place insurance to cover its Directors and officers
which gives appropriate cover for legal action brought against any of them.
In addition, the Company’s Articles of Association provide for the ability
of the Company to grant qualifying third-party indemnity provisions (as
defined in section 234 of the Companies Act 2006) for the benefit of the
Directors in relation to certain losses and liabilities which they may incur (or
have incurred) in connection with their duties, powers or office.

Ordinary and special business
Resolutions will be placed before the Annual General Meeting to confer
authority on the Company to allot equity securities of up to an aggregate
nominal amount of £946,162 and to authorise and empower the
Company to allot equity securities.

The Companies Act 2006 permits a public company to purchase its own
shares in accordance with powers contained in its Articles of Association
and with the authority of a resolution of shareholders. The Directors
believe that the Company should be authorised to take advantage of
these provisions and, therefore, pursuant to the power contained in the
Company’s Articles of Association, it is intended to propose a special
resolution at the forthcoming Annual General Meeting to confer authority
on the Company to purchase up to a maximum in aggregate of 10%
of the Ordinary Shares of 6 2/3 pence each in the share capital of the
Company at a price or prices which will not be less than 6 2/3 pence and
which will not be more than 5% above the average of the middle market
quotation derived from the London Stock Exchange Daily Official List for
the ten business days before the relevant purchase is made.

The authority was given at the last Annual General Meeting of the
Company for a period expiring at the conclusion of the next Annual
General Meeting. It is the Directors’ intention that a resolution for its
renewal will be proposed at each succeeding Annual General Meeting.
The Directors will only make use of the authority when satisfied that it is in
the interest of the Company to do so. Shareholders should note that any
Ordinary Shares purchased by the Company will either be cancelled and
the number of Ordinary Shares in issue will accordingly be reduced or will
be held as treasury shares.

Financial Instruments and risk management
The risk management objectives and policies of the Group are set out in
Note 23 to the financial statements.

44
Corporate governance

Walker Crips Group plc
Annual Report and Accounts 2018

Audit Information
Each of the persons who is a Director at the date of approval of this
annual report confirms that:
 so far as the Director is aware, there is no relevant audit information of

which the Company’s auditor is unaware;

 the Director has taken all the steps that they ought to have taken as
a Director in order to make themselves aware of any relevant audit
information and to establish that the Company’s auditor is aware of
that information; and

 a resolution to reappoint the auditor, BDO LLP, will be put to the AGM

on 5 September 2018.

By order of the Board

R. A. FitzGerald FCA
Director
31 July 2018

Directors’ report continued
for the year ended 31 March 2018

Substantial shareholdings
As at 31 March 2018, the following interests, excluding those of Directors,
in excess of 3% of the Ordinary Share capital of the Company were held:

Miton Asset Management Limited
L. W. S. Lim
L. W. Y. Lim
L. W. J. Lim

Number

Percentage

1,350,000
2,808,209
2,808,209
2,808,206

3.21
6.78
6.78
6.78

As at 30 June 2018, the following interests, excluding those of Directors,
in excess of 3% of the Ordinary Share capital of the Company were held:

L. W. S. Lim
L. W. Y. Lim
L. W. J. Lim

Number

Percentage

2,883,209
2,883,209
2,883,206

6.77
6.77
6.77

Pillar 3 disclosures
The Basel Capital Accord, issued by the Basel Committee on Banking
Supervision, aims to improve the flexibility and risk sensitivity of the
existing Accord. The Accord consists of three mutually reinforcing pillars.
Pillar 3 recommends requirements aimed at enhancing market discipline
through effective disclosure of information to market participants.

The disclosures can be found on the following website: www.wcgplc.co.uk.

Carbon emission reporting
Greenhouse Gas (GHG) emissions data for the year ended 31 March
2018:

Scope 1 – combustion of fuel
Scope 2 – purchased electricity

Total

Total emissions per employee

2018
tCO²e

17
198

215

1.00

2017
tCO²e

13
213

226

1.05

The Greenhouse Gas Protocol assessment methodology and UK
Government conversion factors for Company reporting have been applied
to calculate the emissions statistics in relation to material sources of
emissions for which the Group is responsible.

The reporting boundary used for collation of the above data is consistent
with that used for consolidation purposes in the financial statements.

The following sources of emissions are not deemed to be material for the
purposes of preparing this disclosure:
 vehicle use; and
 air conditioning.

45
Corporate governance

Walker Crips Group plc
Annual Report and Accounts 2018

Statement of Directors’ responsibilities
year ended 31 March 2018

Directors’ responsibilities pursuant to DTR4
The Directors confirm to the best of their knowledge:
 The Group financial statements have been prepared in accordance with
International Financial Reporting Standards (IFRSs) as adopted by the
European Union and Article 4 of the IAS Regulation and give a true and
fair view of the assets, liabilities, financial position and profit and loss of
the Group.

 The Annual Report includes a fair review of the development and

performance of the business and the financial position of the Group and
the Parent Company, together with a description of the principal risks and
uncertainties that they face.

By order of the Board

R. A. FitzGerald FCA
Director
31 July 2018

The Directors are responsible for preparing the Annual Report and the
financial statements in accordance with applicable law and regulations.

Company law requires the Directors to prepare financial statements for
each financial year. Under that law the Directors are required to prepare
the Group financial statements in accordance with International Financial
Reporting Standards (IFRSs) as adopted by the European Union and
have elected to prepare the Company financial statements in accordance
with United Kingdom Generally Accepted Accounting Practice (United
Kingdom Accounting Standards and applicable law). Under Company law
the Directors must not approve the financial statements unless they are
satisfied that they give a true and fair view of the state of affairs of the
Group and Company and of the profit or loss for the Group for that period.

In preparing these financial statements, the Directors are required to:
 select suitable accounting policies and then apply them consistently;
 make judgements and accounting estimates that are reasonable and

prudent;

 state whether the financial statements of the Group have been prepared
in accordance with IFRSs as adopted by the European Union, subject
to any material departures disclosed and explained in the financial
statements;

 state whether applicable UK Accounting Standards have been followed
in the preparation of the Company financial statements, subject to any
material departures disclosed and explained in the financial statements;
 prepare the financial statements on the going concern basis unless it is
inappropriate to presume that the Company will continue in business;
and

 prepare a Directors’ report, a Strategic report and Directors’

remuneration report which comply with the requirements of the
Companies Act 2006.

The Directors are responsible for keeping adequate accounting records
that are sufficient to show and explain the Company’s transactions and
disclose with reasonable accuracy at any time the financial position of
the Company and enable them to ensure that the financial statements
comply with the Companies Act 2006 and, as regards the Group financial
statements, Article 4 of the IAS Regulation. They are also responsible for
safeguarding the assets of the Company and hence for taking reasonable
steps for the prevention and detection of fraud and other irregularities.

The Directors are responsible for ensuring that the Annual Report and
Accounts, taken as a whole, are fair, balanced, and understandable and
provides the information necessary for shareholders to assess the Group’s
performance, business model and strategy.

Website publication
The Directors are responsible for ensuring the Annual Report and the
financial statements are made available on a website. Financial statements
are published on the Company’s website in accordance with legislation
in the UK governing the preparation and dissemination of financial
statements, which may vary from legislation in other jurisdictions. The
maintenance and integrity of the Company’s website is the responsibility
of the Directors. The Directors’ responsibility also extends to the ongoing
integrity of the financial statements contained therein.

46
Financial statements

Walker Crips Group plc
Annual Report and Accounts 2018

49
Financial statements

Walker Crips Group plc
Annual Report and Accounts 2018

Financial
statements

48 Independent auditor’s report

53 Consolidated income statement

54 Consolidated statement of
comprehensive income

55 Consolidated statement of

financial position

56 Consolidated statement of

cash flows

57 Consolidated statement of

changes in equity

58 Notes to the accounts

78 Company balance sheet

79 Company statement of
changes in equity

80 Notes to the Company

accounts

89 Notice of Annual

General Meeting

95 Form of proxy

97 Officers and
professional
advisers

48
Financial statements

Walker Crips Group plc
Annual Report and Accounts 2018

Independent auditor’s report
to the members of Walker Crips Group plc

Opinion
We have audited the financial statements of Walker Crips Group plc (the ‘Parent company’) and its subsidiaries (the ‘Group’) for the year ended 31 March
2018 which comprise the Consolidated income statement, the Consolidated statement of comprehensive income, the Consolidated statement of financial
position, the Consolidated and Parent statement of changes in equity, the Consolidated statement of cash flows, the Parent Company balance sheet and
the related notes to the financial statements, including a summary of significant accounting policies. The financial reporting framework that has been
applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union and, as regards the
Parent company financial statements United Kingdom Accounting Standards including Financial Reporting Standard 102 The Financial Reporting Standard
applicable in the UK and Republic of Ireland (United Kingdom Generally Accepted Accounting Practice).

In our opinion:
 the financial statements give a true and fair view of the state of the Group’s and of the Parent company’s affairs as at 31 March 2018 and of the Group’s

profit for the year then ended;

 the Group financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union;
 the Parent company financial statements have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and
 the financial statements have been prepared in accordance with the requirements of the Companies Act 2006; and, as regards the Group financial

statements, Article 4 of the IAS Regulation.

Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those
standards are further described in the Auditor’s responsibilities for the audit of the financial statements section of our report. We are independent of the
Company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical
Standard as applied to listed public interest entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe
that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Conclusions relating to principal risks, going concern and viability statement
We have nothing to report in respect of the following information in the Annual Report, in relation to which the ISAs (UK) require us to report to you
whether we have anything material to add or draw attention to:
 the disclosures in the Annual Report set out on pages 14-15 that describe the principal risks and explain how they are being managed or

mitigated;

 the directors’ confirmation set out on page 28 in the Annual Report that they have carried out a robust assessment of the principal risks facing

the Group, including those that would threaten its business model, future performance, solvency or liquidity;

 the directors’ statement set out on pages 29-30 in the financial statements about whether the directors considered it appropriate to adopt the
going concern basis of accounting in preparing the financial statements and the directors’ identification of any material uncertainties to the
Group and the Parent company’s ability to continue to do so over a period of at least twelve months from the date of approval of the financial
statements;

 whether the directors’ statement relating to going concern required under the Listing Rules in accordance with Listing Rule 9.8.6R(3) is materially

inconsistent with our knowledge obtained in the audit; or

 the directors’ explanation set out on pages 29-30 in the Annual Report as to how they have assessed the prospects of the Group, over what
period they have done so and why they consider that period to be appropriate, and their statement as to whether they have a reasonable
expectation that the Group will be able to continue in operation and meet its liabilities as they fall due over the period of their assessment,
including any related disclosures drawing attention to any necessary qualifications or assumptions.

Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current
period and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we identified. These matters included
those which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit; and directing the efforts of the engagement team.
These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide
a separate opinion on these matters.

49
Financial statements

Walker Crips Group plc
Annual Report and Accounts 2018

Matter

Audit response

Revenue recognition (Note 4)
The Group’s revenue of £30,456,000 consists of fees from two distinct
components, broking income and non-broking income.

Revenue recognition is considered to be a significant audit risk as it is a
key driver of shareholder return to investors.

In respect of broking income there is a risk that the IT platform may
not capture the trades correctly.

In respect of management fees there is a risk that the management
fee may be calculated incorrectly and there is judgement over
the accrual of revenue as well as the treatment of performance
measures and at the point at which it is probable that the revenue will
be realised.

International Standards on Auditing (UK) prescribe a presumed risk
of fraud in revenue recognition in that revenue may be misstated
through improper recognition. Given this inherent risk we identiﬁed the
occurrence of revenue as a signiﬁcant risk.

Recognition and impairment of client lists intangible assets (Note 15)
Acquired client lists of £7,790,000 (2017: £8,294,000) are capitalised
at cost.

Judgement is exercised in determining whether the consideration paid
in respect of acquiring the client lists meets the criteria for capitalisation
and if so, then the appropriate period for the capitalised costs to be
amortised over.

Judgement is also exercised in determining the underlying assumptions
used in the impairment review.

Management have completed an assessment on each intangible
at the year-end which involved undertaking a review for indicators
of impairments.

These risks are explained further in Note 3 Key Sources of Estimation
Uncertainty and in the disclosures in Note 15.

Provisions for client claims (Note 24)
Provisions are made for client claims based on management’s
assessment of the likelihood of outcomes of individual cases whilst
taking into consideration factors such as the level of insurance cover
and the progress of any claims referred to the Financial Ombudsman
Service.

The provisions amounted to £461,000 (2017: £328,000) and are
disclosed in Note 24.

Provision for client claims is considered to be a significant audit risk as
judgment is involved in determining whether a provision is required.

We responded to this matter by performing a range of tests of detail
covering all revenue streams.

Our audit testing included but was not restricted to:
Broking income
 Controls testing was undertaken on the significant controls in place
over broking revenue, including automated controls and manual
controls.

 We performed procedures around cut-off of revenue to ensure for a
sample that trades were being recognised in the correct period.
 We traced a sample of transactions to supporting invoices and to

either bank statements or deductions from client accounts.

Non-broking income
 We recalculated a sample of management and performance fees.
This recalculation was based on the fee tariff and the value of
Assets Under Management (AUM). This sample was traced through
to invoice/investor pack and we ensured that the fees have been
deducted from client accounts

 For AUMs, controls testing was undertaken on the significant controls
in place over the valuation of securities, including automated controls
and manual controls.

 For a sample of AUMs these were agreed to an independent 3rd party

source.

 In respect of fee tariffs, we agreed a sample to either client
agreements or fee tariff confirmation letters issued by the
organisation.

 In respect of accrued fees, testing was performed on a sample basis

to ensure that revenue was recognised in the correct period.

Our audit testing included but was not restricted to:
 We obtained and examined a sample of contracts to assess whether
the payments made in the year, in respect of follow on payments in
relation to prior year additions meet the capitalisation criteria set out
in the accounting standards.

 We obtained and challenged management’s technical analysis in

respect of compliance with the capitalisation criteria by benchmarking
to comparable companies.

In respect of the impairment assessment we challenged this assessment
by undertaking the following tests:
 We compared the Useful Economic Life (UEL) of the intangibles

against the actual client attrition rates

 We challenged management’s assessment of indicators of

impairment by comparing to AUM and revenue generated from the
intangible asset.

As part of our audit testing we obtained and challenged management’s
analysis of claims and agreed this to the relevant correspondence and
to the complaints register.

We also:
 Reviewed correspondence from the Group’s legal advisors where

applicable

 Reviewed the level of insurance coverage in place and correspondence

with brokers or underwriters

 Reviewed the accuracy of the provisioning basis in prior years
 Considered the completeness of the provisions for client claims
through review of board minutes, complaints registers and
compliance reviews.

50
Financial statements

Walker Crips Group plc
Annual Report and Accounts 2018

Independent auditor’s report
to the members of Walker Crips Group plc

Matter

Audit response

Impairment of goodwill (Note 14)
Goodwill of £4,388,000 (2017: £4,388,000) relates to the Group’s
wealth management division and the acquisition of Barker Poland Asset
Management LLP.

Impairment of goodwill is considered to be a significant audit risk as
judgement is exercised in determining the underlying assumptions used
in the impairment review. The assumptions include the discount rate,
operating margin and growth rate, which gives rise to the risk of material
misstatement in the carrying value of goodwill.

These risks are explained further in Note 3 Key Sources of Estimation
Uncertainty and in the disclosures in Note 14.

As part of our audit testing we challenged management’s assessment of
goodwill and the related impairment reviews by undertaking the following
procedures:
 We have tested the integrity of the valuation models.
 With the assistance of our valuation specialists we reviewed the

assumptions used in the calculations and evaluated these assumptions,
in particular the discount rate used to discount expected future cash-
flows and the assumptions associated with the Fair Value less cost of
disposal basis.

 We have assessed management’s sensitivity analysis showing the

impact of a reasonably possible change in impairment assumptions and
we performed sensitivity analysis using a range of acceptable discount
factors. The discount rate used is a pre-tax Weighted Average Cost of
Capital (WACC) that reflects current market assessments of the time
value of money and the risks specific to the cash-flows. We benchmarked
individual components of the WACC to current market rates.

 We corroborated the calculations in the valuation models to forecasts
which we have examined as part of the going concern review, to check
for consistency

 We compared the results of the cash generating units against forecasts

made in the prior year

 We have assessed the adequacy of disclosures within the

financial statements.

Our application of materiality
We apply the concept of materiality both in planning and performing our audit, and in evaluating the effect of misstatements. We consider materiality
to be the magnitude by which misstatements, including omissions, could influence the economic decisions of reasonable users that are taken on
the basis of the financial statements. Importantly, misstatements below these levels will not necessarily be evaluated as immaterial as we also take
account of the nature of identified misstatements, and the particular circumstances of their occurrence, when evaluating their effect on the financial
statements as a whole.

Materiality measure

Purpose

Key considerations and benchmarks

Quantum (£)

Financial statement materiality
(5% of the pre-tax profits)

Assessing whether the financial
statements as a whole present a
true and fair view.

 A principal consideration for members of
the company in assessing the financial
performance of the Group

£53,000 (31 March
2017: £40,000)

Performance materiality (60% of
financial statement materiality)

Lower level of materiality
applied in performance of the
audit when determining the
nature and extent of testing
applied to individual balances
and classes of transactions.

 Financial statement materiality
 Risk and control environment
 History of prior errors

£32,000 (31 March
2017: £24,000)

Parent company financial
statement materiality (95% of
Group materiality)

Assessing whether the financial
statements as a whole present a
true and fair view.

 A principal consideration for members of
the Company in assessing the financial
performance of the Group.

£50,000 (31 March
2017: £38,000)

We agreed with the Audit Committee that we would report to the Committee all audit differences in excess of £1,000, as well as differences below that threshold
that, in our view, warranted reporting on qualitative grounds.

51
Financial statements

Walker Crips Group plc
Annual Report and Accounts 2018

An overview of the scope of our audit
Our audit approach was developed by obtaining an understanding of the Group’s activities and the overall control environment. Based on this understanding
we assessed those aspects of the Group’s transactions and balances which were most likely to give rise to a material misstatement.

Audits of the eighteen components were performed at a materiality level calculated by reference to a proportion of Group materiality appropriate to the
relative scale of the business concerned. Component materiality ranged from £50,000 to £1,000. All components are based in the UK and the Group audit
team have responsibility for the audit of all components included in the consolidated financial statements. Seven of the components were subject to full
scope audits. For components where full scope audits were not undertaken, the group audit team undertook audit procedures on material balances.

Other information
The directors are responsible for the other information. The other information comprises the information included in the annual report other than the
financial statements and our auditor’s report thereon. Our opinion on the financial statements does not cover the other information and, except to the
extent otherwise explicitly stated in our Report, we do not express any form of assurance conclusion thereon. In connection with our audit of the Financial
Statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the
financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies
or apparent material misstatements, we are required to determine whether there is a material misstatement in the financial statements or a material
misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of the other
information; we are required to report that fact.

We have nothing to report in this regard.

In this context, we also have nothing to report in regard to our responsibility to specifically address the following items in the other information and to report
as uncorrected material misstatements of the other information where we conclude that those items meet the following conditions:
 Fair, balanced and understandable – the statement given as to why the Annual Report does not include a statement by the directors that they consider
the Annual Report and financial statements taken as a whole is fair, balanced and understandable and provides the information necessary for shareholders
to assess the Group’s performance, business model and strategy, is materially inconsistent with our knowledge obtained in the audit; or

 Audit Committee reporting – the section describing the work of the audit committee does not appropriately address matters communicated by us to

the audit; or

 Directors’ statement of compliance with the UK Corporate Governance Code – the parts of the directors’ statement required under the Listing

Rules relating to the company’s compliance with the UK Corporate Governance Code containing provisions specified for review by the auditor in
accordance with Listing Rule 9.8.10R(2) do not properly disclose a departure from a relevant provision of the UK Corporate Governance Code.

Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of the audit:
 the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance with the Companies Act 2006; and
 the information given in the Strategic Report and the Directors’ Report for the financial year for which the financial statements are prepared is consistent

with the financial statements and those Reports have been prepared in accordance with applicable legal requirements.

Matters on which we are required to report by exception
In the light of the knowledge and understanding of the Group and the parent company and its environment obtained in the course of the audit, we have not
identified material misstatements in the Strategic Report or the Directors’ Report.

We have nothing to report in respect of the following matters in relation to which the
Companies Act 2006 requires us to report to you if, in our opinion:
 adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not

visited by us; or

 the parent company financial statements and the part of the Directors’ Remuneration Report to be audited are not in agreement with the accounting

records and returns; or

 certain disclosures of directors’ remuneration specified by law are not made; or
 we have not received all the information and explanations we require for our audit.

Responsibilities of directors
As explained more fully in the directors’ responsibilities statement set out on page 45, the directors are responsible for the preparation of the financial
statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the
preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, the directors are responsible for assessing the Group’s and the parent company’s ability to continue as a going
concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to
liquidate the Group or the parent company or to cease operations, or have no realistic alternative but to do so.

52
Financial statements

Walker Crips Group plc
Annual Report and Accounts 2018

Independent auditor’s report continued
to the members of Walker Crips Group plc

Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to
fraud or error, and to issue an Auditor’s Report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an
audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are
considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of
these financial statements.

Our audit was performed using the materiality thresholds outlined elsewhere in this Report. We have therefore tested all classes of transactions, account
balances and disclosures at or in excess of these thresholds. Consequently, we consider it unlikely that there will be any undetected fraud with an impact
exceeding our materiality thresholds. It is possible that there are undetected instances of fraud whose impact is below these thresholds.

A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s website at:
www.frc.org.uk/auditorsresponsibilities.

This description forms part of our Auditor’s Report.

Other matters which we are required to address
Following the recommendation of the audit committee, we were appointed on 3 August 2016 to audit the financial statements for the year ended 31 March
2017 and subsequent financial periods. In respect of the year ended 31 March 2018 we were reappointed as auditor by the members of the company at the
annual general meeting held on 6 September 2017. The period of total uninterrupted engagement is two years, covering the years ending 31 March 2017 to
31 March 2018.

The non-audit services prohibited by the FRC’s Ethical Standard were not provided to the Group or the parent company and we remain independent of the
Group and the parent company in conducting our audit.

Subject to transitional arrangements, there is a limit on the amount of fees that may be charged by an auditor in respect of non-audit services. This fee ‘cap’
is calculated by reference to the fees charged for the audits of the Group financial statements and the financial statements of subsidiary undertakings over
a three year period. For the purposes of calculating this cap the fees for the following service may be disregarded as non-audit services on the grounds that
they relate to services required by EU or national law;
 Interim review of half yearly results
 Reasonable assurance CASS Reports to the FCA

Our audit opinion is consistent with the additional Report to the audit committee.

Use of our report
This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has
been undertaken so that we might state to the Company’s members those matters we are required to state to them in an auditor’s report and for no other
purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s members
as a body, for our audit work, for this report, or for the opinions we have formed.

Neil Fung-On (Senior Statutory Auditor)
For and on behalf of BDO LLP, Statutory Auditor
London
United Kingdom
31 July 2018

BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).

53
Financial statements

Walker Crips Group plc
Annual Report and Accounts 2018

Consolidated income statement
year ended 31 March 2018

Revenue
Commission payable
Share of after tax profits of joint ventures

Administrative expenses – other
Administrative expenses – exceptional items

Total administrative expenses
Operating profit

Analysed as:
Profit before tax and exceptional items
Administrative expenses – exceptional items

Operating profit
Investment revenues
Finance costs

Profit before tax
Taxation

Profit for the year attributable to equity holders of the Company

Earnings per share
Basic
Diluted

1 Amounts have been restated and are explained further in Note 33.

2018
£000

30,456
(10,001)
7

(19,556)
(16)

(19,572)
890

906
(16)

890
41
(7)

924
(179)

745

1.77
1.75

Restated
2017
£000

29,244¹
(8,824)¹

(19,330)¹
(360)

(19,690)¹
742¹

1,102¹
(360)

742¹
24
(2)

764¹
(189)¹

575¹

1.48¹
1.44¹

Notes

4
6
17

8
8

13
13

54
Financial statements

Walker Crips Group plc
Annual Report and Accounts 2018

Consolidated statement of comprehensive income
year ended 31 March 2018

Net loss recognised directly in equity
Profit for the year

Total comprehensive income for the year attributable to equity holders of the Company

1 Amounts have been restated and are explained further in Note 33.

Notes

2018
£000

–
745

745

Restated
2017
£000

–
575¹

575¹

55
Financial statements

Walker Crips Group plc
Annual Report and Accounts 2018

Consolidated statement of financial position
as at 31 March 2018

Non-current assets
Goodwill
Other intangible assets
Property, plant and equipment
Interest in joint ventures
Available-for-sale investments

Current assets
Trade and other receivables
Financial assets held for trading
Cash and cash equivalents

Total assets

Current liabilities
Trade and other payables
Current tax liabilities
Deferred tax liabilities
Bank overdrafts
Shares to be issued – deferred consideration

Net current assets

Long-term liabilities
Deferred cash consideration
Shares to be issued
Dilapidation provision
Landlord contribution to leasehold improvements

Net assets

Equity
Share capital
Share premium account
Own shares
Retained earnings
Other reserves

Equity attributable to equity holders of the Company

1 Amounts have been restated and are explained further in Note 33.

Notes

14
15
16
17
18

19
18
20

21
22

25
25
26
26
26

Group
2018
£000

4,388
7,827
2,706
47
203

Restated
Group
2017
£000

Restated
Group
2016
£000

4,388
8,294
836
40
68

4,388
7,992
841
28
57

15,171

13,626

13,306

37,427
1,851
8,367

47,645

62,816

(39,028)
–
(341)
–
(171)

52,643¹
1,086
7,729

39,234¹
1,237
7,257

61,458¹

47,728¹

75,084¹

61,034¹

(51,869)¹
(287)¹
(308)
(35)
(366)

(36,970)¹
(123)¹
(512)
(77)
(912)

(39,540)

(52,865)¹

(38,594)¹

8,105

8,593¹

9,134¹

(197)
–
(543)
(523)

(1,263)

(372)
–
–
–

(372)

(1,556)
(218)
(132)
–

(1,906)

22,013

21,847¹

20,534¹

2,861
3,674
(312)
11,122
4,668

2,826
3,502
(312)
11,163¹
4,668

2,595
2,279
(312)
11,304¹
4,668

22,013

21,847¹

20,534¹

The financial statements of Walker Crips Group plc (Company registration no: 01432059) were approved by the Board of Directors and authorised for
issue on 31 July 2018.

Signed on behalf of the Board of Directors

R. A. FitzGerald FCA
Director
31 July 2018

56
Financial statements

Walker Crips Group plc
Annual Report and Accounts 2018

Consolidated statement of cash flows
year ended 31 March 2018

Operating activities
Cash generated by operations
Tax paid

Net cash generated by operating activities

Investing activities
Purchase of property, plant and equipment
(Purchase)/sale of investments held for trading
Cost of available-for-sale investments
Consideration paid on acquisition of client lists
Deferred consideration paid on acquisition of subsidiary
Dividends received
Interest received

Net cash used by investing activities

Financing activities
Dividends paid
Interest paid

Net cash used by financing activities

Net increase in cash and cash equivalents
Net cash and cash equivalents at beginning of year

Net cash and cash equivalents at end of year

Cash and cash equivalents
Bank overdrafts

1 Amounts have been restated and are explained further in Note 33.

Notes

2018
£000

5,656
(500)

5,156

(1,642)
(710)
(135)
(644)
(600)
8
33

Restated
2017
£000

2,8911
(229)

2,6621

(499)
143
–
(498)
(600)
4
20

(3,690)

(1,430)

(786)
(7)

(793)

673
7,694

8,367

8,367
–

8,367

(716)
(2)

(718)

514
7,180

7,694

7,729
(35)

7,694

57
Financial statements

Walker Crips Group plc
Annual Report and Accounts 2018

Consolidated statement of changes in equity
year ended 31 March 2018

Called up
share
capital
£000

Share
premium
account
£000

Own
shares
held
£000

Capital
redemption
£000

Restated1 equity as at 31 March 2016

2,595

2,279

(312)

Restated1 total comprehensive income for the year

Contributions by and distributions

to owners
Dividends paid
Issue of shares on acquisition of intangibles
and as deferred consideration

Total contributions by and distributions

to owners

Restated1 equity as at 31 March 2017

Total comprehensive income for the year

Contributions by and distributions

to owners
Dividends paid
Issue of shares on acquisition of intangibles
and as deferred consideration

Total contributions by and distributions

to owners

–

231

1,223

231

2,826

1,223

3,502

–

172

3,674

–

(312)

–

Restated
Retained
earnings
£000

11,304

575

Restated
Total
equity
£000

20,534

575

(716)

–

1,454

(716)

738

Other
£000

4,557

–

4,557

11,163

21,847

–

745

(786)

–

207

(786)

(579)

111

–

111

–

Equity as at 31 March 2018

2,861

(312)

111

4,557

11,122

22,013

1 Equity as at 31 March 2017 and 31 March 2016 and total comprehensive income for the year ended 31 March 2017 restated Note 33.

58
Financial statements

Walker Crips Group plc
Annual Report and Accounts 2018

Notes to the accounts
year ended 31 March 2018

1. General information
Basis of preparation
The consolidated financial statements have been prepared in accordance
with International Financial Reporting Standards (‘IFRSs’) as adopted by the
European Union (EU),Article 4 of the EU IAS Regulation and Companies Act
2006. The Company financial statements are presented on pages 76 to 86.

The consolidated financial statements have been prepared on the historical
costs basis, except for certain financial instruments that are measured at fair
value, and are presented in pounds sterling. The principal accounting policies
adopted are set out below and have been applied consistently to all periods
presented in the consolidated financial statements.

Standards and interpretations affecting the reported results or
the financial position
In the current year, no standards or interpretations, new or revised, have
been adopted that have had a significant impact on the amounts reported
in these financial statements.

Future new standards and interpretations
A number of new standards and amendments to standards and
interpretations are effective for annual periods beginning after 1 April
2017 and therefore have not been applied in preparing these consolidated
financial statements. The effects of IFRS 9 ‘Financial Instruments’, IFRS
15 ‘Revenue from Contracts with Customers’ and IFRS 16 ‘Leases’ on
the consolidated financial statements are discussed below. The effective
dates of IFRS 9, IFRS 15 and IFRS 16 are not until 2018, 2018 and 2019
respectively; the Group has decided not to implement these standards early.

IFRS 9 ‘Financial Instruments’
IFRS 9 is effective for periods commencing on or after 1 January 2018. The
standard was endorsed by the EU during 2016. The Group has not adopted
this standard early and will be first applicable to the Group’s accounting
period ending 31 March 2019.

IFRS 9 changes the classification and measurement of financial assets,
new hedge accounting requirements, enhanced disclosures in the financial
statements and the timing and extent of credit provisioning. The Group
does not use hedge accounting and this element of the new standard is
not applicable.

The Group has conducted a preliminary assessment of the potential impact
of the new standard; it is not currently expected, based on the profile of
its financial instruments as at the balance sheet date, to have a material
financial impact on these consolidated financial statements.

Classification of financial assets
The basis classification for financial assets under IFRS 9 is different from
that under IAS 39. Financial assets will be classified into one of three
categories: amortised cost, fair value through profit or loss (FVTPL) or fair
value through other comprehensive income (FVOCI). The held-to-maturity
loans and receivables and available-for-sale categories available under IAS
39 have been removed. The classification criteria for allocating financial
assets between categories under IFRS 9 requires the Group to document
the business models under which its assets are managed, distinguishing
whether they are; held-to-collect, both held-to-collect and for sale or another
type of business model (e.g. trading). The Group is also required to review
contractual terms and conditions to determine whether the cash flows
arising on these assets are solely payments of principal and interest.

The Group has not identified any material differences from the classification
of financial assets under the new standard. Financial assets held for trading
will continue to be held at fair value with movements through the income
statement (FVTPL). Available for sale investments includes a junior debt
instrument of £150,000 which will be reclassified as held-to-collect under
the new standard with amortised cost applied. Other financial assets such
as Debtors have short lives and no material financing component and will
continue to be recorded at transaction price. Cash and cash equivalents will
continue to be measured at amortised cost.’

Impairment of financial assets
Under IFRS 9, an expected credit loss (ECL) model replaces the incurred
loss model, meaning there no longer needs to be a triggering event in order
to recognise impairment losses. A credit loss provision is required for any
loss that is expected to arise whereas previously it was recorded when they
were incurred.

The Group’s trade receivables are generally short term and do not contain
significant financing components. Therefore, the Group expects to apply
a practical expedient by using a tabulated provision to calculate future
expected losses over the remaining life of each financial asset.

Classification of financial liabilities
The basis of classification for financial liabilities under IFRS 9 remains
unchanged from that under IAS 39. The two categories are amortised cost
or FVTPL (either designated as such, or held for trading).

The Group does not currently designate any liabilities as fair value through
profit or loss and does not anticipate doing so. Therefore, under IFRS 9, the
Group expects to classify all financial liabilities initially as amortised cost,
with no material impact on measurement.

Transition
In adopting IFRS 9, the Group intends to take advantage of the exemption
from having to restate comparative information, instead recognising any
differences between previous and new carrying amounts in opening equity
and reserves.

Estimated impact of adoption of IFRS 9
The Group has assessed the estimated impact that the initial application
of IFRS 9 will have on its consolidated financial statements as at 31 March
2018. From the work completed to date the Group estimates that adoption
of IFRS 9 will not result in any material adjustments to opening equity or
the carrying amount of financial assets, including cash and cash equivalents,
and liabilities recognised on the statement of financial position. Additional
expected credit loss provisions recognised under IFRS 9 are expected to be
immaterial reflecting the high level of security held against trade debtors,
the spread of risk across several counterparties and the historically negligible
level of impairment incurred by the Group.

IFRS 15 ‘Revenue from Contracts with Customers’
IFRS 15 is effective for periods commencing on or after 1 January 2018
and replaces existing revenue recognition guidance in particular under IAS
18. The standard was endorsed by the EU during 2016. The Group has not
adopted this standard early.

IFRS 15 changes how and when revenue is recognised from contracts with
customers and the treatment of the costs of obtaining a contract with a
customer. The standard requires that the recognition of revenue is linked to
the fulfilment of performance obligations that are enshrined in the contract
with the customer. It also requires that the incremental cost of obtaining
a customer contract should be capitalised if that cost is expected to be
recovered.

59
Financial statements

Walker Crips Group plc
Annual Report and Accounts 2018

1. General information continued
The Group has considered the impact of adopting the standard on its
existing revenue streams, as well as on its policy of capitalising the cost of
obtaining customer contracts.

Stockbroking commission and fees relating to portfolio management,
financial planning and pension management
Included within Revenue are initial fees charged by some our Group
companies in relation to certain business activities. Under IFRS 15, the
Group is required to make an assessment as to whether the work performed
to earn such fees constitutes the transfer of service and therefore fulfills any
performance obligations. If so then these fees can be recognised when the
relevant performance obligation has been satisfied, if not then the fees can
only be recognised in the period the services are provided. Included within
commission and fee income are initial fees, charged by a number of Group
companies in relation to certain business activities. Under IFRS 15 the
Group is required to make an assessment as to whether the work performed
to earn such fees constitutes the transfer of services and therefore fulfills
any performance obligations. If so then these fees can be recognised
when the relevant performance obligation has been satisfied; if not then
the fees can only be recognised in the period the service are provided.
We have not identified any instances where the recognition of revenue
will change materially from the current treatment in the consolidated
financial statements.

Contract costs/Client relationship intangibles
Under the Group’s current policy of capitalising contract costs, incremental
payments that are made to newly recruited investment managers to secure
investment management contracts are capitalised as client relationship
intangibles if they are separable, reliably measured and expected to be
recovered. The period during which such payments are capitalised and
amortised is typically between 10 to 20 years as explained in Note 15.

The Group has assessed its current policy and has concluded that IFRS 15
reinforces the existing treatment of such incremental costs. Therefore, the
Group does not believe the adoption of IFRS 15 will materially change the
way it accounts for client relationship intangibles.

Transition
The Group plans to adopt IFRS 15 in its consolidated financial statements
for the year ending March 2019 using the modified retrospective approach
with the effect of initially applying the standard recognised at the date of
initial application, with no restatement of prior period comparatives.

Estimated impact of adoption of IFRS 15
The Group has assessed the estimated impact that the initial application
of IFRS 15 will have on its consolidated financial statements. Based on this
review there will be no material impact on the existing Group’s revenue
recognition policies. The Group has no contracts where costs are not
capitalised in relation to payments made to investment managers for
introducing client relationships to the Group and therefore in this respect
IFRS 15 also has no material impact.

IFRS 16 ‘Leases’
IFRS 16 is effective for periods commencing on or after 1 January 2019. The
standard was endorsed by the EU during 2017 and the Group does not plan
to adopt this standard early.

For lessees, IFRS 16 largely eliminates the classification of leases as either
operating leases or financial leases. The Group will be required to recognise
as a right-of-use lease asset on its balance sheet wherever it has a lease with
a term of more than 12 months remaining, other than with respect to low
value leases; for those leases where a right-of-use asset is recognised; the
Group will also recognise a financial liability representing its obligation to
make future lease payments.

Although the Group has not quantified the impact of adopting the standard,
it has conducted an initial assessment of the potential impact, based on its
existing lease contracts.

Transition
Definition of a lease
On transition to IFRS 16, the Group can choose whether to:
 apply the new definition of a lease to all its contracts as if IFRS 16 had

always applied; or

 apply a practical expedient approach and retain previous assessments of

contracts which contain a lease obligation. The Group intends to apply the
practical expedient and therefore will not be reassessing those contracts
that are not deemed to contain a lease prior to the date of adoption in
accordance with IAS17 and IFRS 4.

Retrospective approach
As a lessee, the Group can either apply the standard using a:
 retrospective approach; or
 modified retrospective approach with optional practical expedients.

The Group is assessing the impact of both approaches and intends to apply
the modified retrospective approach. This will result in the comparatives to
the financial statements in which IFRS 16 is first applied not being adjusted
for the effects of IFRS 16, but instead the differences arising being taken
through equity.

Potential impact
The Group has conducted an initial quantification of the impact of adopting
the standard based on its existing lease contracts. The Group’s total assets
and total liabilities will be increased by the recognition of lease assets
and liabilities. The lease assets will be depreciated over the shorter of the
expected life of the asset and the lease term. The lease liability will be
reduced by lease payments, offset by the unwinding of the liability over the
lease term.

The most significant impact is in respect of the Group’s London, York and
Romford offices. Annual total operating lease expenses of £965,000 which
would have been recognised under the existing leases standard, will be
replaced by anticipated higher levels of depreciation and interest expense
in the early years of each lease, falling to lower levels as each lease heads
towards expiry. As at 31 March 2020, the expected effects of the new
standard will be to reduce net assets, have an increase on interest costs, also
an increase in depreciation costs and a reduction in lease expenses.

On the Group’s statement of comprehensive income, the profile of lease
costs will be front-loaded, at least individually, as the interest charge is
higher in the early years of a lease term as the discount rate unwinds. The
total cost of the lease over the lease term is expected to be unchanged.

In addition to the above impacts, recognition of lease assets will increase
the Group’s regulatory capital requirement.

60
Financial statements

Walker Crips Group plc
Annual Report and Accounts 2018

Notes to the accounts continued
year ended 31 March 2018

2. Significant accounting policies
Basis of consolidation
The Group financial statements consolidate the financial statements of
the Company and entities controlled by the Company (its subsidiaries)
made up to 31 March each year.

The Group controls an entity when it is exposed to, or has rights to,
variable returns from its involvement with the entity and has the ability to
affect those returns through its powers to direct relevant activities of the
entity. Subsidiaries are fully consolidated from the date on which control
is obtained and no longer consolidated from the date that control ceases;
their results are in the consolidated financial statements up to the date
that control ceases.

Entities where the interest is 49% or less are assessed for potential
treatment as a group company against the control tests outlined in IFRS
10, being power over the investee, exposure or rights to variable returns
and power over the investee to affect the amount of investor’s returns.

All intra-Group transactions, balances, income and expenses are
eliminated on consolidation.

Business combinations
The acquisition of subsidiaries is accounted for using the acquisition
method. The cost of the acquisition is measured at the aggregate of the
fair values, at the date of exchange, of assets given, liabilities incurred or
assumed, and equity instruments issued by the Group in exchange for
control of the acquiree.

Interests in joint ventures
A joint venture is a contractual arrangement whereby the Group and
other parties undertake an economic activity that is subject to joint
control; that is when the strategic financial and operating policy decisions
relating to the activities require the unanimous consent of the parties
sharing control.

The Group’s share of the assets, liabilities, income and expenses of
jointly controlled entities are accounted for in the consolidated financial
statements under the equity method.

Goodwill
Goodwill arising on consolidation represents the excess of the cost of
acquisition over the Group’s interest in the fair value of the identifiable
assets and liabilities of a subsidiary or jointly controlled entity at the
date of acquisition. Goodwill is initially recognised as an asset at cost
and reviewed for impairment at least annually. Any impairment is
recognised immediately in profit or loss and is not subsequently reversed
in future periods.

For the purpose of impairment testing, goodwill is allocated to each of
the Group’s cash-generating units expected to benefit from the synergies
of the combination. Cash-generating units to which goodwill has been
allocated are tested for impairment annually, or more frequently when
there is an indication that the unit may be impaired. On disposal of a
subsidiary or jointly controlled entity, the attributable amount of goodwill
is included in the determination of the profit or loss on disposal.

Intangible assets
(a) Client lists
Client lists are recognised when it is probable that future economic
benefits will flow to the Group and the cost of the asset can be measured
reliably whilst the risk and rewards have also transferred into the Group’s
ownership.

Intangible assets classified as client lists are recognised when acquired as
part of a business combination or when separate payments are made to
acquire funds by adding teams of investment managers.

The cost of acquired client lists and businesses generating revenue
from clients and investment managers are capitalised. These costs are
amortised on a straight-line basis over their expected useful lives of
3 to 20 years. The amortisation period and amortisation method for
intangible assets are reviewed at least each financial year end.

Amortisation of intangible fixed assets is included within Administrative
expenses – other in the consolidated income statement.

At each statement of financial position date, the Group reviews the
carrying amounts of its intangible assets to determine whether there is
any indication that those assets have suffered an impairment loss. If any
such indication exists, the recoverable amount of the asset is estimated
in order to determine the extent of the impairment loss (if any). Where
the asset does not generate cash flows that are independent from
other assets, the Group estimates the recoverable amount of the cash-
generating unit to which the asset belongs.

(b) Unit Trust Management Contracts
Acquired Unit Trust Management Contracts are capitalised as intangible
assets based on an estimate of the expected future cash flows that those
contracts will generate over their useful lives of ten years. These costs are
amortised on a straight-line basis over their expected useful lives.

Own shares held
Own shares consist of treasury shares which are recognised at cost as a
deduction from equity shareholders’ funds. Subsequent consideration
received for the sale of treasury shares is also recognised in equity
with any difference being taken to retained earnings. No gain or loss is
recognised on sale of treasury shares.

Shares to be issued
Shares to be issued represent the Group’s best estimate of the Ordinary
Shares in the Group which are likely to be issued, following business
combinations or the acquisition of client relationships which involve
deferred payments in the Group’s shares. Where shares are due to be
issued within a year, the sum is included in current liabilities. Shares to be
issued are dependent on the achievement of pre-defined targets and are
treated as a liability until they are allotted and issued, at which time they
are reclassified within equity. The Group had recognised as a liability the
sum which has been issued and allotted to personnel associated with the
Group in order to meet contractual commitments given as part of the
recent expansion of its client base.

Revenue recognition
Revenue is measured at the fair value of the consideration or receivable
and represents gross commissions, interest receivable and fees in the
course of ordinary investment business, net of discounts, VAT and sales
related taxes.

Commission on stockbroking
Gross commissions on stockbroking activities are recognised on those
transactions whose bargain date falls within the financial year.

Investment management and financial planning income
Fees earned from managing various types of client portfolios, in the
Investment Management division, are accrued evenly over the period
to which they relate. Fees in respect of financial services activities in the
Wealth Management division are accrued evenly over the period to which
they relate.

61
Financial statements

Walker Crips Group plc
Annual Report and Accounts 2018

2. Significant accounting policies continued
Interest income
Interest is recognised as it accrues in respect of the financial year.

Structured investment fees
Fees earned from structured investments are recognised on the date the
underlying security of the structured investment is traded.

Dividend income
Dividend income is recognised when received.

Gains or losses on securities held-for-trading
Gains or losses arising on changes in fair value of securities held-for-
trading are recognised in profit and loss. Net profits or losses on dealing
in the parent company’s own shares are taken to profit and loss and
included in Revenue.

Operating expenses
Operating expenses and other charges are provided for in full up to the
statement of financial position date on an accruals basis.

Exceptional items
To assist in understanding its underlying performance, the Group
identifies certain items of pre-tax income and expenditure and discloses
them separately in the Consolidated income statement. Such items would
include:

1. profits or losses on disposal, closure or impairment of assets or

businesses;

2. corporate transaction and restructuring costs;
3. changes in the fair value of contingent consideration; and
4. non-recurring items considered individually for classification as

exceptional by virtue of their nature or size.

The separate disclosure of these items allows a clearer understanding of
the Group’s trading performance on a consistent and comparable basis,
together with an understanding of the effect of non-recurring or large
individual transactions upon the overall profitability of the Group.

The exceptional items arising in 2016/17 and 2017/18 are explained in
Note 7 on page 65 and all fall under category 4 above. The related tax
effect is also quantified and disclosed in Note 11 on page 67.

Deferred income
Income received from clients in respect of future periods to the
transaction or reporting date are classified as deferred income within
creditors until such time as value has been received by the client.

Foreign currencies
The individual financial statements of each Group company are
presented in Pounds Sterling, which is the functional currency of
the Company and the presentation currency of the consolidated
financial statements.

In preparing the financial statements of the individual companies,
transactions in currencies other than the entity’s functional currency
(foreign currencies) are recorded at the rates of exchange prevailing on
the dates of the transactions. At each statement of financial position
date, monetary assets and liabilities that are denominated in foreign
currencies are retranslated at the rates prevailing on the balance
sheet date.

Exchange differences arising on the settlement of monetary items, and
on the re-translation of monetary items, are included in the consolidated
income statement for the period.

Impairment of non-financial assets
At each balance sheet date, the Group reviews the carrying amounts
of its tangible and intangible assets to determine whether there is any
indication that those assets have suffered an impairment loss. For the
purposes of assessing impairment, assets are grouped at the lowest levels
for which there are separately identifiable cash flows (cash-generating
units). If there is an indication of possible impairment, the recoverable
amount of any affected asset (or group of related assets) is estimated
and compared with its carrying amount. If the estimated recoverable
amount is lower, the carrying amount is reduced to its estimated
recoverable amount, and an impairment loss is recognised immediately in
profit or loss.

Property, plant and equipment
Fixtures and equipment are stated at historical cost less accumulated
depreciation and provision for any impairment. Depreciation is charged
so as to write off the cost or valuation of assets over their estimated
useful lives using the straight-line method on the following bases:

Computer hardware
Computer software
Leasehold improvements
Furniture and equipment

33 1/3% p.a. on cost
Between 20% and 33 1/3% p.a. on cost
Over the term of the lease
33 1/3% p.a. on cost

The gain or loss on the disposal or retirement of an asset is determined
as the difference between the sales proceeds and the carrying amount
of the asset and is recognised in income. The gain or loss on the disposal
or retirement of an asset is determined as the difference between sales
proceeds and the carrying amount of the asset and is recognised in
income. The residual values and estimated useful life of items within
property, plant and equipment are reviewed at least at each financial
year end. Any shortfalls in carrying value are impaired immediately
through profit or loss.

Taxation
The tax expense represents the sum of the tax currently payable and
deferred tax.

The tax currently payable is based on taxable profit for the year. Taxable
profit differs from net profit as reported in the income statement because
it excludes items of income or expense that are taxable or deductible
in other years and it further excludes items that are never taxable or
deductible. The Group’s liability for current tax is calculated using tax
rates that have been enacted or substantively enacted by the statement
of financial position date.

Deferred tax is the tax expected to be payable or recoverable on
differences between the carrying amounts of assets and liabilities in
the financial statements and the corresponding tax bases used in the
computation of taxable profit. Deferred tax liabilities are generally
recognised for all taxable temporary differences and deferred tax assets
are recognised to the extent that it is probable that taxable profits will be
available against which deductible temporary differences can be utilised.

The carrying amount of deferred tax assets is reviewed at each statement
of financial position date and reduced to the extent that it is no longer
probable that sufficient taxable profits will be available to allow all or part
of the asset to be recovered.

Deferred tax is calculated at the tax rates that are expected to apply in
the period that the liability is settled or the asset is realised. Deferred
tax is charged or credited directly to the income statement except
when it relates to items charged or credited to other comprehensive
income in which case the deferred tax is also dealt with in other
comprehensive income.

62
Financial statements

Walker Crips Group plc
Annual Report and Accounts 2018

Notes to the accounts continued
year ended 31 March 2018

2. Significant accounting policies continued
Financial assets and liabilities
Financial assets and liabilities are recognised in the Consolidated
statement of financial position when the Group becomes a party to the
contractual provisions of the instrument.

Trade receivables
Trade receivables are predominantly settled within normal market cycles.
Trade receivables are recognised initially at fair value and subsequently at
amortised cost using the effective interest method, less any impairment.

Investments
Investments are recognised and derecognised on a trade date basis
where a purchase or sale of an investment is under a contract whose
terms require delivery of the investment within the timeframe established
by the market concerned, and are initially measured at cost, including
transaction costs, or at fair value, depending on the nature of the
instrument held.

The Group’s policy is to de-recognise financial assets when it is deemed
that substantially all the risks and rewards of ownership have been
transferred. The Group also de-recognises a financial asset when the
contractual rights to the cash flows from the financial asset expire.
Where the Group neither transfers nor retains substantially all the risks
and rewards of ownership, the Group will de-recognise the financial
asset where it is deemed that the Group has not retained control of the
financial asset.

Investments are classified as either held-for-trading or available-for-sale,
and are measured at subsequent reporting dates at fair value. Where
securities are held for trading purposes, gains and losses arising from
changes in fair value for the period are recognised through profit and loss.
Depending on the nature of the instrument held, gains and losses arising
from changes in fair value of available-for-sale investments are recognised
in the income statement, until the security is de-recognised, disposed of
or is determined to be impaired, at which time the cumulative gain or loss
previously recognised in equity is included in the net profit or loss for the
period.

Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and demand deposits
and other short-term highly liquid investments that are readily convertible
to a known amount of cash and are subject to an insignificant risk of
changes in value.

Trade payables
Trade payables are recognised and measured at fair value.

Bank overdrafts
Interest-bearing bank overdrafts are initially measured at fair value.
Finance charges are accounted for on an accrual basis in profit or loss
using the effective interest rate method and are added to the carrying
amount of the instrument to the extent that they are not settled in the
period in which they arise.

Equity instruments
Equity instruments issued by the Company are recorded at the proceeds
received, net of direct issue costs.

Provisions
Provisions are recognised when the Group has a present obligation as a
result of a past event, and it is probable that the Group will be required
to settle that obligation. Provisions are measured at the Directors’ best
estimate of the expenditure required to settle the obligation at the
statement of financial position date, and are discounted to present value
where the effect is material.

Long-term liabilities – deferred cash and shares consideration
Amounts payable to personnel under recruitment contracts in respect
of the client relationships, which transfer to the Group, are treated as
long-term liabilities if the due date for payment of cash consideration
is beyond the period of one year after the year end date. The value of
shares in all cases is derived by a formula based on the value of client
assets received in conjunction with the prevailing share price at the date
of issue which in turn determines the number of shares issuable.

Share-based payments
The Group issues equity-settled share-based payments to certain
employees and other personnel. Equity-settled share-based payments
are measured at fair value (excluding the effect of non-market-based
vesting conditions) at the date of grant. The fair value determined at the
grant date of the equity-settled share-based payments is expensed on a
straight-line basis over the vesting period, based on the Group’s estimate
of shares that will eventually vest and adjusted for the effects of non-
market-based vesting conditions.

Fair value is measured by use of a binomial model. The expected life used
in the model has been adjusted, based on management’s best estimate,
for the effects of non-transferability, exercise restrictions and behavioural
considerations.

Pension costs
The Group contributes to defined contribution personal pension schemes
for selected employees. The contribution rate is based on annual salary
and the amount is charged to the income statement on an accrual basis.

Leases
Rentals under operating leases are charged on a straight-line basis over
the lease term, even if the payments are not made on such a basis.
Benefits received as an incentive to enter into an operating lease are also
spread on a straight-line basis over the lease term. These benefits include
rent-free periods and landlord contributions to leasehold improvements.

Dividends paid
The Group strives to pay consistent rising dividends annually to shareholders
taking into account the need to reinvest cash into resources and personnel
in order to maintain growth, deliver the implementation of its strategies,
preserve appropriate levels of liquid resources and maintain sufficient
headroom above its regulatory capital requirements.

Going concern
The Group’s business activities together with the factors likely to affect its
future development, performance and position has been rigorously assessed.
In addition, Note 23 to the financial statements includes details of risk
management objectives, policies and processes for managing its capital.

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

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

63
Financial statements

Walker Crips Group plc
Annual Report and Accounts 2018

Short Term Lending Administration – judgement
The Group provides administrative services to Special Purpose Vehicles
who in turn make loans to specialist lenders in the residential housing
construction industry. Having considered the implications of IFRS 10,
the Directors have also obtained independent advice to support our
conclusion that no additional consolidation is required as a result of these
arrangements and the structure in which the Group provides this service.

Provision for dilapidations – judgement
The Group has made provisions for dilapidations under three leases for
its offices. Two new leases were entered into during the year for which a
total liability of £507,000 to restore the premises at the end of the term is
crystallised. These amounts have been provided in full based on valuations
prepared by the office fit-out companies who carried out our office
improvements and are disclosed in Note 24. A provision of £105,000 has
been made for dilapidations at our former office premises in York where the
lease came to an end in May 2018. This amount was based on advice and a
valuation received from a major independent firm of chartered surveyors.

3. Key sources of estimation uncertainty and judgements
Impairment of goodwill – estimation and judgement
Determining whether goodwill is impaired requires an estimation of the fair
value less costs to sell and the value-in-use of the cash-generating units to
which goodwill has been allocated. The fair value less costs to sell involves
estimation of values based on the application of earnings multiples and
comparison to similar transactions. The value-in-use calculation requires the
entity to estimate the future cash flows expected to arise from the cash-
generating unit and apply a discount rate in order to calculate present value.
The assumptions used and inputs involve judgements and create estimation
uncertainty. These assumptions have been stress-tested as described in Note
14. The carrying amount of goodwill at the balance sheet date was £4.4m
(2017: £4.4m) as shown in Note 14.

Other intangible assets – judgement
Acquired client lists are capitalised based on current fair values. During the
year the Group acquired one investment manager and the business of their
clients. When the Group purchases client relationships from other corporate
entities, a judgement is made as to whether the transaction should be
accounted for as a business combination, or a separate purchase of intangible
assets. In making this judgement, the Group assesses the acquiree against
the definition of a business combination in IFRS 3. Payments to newly
recruited investment managers are capitalised when they are judged to be
made for the acquisition of client relationship intangibles. The useful lives
are estimated by assessing the historic rates of client retention, the ages and
succession plans of the investment managers who manage the clients and the
contractual incentives of the investment managers. The Directors conduct a
review of indicators of impairment and also consider a life of up to 20 years to
be both appropriate and in line with peers.

4. Revenue
An analysis of the Group’s revenue is as follows:

Stockbroking commission
Fees and other revenue1, 2

Investment Management Division2
Wealth Management, Financial Planning & Pensions

Revenue2
Net investment revenue

Total income2

% of total income

1 Includes Investment Management, Structured Investments, Alternative Investments.

2 Amounts have been restated and are explained further in Note 33.

2018

2018
Broking Non-broking
income
income
£000
£000

10,953
–

10,953

35.9

–
17,186

17,186
2,317

19,503
34

19,537

64.1

2018
Total
£000

10,953
17,186

28,139
2,317

30,456
34

30,490

100.0

Restated
2017
Broking
income
£000

11,194
–

11,194

38.2

Restated
2017
Non-broking
income
£000

–
15,824

15,824
2,226

18,050
22

18,072

61.8

Restated
2017
Total
£000

11,194
15,824

27,018
2,226

29,244
22

29,266

100.0

5. Segmental analysis
For segmental reporting purposes, the Group currently has two operating segments, Investment Management, being portfolio-based transaction
execution and investment advice, and Wealth Management, being financial planning and pension advice. Unallocated corporate expenses, assets and
liabilities are not considered to be allocable accurately, or fairly, under any known basis of allocation and are therefore disclosed separately.

The Investment Management division activities focus predominantly on investment management of various types of portfolios and asset classes.

The Wealth Management division provides advisory and administrative services to clients in relation to their financial planning, life insurance,
inheritance tax and pension arrangements. These divisions, both of which conduct business in the UK only, are the basis on which the Group reports its
primary segment information.

64
Financial statements

Walker Crips Group plc
Annual Report and Accounts 2018

Notes to the accounts continued
year ended 31 March 2018

5. Segmental analysis continued

2018

Revenue
External sales

Result
Segment result
Unallocated corporate expenses

Operating profit
Gain on disposal of available-for-sale-investments
Investment revenues
Finance costs

Profit before tax
Tax

Profit after tax

2018

Other information
Capital additions
Depreciation
Statement of financial position
Assets
Segment assets
Unallocated corporate assets

Consolidated total assets

Liabilities
Segment liabilities
Unallocated corporate liabilities

Consolidated total liabilities

2017

Revenue
External sales1

Result
Segment result1
Unallocated corporate expenses

Operating profit1
Gain on disposal of available-for-sale-investments
Investment revenues
Finance costs

Profit before tax
Tax1

Profit after tax1

1 Amounts have been restated and are explained further in Note 33.

Investment

Wealth
Management Management
£000

£000

Consolidated
year ended
31 March
2018
£000

28,139

2,317

30,456

2,097

199

2,296
(1,406)

890
–
41
(7)

924
(179)

745

Investment

Wealth
Management Management
£000

£000

Consolidated
year ended
31 March
2018
£000

2,182
500

213
17

2,395
517

53,878

2,407

39,475

855

56,285
6,531

62,816

40,330
473

40,803

Restated
Investment

Wealth
Management Management
£000

£000

Restated
Consolidated
year ended
31 March
2017
£000

27,018

2,226

29,244

2,380

2,452
(1,710)

742
–
24
(2)

764
(189)

575

65
Financial statements

Walker Crips Group plc
Annual Report and Accounts 2018

5. Segmental analysis continued

2017

Other information
Capital additions
Depreciation
Statement of financial position
Assets
Segment assets1
Unallocated corporate assets

Consolidated total assets1

Liabilities
Segment liabilities1
Unallocated corporate liabilities

Consolidated total liabilities1

1 Amounts have been restated and are explained further in Note 33.

6. Commission payable
Commission payable comprises:

To authorised external agents
To approved persons1

1 Amounts have been restated and are explained further in Note 33.

Restated
Investment

Wealth
Management Management
£000

£000

Restated
Consolidated
year ended
31 March
2017
£000

497
486

2
18

499
504

67,826

2,213

52,089

738

2018
£000

31
9,970

10,001

70,039
5,045

75,084

52,827
410

53,237

Restated
2017
£000

37
8,787

8,824

7. Administrative expenses – exceptional items
As a result of their materiality the Directors decided to disclose certain amounts separately in order to present results which are not distorted
by significant exceptional events.

Property relocation expenses
Non-recurring rebate
Change of VAT partial exemption special method
Costs incurred on suitability project
Exceptional employment-related costs

2018
£000

322
(63)
(243)
–
–

2017
£000

–
–
–
(58)
418

360

In the year to 31 March 2018, the Group incurred material costs of £388,000 under its existing leases related to the relocation of the head office and
the York office to new premises in December 2017 and April 2018, offset by an unusually high service charge credit of £66,000 on the old head office.

An additional one-off refund of £63,000 was received for incorrect custody charges incurred in prior years as well as significant annual credits of
£243,000 relating to the Group’s agreement with HMRC to a revised input VAT recovery method (partial exemption special method). During the period
to 31 March 2017, £58,000 of the estimated costs provided in the prior year were not required and therefore have been reversed. In the year to 31 March
2017 the Group also incurred significant legal fees and other costs in connection with employment matters of an exceptional nature.

66
Financial statements

Walker Crips Group plc
Annual Report and Accounts 2018

Notes to the accounts continued
year ended 31 March 2018

8. Investment revenues and finance costs
Net investment revenue comprises:

Investment revenue
Interest on bank deposits/fixed income securities
Dividends from equity investment

Finance costs
Interest on overdue liabilities

Net investment revenue (see Note 4)

9. Profit for the year
Profit for the year on continuing operations has been arrived at after charging:

Depreciation of property, plant and equipment (see Note 16)
Amortisation of intangibles (see Note 15)
Staff costs1 (see Note 10)
Recharge of staff costs1
Settlement costs
Communications
Computer expenses
Other expenses1
Other employment cost – provision
Other employment cost – recoverable
Auditor’s remuneration
Lease payment

Total administrative expenses1

1 Amounts have been restated and are explained further in Note 33.

2018
£000

2017
£000

33
8

(7)

2018
£000

517
553
12,236
(518)
1,038
1,139
603
2,720
225
(225)
228
1,056

20
4

(2)

Restated
2017
£000

504
525
12,108
(388)
1,110
1,098
587
3,351
1,786
(1,786)
147
648

19,572

19,690

Other employment costs include £0.225m (2017: £1.786m) expensed during the year in relation to a provision established in respect of the potential
income tax and national insurance liability relating to payment to two former fund managers of Walker Crips Asset Managers Limited, a wholly-
owned subsidiary, which was sold to Liontrust Asset Management plc (Liontrust) in April 2012. As explained in Note 24, under the Sale and Purchase
Agreement, this amount will be met by Liontrust by way of reimbursement under the terms of the Sale and Purchase Agreement. Therefore, a
corresponding credit for the same amount has also been recorded in other employment costs.

A more detailed analysis of auditor’s remuneration is provided below:

Audit services
Fees payable to the Company’s auditor for the audit of the Company’s annual accounts
The audit of the Company’s subsidiaries pursuant to legislation – current year
The audit of the Company’s subsidiaries pursuant to legislation – prior year
Non-audit services
FCA client assets reporting
Report under AAF 01/06
Interim review

2018
£000

2018
%

2017
£000

2017
%

36
102
46

12
30
2

228

16
45
20

5
13
1

35
75
–

10
25
2

24
51
–

7
17
1

100

147

100

67
Financial statements

Walker Crips Group plc
Annual Report and Accounts 2018

10. Staff costs
Particulars of employee costs (including Directors) are as shown below:

Employee costs during the year amounted to:
Wages and salaries1
Social security costs1
Other employment costs1

1 Amounts have been restated and are explained further in Note 33.

2018
£000

10,254
1,095
887

12,236

Restated
2017
£000

10,213
1,060
835

12,108

Staff costs do not include commissions payable mainly to self-employed account executives, as these costs are included in total commissions payable to approved
persons disclosed in Note 6. At the end of the year there were 54 self-employed account executives who were approved persons of the Group (2017: 65). Please see
page 36 for details of Directors’ remuneration.

The average number of staff employed during the year was:

Executive Directors
Approved persons
Other staff

11. Taxation
The tax charge is based on the profit for the year of continuing operations and comprises:

UK corporation tax at 19% (2017: 20%)1
Overseas tax
Prior year adjustments
Double tax relief
Deferred tax

1 Amounts have been restated and are explained further in Note 33.

Corporation tax is calculated at 19% (2017: 20%) of the estimated assessable profit for the year.

The charge for the year can be reconciled to the profit per the income statement as follows:

Profit

Tax on profit on ordinary activities at the standard rate UK corporation tax rate of 19% (2017: 20%)1
Effects of:
Tax rate changes for deferred tax
Expenses not deductible for tax purposes
Chargeable gains
Prior year adjustment
Fixed asset differences
Overseas taxes
Non-taxable income
Other1

2018
Number

2017
Number

4
59
152

215

2018
£000

329
–
(3)
–
(147)

179

2018
£000

924

176

(23)
1
–
(3)
30
–
–
(2)

4
60
151

215

Restated
2017
£000

407
–
(4)
–
(214)

189

Restated
2017
£000

764

153

–
4
–
(4)
34
–
–
2

179

189

Finance (No. 2) Act 2015 enacted reductions in the UK corporation tax rate to 19% with effect from 1 April 2017 and 18% with effect from 1 April
2020. Finance Act 2016 enacted a reduction in the 18% rate to 17% with effect from 1 April 2020. These reductions in the tax rate will impact the
current tax charge in future periods.

The exceptional costs of £16,000, disclosed separately on the consolidated income statement, are tax deductible to the value of £3,000 of corporation
tax. Classifying these costs as exceptional has no effect on the tax liability.

68
Financial statements

Walker Crips Group plc
Annual Report and Accounts 2018

Notes to the accounts continued
year ended 31 March 2018

12. Dividends
The Group’s dividend policy described in Note 2 is observed when determining the level of proposed dividend in any year after considering a number
of factors including future cash commitments, investment needs, potential strategic opportunities and prudent buffers for maintaining an adequate
regulatory capital surplus. Amounts recognised as distributions to equity holders in the period:

Final dividend for the year ended 31 March 2017 of 1.29p (2016: 1.27p) per share
Interim dividend for the year ended 31 March 2018 of 0.58p (2017: 0.58p) per share

Proposed final dividend for the year ended 31 March 2018 of 1.29p (2017: 1.29p) per share

2018
£000

542
244

786

549

2017
£000

487
229

716

542

The proposed final dividends are subject to approval by shareholders at the Annual General Meeting and have not been included as liabilities in these
financial statements.

Shareholders will be subject to income tax on dividends depending on whether they are basic, higher or additional rate taxpayers at 7.5%, 32.5% or
38.1% respectively on the excess of annual dividend income over £5,000 for 2017/18.

13. Earnings per share
The calculation of basic earnings per share for continuing operations is based on the post-tax profit for the financial year of £745,000 (2017:
£575,0001) and on 42,025,970 (2017: 38,974,002) Ordinary Shares of 6 2/3 pence, being the weighted average number of Ordinary Shares in issue
during the year.

The calculation of diluted earnings per share is based on 42,476,107 (2017: 38,974,002) ordinary shares, being the weighted average number of
ordinary shares in issue during the period adjusted for dilutive potential ordinary shares, issued in May 2018, to the sellers of Barker Poland Asset
Management (BPAM) in order to satisfy the Group’s obligation in connection with the payment of year three deferred consideration. A further
dilution adjustment is made for the effect of shares issued in May 2018 to other personnel associated with the Group in order to meet contractual
commitments made by the Group as part of the ongoing recruitment of investment advisers and expansion of its client base

The calculation of the basic and diluted earnings per share is based on the following data:

Earnings for the purpose of basic earnings per share being net profit attributable to equity holders of the Parent1

Earnings for the purposes of diluted earnings per share

Number of shares

Weighted average number of Ordinary Shares for the purposes of basic earnings per share
Effect of dilutive potential Ordinary Shares:
 Deferred Consideration deemed issued

Weighted average number of Ordinary Shares for the purposes of diluted earnings per share

2018
£000

745

2018
Number

Restated
2017
£000

575

Restated
2017
Number

42,025,970 38,974,002

250,137

950,261

42,276,107 39,924,263

This produced basic earnings per share of 1.77 pence (2017: 1.48 pence restated) and diluted earnings per share of 1.75 pence (2017: 1.44 pence
restated).

1 Amounts have been restated and are explained further in Note 33.

14. Goodwill

Cost
At 1 April 2017

At 31 March 2018

Accumulated impairment
At April 2017
Impaired during the year

At 31 March 2018

Carrying amount
At 31 March 2018

At 31 March 2017

£000

7,056

2,668
–

2,668

4,388

69
Financial statements

Walker Crips Group plc
Annual Report and Accounts 2018

14. Goodwill continued
Goodwill acquired in a business combination is allocated, at acquisition, to the cash-generating units (CGUs) that are expected to benefit from that
business combination or intangible asset. The carrying amount of goodwill has been allocated as follows:

London York CGU
BPAM CGU

2018
£000

2,901
1,487

4,388

2017
£000

2,901
1,487

4,388

The recoverable amounts of the CGUs have first been determined based upon value-in-use calculations for the London York CGUs and fair value less costs
of disposal for the BPAM CGU. The London York computation was based on based on discounted five year cash flow projections and terminal values. The
key assumptions for these calculations are a pre-tax discount rate of 12%, terminal growth rates of 2.5% and the expected changes to revenues and
costs during the five year projection period based on discussions with senior management, comparisons with our peers and widely available economic
and market forecasts. The pre-tax discount rate is determined by management based on current market assessments of the time value of money and
risks specific to the CGUs. The terminal growth rate is determined by management based on assessment of past experience and future expectations, in
light of anticipated market and economic conditions. Based upon the value-in-use calculations there was headroom for the London York CGU of £3.9m
(2017: £3.2m). The base value-in-use cash flows were stress tested for an increase in discount rates to 16% and a 20% fall in net inflows resulting in no
impairment.

In prior years the BPAM CGU recoverable amount has been assessed using the value-in-use calculations but this year, in accordance with IAS 36, the
Company has adopted the higher method of the fair value less cost of disposal to determine the recoverable amount.

The recoverable amount calculated for the BPAM CGU, representing fair value less cost of disposal amounted to £6.8m after applying price earnings
multiples based on the Company’s price earnings ratio. The fair value has accordingly been measured into a fair value hierarchy Level 2 being directly
based on observable market data.

The discount rate would need to increase to 24.7% for the London York CGU to equal the respective carrying values. A 20% fall in net inflows gives rise
to a potential headroom of £3.8m for this CGU. A 20% decrease in BPAM’s profit after tax would result in potential headroom of £2.3m.

Based upon the above assessments management has concluded there is no impairment to goodwill.

15. Other intangible assets

Cost
At 1 April 2016
Additions in the year

At 1 April 2017
Additions in the year

At 31 March 2018

Amortisation
At 1 April 2016
Charge for the year

At 1 April 2017
Charge for the year

At 31 March 2018

Carrying amount
At 31 March 2018

At 31 March 2017

Unit trust
management
contracts
£000

Software
Licences
£000

Client lists
£000

Total
£000

240
–

240

240
–

240

–

–
–

–
44

–
–

–
7

–

9,662
827

10,489
42

10,531

1,670
525

2,195
546

2,741

7,790

8,294

9,902
827

10,729
86

10,815

1,910
525

2,435
553

2,988

7,827

8,294

The intangible assets are both amortised over their estimated useful lives. ‘Unit trust management contracts’ are amortised over 10 years and ‘Client
lists’ are amortised over 3 to 20 years and ‘Software Licenses’ are amortised over 5 years. There are no indications that the value attributable to client
lists should be impaired.

70
Financial statements

Walker Crips Group plc
Annual Report and Accounts 2018

Notes to the accounts continued
year ended 31 March 2018

16. Property, plant and equipment

Leasehold improvements
furniture and equipment
£000

Computer
software
£000

Computer
hardware
£000

Cost
At 1 April 2016
Additions

At 1 April 2017
Write down
Additions

At 31 March 2018

Accumulated depreciation
At 1 April 2016
Charge for the year

At 1 April 2017
Eliminated on write down
Charge for the year

At 31 March 2018

Carrying amount
At 31 March 2018

At 31 March 2017

1,498
2

1,500
(768)
2,033

2,765

1,035
256

1,291
(768)
239

762

2,003

209

1,860
257

2,117
–
238

2,355

1,658
94

1,752
–
130

1,882

473

365

Total
£000

4,326
499

4,825
(788)
2,395

6,432

3,485
504

3,989
(780)
517

968
240

1,208
(20)
124

1,312

792
154

946
(12)
148

1,082

3,726

230

262

2,706

836

17. Interest in joint venture
The Group has a 50% (2017: 50%) interest in a joint venture, JWPCreers Wealth Management Limited, a regulated financial services company. The
primary activity of JWPCreers Wealth Management Limited is to provide financial advice to the clients of JWPCreers LLP Accountants, who hold the
other 50% interest in the joint venture. The risks associated with the joint venture, which have not changed during the year, are minimal by comparison
to the rest of the Group and where identified have been mitigated by controls or proposed management actions.

The contractual arrangement provides the Group with equal rights to the net assets of the joint arrangement, with the rights to the assets and
obligation regarding the liabilities resting primarily with JWPCreers Wealth Management Limited. Under IFRS 11 this joint arrangement is classified as
a joint venture and has been included in the consolidated financial statements using the equity method.

Summarised financial information in relation to the joint venture is presented below:

As at 31 March

Current assets
Non-current assets
Current liabilities
Non-current liabilities
Included in the above amounts are:
Cash and cash equivalents
Current financial liabilities (excluding trade payables)
Non-current financial liabilities (excluding trade payables)
Net assets (100%)
Group share of net assets (50%)
Period ending 31 March
Revenue
Profit before tax
Profit after tax
Tax expense
Total consolidated income
Total consolidated income (100%)
Group share of total consolidated income (50%)
Dividends received by Group from Joint Venture
Included in the above amounts are:
Depreciation and amortisation

Interest income
Interest expense
Income tax expense (income)

2018
£000

108
–
14
–

101
13
–
94
47
72
99
17
14
3
–
14
7
–
–
–
–
–
–

2017
£000

90
–
11
–

77
–
–
80
40
40
99
30
24
6
–
24
12
–
–
–
–
–
–

71
Financial statements

Walker Crips Group plc
Annual Report and Accounts 2018

17. Interest in joint venture continued
The Group owns 50% of JWPCreers Wealth Management Limited (20,000 ordinary ‘B’ shares). JWPCreers LLP owns 50% of JWPCreers Wealth
Management Limited (20,000 ordinary ‘A’ shares). Each share caries equal rights to voting and dividends. Both entities have joint control and joint
ownership of JWPCreers Wealth Management Limited. The Board of Directors and officer is represented by two Directors from JWPCreers LLP and two
Directors from Walker Crips Wealth Management Ltd.

The joint arrangement of control and ownership leads to the classification of JWPCreers Wealth Management Limited as a joint venture. The Group’s
share of both JWPCreers Wealth Management Ltd contingent liabilities and capital commitments is nil (2017: nil).

18. Investments

Available-for-sale investments

At 1 April 2016
Additions in the year

At 1 April 2017
Additions in the year
Disposals

At 31 March 2018

UCIS
investments
£000

Life Policy
investments
£000

Debt
investments
£000

Total
investments
£000

57
–

57
13
(28)

–
11

11
-
–

–
–

–
150
–

150

57
11

68
163
(28)

203

The Group’s life policy investments are held in relation to a number of customer complaints. The fair value is based upon the life company’s forecast
terminal value.

The Group’s unregulated collective investment scheme (UCIS) investments are held in relation to a number of customer complaints. The fair value is
based upon the market price as at 31 March 2018. During the period to 31 March 2018 there were £13,000 of additional units purchased and £28,000
of disposals.

Debt Instruments comprises the Group’s investments in the junior debt of Topaz STL, a special purpose vehicle (SPV) which advances short term loans
to property investors. During the period to 31 March 2018 investments of £150,000 were made.

Financial assets held for trading
Fair value (Level 1)

2018
£000

2017
£000

1,851

1,086

Financial assets held for trading represent investments in equity securities and collectives that present the Group with opportunity for return through
dividend income, interest and trading gains. The fair values of these securities are based on quoted market prices.

The following 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 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities. The trading

investments fall within this category;

 Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable for the asset or
liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices). The Group does not hold financial instruments in this category; and
 Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on

observable market data (unobservable inputs). The Group’s available-for-sale investments fall within this category.

Further IFRS 13 disclosures have not been presented here as the balance represents 2.904% (2017: 0.095%) of total assets. There were no transfers of
investments between any of the Levels of hierarchy during the year.

19. Other financial assets

Trade and other receivables

Amounts falling due within one year:
Due from clients, brokers and recognised stock exchanges
Other debtors1
Prepayments and accrued income2

1 Other debtors includes a receivable from Liontrust Asset Management plc of £2,031,000 as described in Note 9.
2 Amount has been restated and is explained further in Note 33.

2018
£000

27,466
5,161
4,800

37,427

Restated
2017
£000

40,939
5,185
6,519

52,643

72
Financial statements

Walker Crips Group plc
Annual Report and Accounts 2018

Notes to the accounts continued
year ended 31 March 2018

20. Cash and cash equivalents

Short-term cash deposits held at bank, repayable on demand with penalty
Cash deposits held at bank, repayable on demand without penalty

2018
£000

4,500
3,867

8,367

2017
£000

2,550
5,179

7,729

Cash and cash equivalents do not include deposits of client monies placed by the Group with banks and building societies in segregated client bank
accounts (free money and settlement accounts). All such deposits are designated by the banks and building societies as clients’ funds and are not
available to satisfy any liabilities of the Group. The amount of such net deposits which are not included in the consolidated statement of financial
position at 31 March 2018 was £307,700,000 (2017: £310,200,000)

The credit quality of banks holding the Group’s cash at 31 March 2018 is analysed below with reference to credit ratings awarded by Fitch.

A
AA–
BBB+

21. Deferred tax liability

At 1 April 2016
Use of loss brought forward
Credit to the income statement
Credit to the statement of comprehensive income

At 1 April 2017
Use of loss brought forward
Credit to the income statement

At 31 March 2018

2018
£000

1,452
4,836
2,079

8,367

2017
£000

1,288
2,936
3,505

7,729

Short-term
temporary
differences
and other
£000

Capital
allowances
£000

(15)
–
7
–

(8)
–
31

(497)
(10)
207
–

(300)
(180)
116

(364)

Total
£000

(512)
(10)
214
–

(308)
(180)
147

(341)

Finance (No. 2) Act 2015 enacted reductions in the UK corporation tax rate to 19% with effect from 1 April 2017 and 18% with effect from 1 April
2020. Finance Act 2016 enacted a reduction in the 18% rate to 17% with effect from 1 April 2020. These changes to corporation tax rates impacted
the deferred tax charge and closing deferred tax position for 2018.

22. Bank overdrafts

Bank overdrafts

2018
£000

–

2017
£000

The borrowings are repayable on demand and are all denominated in Sterling. As the borrowing represents book overdrafts only, no bank interest has
been paid during the period.

23. Financial instruments and risk profile
Financial risk management
Procedures and controls are in place to identify, assess and ultimately control the financial risks faced by the Group arising from its use of financial
instruments. Steps are taken to mitigate identified risks with established and effective procedures and controls, efficient systems and the adequate
training of staff.

The Group’s risk appetite, along with the procedures and controls mentioned above, are laid out in the Group’s Internal Capital Adequacy Assessment
Process document prepared in accordance with the requirements of the Financial Conduct Authority (FCA).

The overall risk appetite for the Group is considered by management to be low, despite operating in a marketplace where financial risk is inherent in the
core businesses of investment management and financial services.

73
Financial statements

Walker Crips Group plc
Annual Report and Accounts 2018

23. Financial instruments and risk profile continued
The Group considers its financial risks arising from its use of financial instruments to fall into three main categories:
(i) credit risk;
(ii)
(iii) market risk.

liquidity risk; and

Financial risk management is a central part of the organisation’s strategic management which recognises that an effective risk management
programme can increase a business’s chances of success and reduce the possibility of failure. Continual assessment, monitoring and updating of
procedures and benchmarks are all essential parts of the Group’s risk management strategy.

(i) Credit risk
The Group’s credit risk is primarily attributable to its trade receivables or pledged collateral which is the risk that a client, market counterparty or
recognised stock exchange will be unable to pay amounts in full when due. Significant changes in the economy or a particular sector could result in
losses that are different from those that the Group has provided for at the year-end date.

The Board is responsible for oversight of the Group’s credit risk. The Group accepts a limited exposure to credit risk but aims to mitigate and minimise
the risk through various methods. There is no material concentrated credit risk as the exposures are spread across a substantial number of clients
and counterparties.

Trade receivables (includes settlement balances)
Settlement risk arises in any situation where a payment of cash or transfer of a security is made in the expectation of a corresponding delivery of a
security or receipt of cash. Settlement balances arise with clients, market counterparties and recognised stock exchanges.

In the vast majority of cases, control of the stock purchased will remain with the Group until client monetary balances are fully settled.

Where there is an absence of securities collateral, clients are usually required to hold sufficient funds in their managed deposit account prior to the
trade being conducted. Holding significant amounts of client money helps the Group to manage credit risks arising with clients. Many of our clients also
hold significant amounts of stock and other securities in our nominee subsidiary company, providing additional security should a specific transaction
fail to be settled and the proceeds of such securities disposed of can be used to settle all outstanding obligations.

In addition, the client side of settlement balances are normally fully guaranteed by our commission-sharing approved persons who conduct transactions
and manage the relationships with our mutual clients.

Exposures to market counterparties also arise in the settlement of trades or when collateral is placed with them to cover open trading positions. Market
counterparties are usually other FCA-regulated firms and are considered creditworthy, some reliance being placed on the fact that other regulated firms
would be required to meet the stringent capital adequacy requirements of the FCA.

Maximum exposure to credit risk:

Cash
Trade receivables
Other debtors
Accrued income1

1 Amount has been restated and is explained further in Note 33.

Analysis of trade receivables:

Neither past due nor impaired
Past due but not impaired

<30 days
>30 days
>3 months

2018
£000

8,367
27,466
5,161
4,055

45,049

2018
£000

25,388
1,826
180
72

27,466

Restated
2017
£000

7,729
40,939
5,185
5,804

59,657

2017
£000

39,071
1,772
40
56

40,939

Concentration of credit risk
In addition, daily risk management procedures to actively monitor disproportionately large trades by a customer or market counterparty are in place. The
financial standing, pattern of trading, type and size of security or instrument traded are amongst the factors taken into consideration.

74
Financial statements

Walker Crips Group plc
Annual Report and Accounts 2018

Notes to the accounts continued
year ended 31 March 2018

23. Financial instruments and risk profile continued
(ii) Liquidity risk
Liquidity risk is the risk that the Group is unable to meet its payment obligations associated with its financial liabilities when they fall due.

Historically, sufficient underlying cash has been prevalent in the business for many years as the Group is normally cash-generative. The risk of
unexpected large cash outflows could arise where large amounts are being settled daily of which only a fraction forms the commission earned by the
Company. This could be due to clients settling late or bad deliveries to the market or CREST, also resulting in a payment delay from the market side.

The Group’s policy with regard to liquidity risk is to carefully monitor balance sheet structure and borrowing limits, including:
 monitoring of cash positions on a daily basis;
 exercising strict control over the timely settlement of trade debtors; and
 exercising strict control over the timely settlement of market debtors and creditors.

The Group holds its cash and cash equivalents spread across a number of highly rated financial institutions. All cash and cash equivalents are short-term
highly liquid investments that are readily convertible to known amounts of cash without penalty.

All the regulated Group subsidiaries are subject to the provisions of FCA Liquidity standards if they are within the scope of the rules in the FCA
Handbook chapter IFPRU 7.

During the year, the Group made contractual undiscounted cash payments of £1,244,000 being deferred cash consideration for acquisition of
intangible assets.

The tables below analyse the Group’s future cash outflows based on the remaining period to the contractual maturity date.

2018

Bank overdrafts
Trade and other payables

2017

Bank overdrafts
Trade and other payables1

Less than
1 year
£000

–
39,028

39,028

35
51,869

51,904

Total
£000

–
39,028

39,028

35
51,869

51,904

1 Amounts have been restated and are explained further in Note 33.

Future contracted undiscounted cash flows for deferred cash consideration amounts to £973,000.

(iii) Market risk
Market risk is the risk that changes in market prices such as foreign exchange rates or equity prices, on financial assets and liabilities will affect the Group’s results.

They relate to price risk on available-for-sale and trading investments and are subject to ongoing monitoring.

Fair value of financial instruments
The fair values of the Group’s financial assets and liabilities are not materially different from their carrying values as they have been revalued at
31 March 2018 using closing market prices.

A 10% fall in global equity markets would, in isolation, result in a pre-tax decrease to net assets of £185,100 (2017: £108,600). A 10% rise would have
an equal and opposite effect.

The impact of foreign exchange and interest rate risk is not material and is therefore not presented.

24. Other financial liabilities
Trade and other payables

Amounts owed to clients, brokers and recognised stock exchanges
Other creditors
Accruals and deferred income1

1 Amounts have been restated and are explained further in Note 33.

2018
£000

25,687
8,702
4,639

39,028

Restated
2017
£000

38,913
8,333
4,623

51,869

75
Financial statements

Walker Crips Group plc
Annual Report and Accounts 2018

24. Other financial liabilities continued
Trade creditors and accruals comprise amounts outstanding for investment-related transactions, to customers or counterparties, and ongoing costs. The
average credit period taken for purchases in relation to costs is 15 days (2017: 14 days).

The Directors consider that the carrying amount of trade payables approximates to their fair value.

Other creditors and long-term liabilities
Provisions included in other creditors and long-term liabilities are made up as follows:

At start of year
Additions
Utilisation of provision
Unused amounts reversed during the year

At end of year

2018
Income tax1
£000

1,786
225
–
–

2,011

2018
Claims/

2018
complaints2 Dilapidations3
£000

£000

328
189
(56)
–

461

236
507
(53)
(43)

647

Total
£000

2,350
921
(109)
(43)

3,119

1. A provision is included in respect of a potential income tax and national insurance liability relating to payments to two former fund managers of Walker Crips Asset Managers Limited, a wholly-owned
subsidiary, which was sold to Liontrust Asset Management plc (Liontrust) in April 2012. Under the terms of the 2012 Sale and Purchase Agreement, to the extent that this liability crystallises, the cost
is to be met by Liontrust. The Board has concluded that recovery from Liontrust would be virtually certain and, in accordance with IAS 31, an offsetting debtor has been recognised with no net impact
on the income statement. The settlement with HMRC is expected to be made within 12 months of the year end. See Note 9.

2. These provisions relate to outstanding claims and complaints from third parties which, in the opinion of the Board, need providing for after taking into account the risks and uncertainties surrounding

each claim or complaint. The timing of these settlements is unknown but it is expected that they will be resolved within 12 to 24 months.

3. The Group has made a provision of £507,000 for dilapidations in connection with its newly acquired leasehold premises. These costs are expected to arise at the end of the lease with a maximum
remaining term of 10 years. A provision of £105,000 has been made for dilapidations at our former office premises in York where the lease came to an end in May 2018. This amount was based
on advice and a valuation received from a major independent firm of chartered surveyors. Provisions for dilapidations payable on leases after more than one year amounted to £543,000 including
£35,000 for the Romford office.

25 Called-up share capital

Called-up, allotted and fully paid
42,917,730 (2017: 42,386,423) Ordinary Shares of 6 2/3p each

2018
£000

2017
£000

2,861

2,826

The Company’s Articles were amended in 2010 since when there has been no Authorised share capital. Shareholders have no restrictions on their holdings
except for certain investment managers who were awarded shares in the Company soon after recently joining as part of the consideration for their client
relationships. These holdings cannot be sold for a period of four to six years from commencement date. During the year 531,307 new Ordinary Shares were
issued and allotted to various personnel associated with the Company in order to meet contractual commitments made by the Company as part of the
ongoing expansion of its client base. All shares issued to personnel under recruitment contracts are restricted from sale for periods between four to six years.

The following movements in share capital occurred during the year:

At 1 April 2016
Shares issued to personnel

At 1 April 2017
Shares issued to personnel

At 31 March 2018

Number of
shares

38,924,046
3,462,377

42,386,423
531,307

42,917,730

Share
capital
£000

2,595
231

2,826
35

2,861

Share
premium
£000

2,279
1,223

3,502
172

3,674

Total
£000

4,874
1,454

6,328
207

6,535

The Group’s capital is defined for accounting purposes as total equity. As at 31 March 2018 this totalled £22,013,000 (2017: £21,847,000 restated).
The increase during the year was attributable to the Company issuing shares to personnel under recruitment contracts, the profit for the year less
dividends paid.

The Group’s objectives when managing capital are to:
 safeguard the Group’s ability to continue as a going concern so that it can continue to provide returns for shareholders and benefits for other stakeholders;
 maintain a strong capital base in a cost-efficient manner to be able to support the development of the business when required;
 optimise the distribution of capital across Group companies, reflecting the requirements of each business;
 strive to make capital freely transferable across the Group where possible; and
 comply with regulatory requirements at all times.

76
Financial statements

Walker Crips Group plc
Annual Report and Accounts 2018

Notes to the accounts continued
year ended 31 March 2018

25. Called-up share capital continued
Walker Crips is classified for capital purposes as an investment management group and performs an Internal Capital Adequacy Assessment Process
(ICAAP), which is presented to the FCA on request. Regulatory capital resources for ICAAP purposes are calculated in accordance with published rules.
These require certain adjustments to and certain deductions from accounting capital, the latter largely in respect of intangible assets. The ICAAP
compares regulatory capital resources against regulatory capital requirements derived using the FCA’s Pillar 1 and Pillar 2 methodology. The Group has
adopted the standardised approach to calculating its Pillar 1 credit risk component and the basic indicator approach to calculating its operational risk
component. Capital management policy and practices are applied at both Group and entity level.

In addition to a variety of stress tests performed as part of the ICAAP process, and daily reporting in respect of treasury activity, capital levels are
monitored and forecast to ensure that dividends and investment requirements are appropriately managed and appropriate buffers are kept against
adverse business conditions.

Regulatory capital
No breaches were reported to the FCA during the financial years ended 31 March 2017 and 2018.

The Company holds 750,000 of its own shares, purchased for total cash consideration of £312,000. In line with the principles of IAS 32 these treasury
shares have been deducted from equity. No gain or loss has been recognised in the income statement in relation to these shares.

26. Reserves
Apart from share capital and share premium, the Group holds reserves at 31 March 2018 under the following categories:
Own shares held (£312,000) – the negative balance of the Group’s own shares, which have been bought back and held in treasury.
Retained earnings (£11,122,000 ) – the net cumulative earnings of the Group not paid out as dividends retained to be reinvested in our core, or new, business.
Other (£4,668,000) – the cumulative share premium on the issue of shares as deferred consideration for corporate acquisitions.

27. Share-based payments
LTIP
The Company recognised total expenses of £12,000 (2017: £nil) related to equity-settled share-based payment transactions.

28. Cash generated from operations

Operating profit for the year1
Adjustments for:
Amortisation of intangibles
Loss on sale of tangible fixed asset
Net change in fair value of financial instruments at fair value through profit or loss
Share of joint venture income
Depreciation
Decrease/(increase) in debtors
(Decrease)/increase in creditors

Net cash inflow

1 Amounts have been restated and are explained further in Note 33.

2018
£000

890

553
7
(55)
(7)
517
15,284
(11,533)

Restated
2017
£000

742

525
–
8
(12)
504
(13,409)
14,533

5,656

2,891

29. Financial commitments
Capital commitments
At the end of the year, there were capital commitments of £nil (2017: £168,000) contracted but not provided for and £nil (2017: £nil) capital
commitments authorised but not contracted for.

Lease commitments
The Group leases various offices and other assets under non-cancellable operating lease agreements.

The minimum lease payments under non-cancellable operating leases fall due are as follows:

Within one year
Within two to five years
More than five years

2018
£000

876
3,161
2,571

2017
£000

541
423
48

77
Financial statements

Walker Crips Group plc
Annual Report and Accounts 2018

30. Related parties
Directors, employees, related parties and their close family members have dealt on standard commercial terms with the Group. The commission earned
by the Group included in revenue through such dealings is as follows:

Commissions received from Directors, employees, approved persons and their family

2018
£000

143

2017
£000

186

Other related parties include Charles Russell Speechlys, of which M. J. Wright, Non-Executive Director, is a Partner. Charles Russell Speechlys provides
certain legal services to the Group on normal commercial terms and the amount paid and expensed during the year was £195,000 (2017: £324,000)
included in administrative expenses or other receivables if the costs are reimbursable.

Commission of £7,169 (2017: £8,562) was earned by the Group from Phillip Securities (HK) Limited (a Phillip Brokerage Pte Limited company, where
H. M. Lim is a shareholder) having dealt on standard commercial terms. Additionally, some custody services are provided by Phillip Securities Pte Ltd
(in Singapore, where H. M. Lim is a Director), again all on standard commercial terms, both these items being included in revenue. Transactions between
the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are accordingly not disclosed. Remuneration of
the Directors who are the key management personnel of the Group totalled £993,000 (2017: £1,241,000 restated) including employers’ NI.

31. Contingent liability
During the prior year, two Group companies, Walker Crips Group plc (WCG) and Walker Crips Stockbrokers Limited (WCSB), received draft proceedings
in respect of a potential claim, from a former listed corporate client of Keith Bayley Rogers & Co (KBR), a former subsidiary of the Group. The corporate
client alleges that its former Executive Chairman and his associates misappropriated assets of £5.6m from it between 2010–2014 and used these
assets to purchase and sell shares in the client through the brokerage of WCG, WCSB and KBR. The client asserts that WCG and WCSB acted dishonestly
to assist the Chairman to perpetrate the alleged fraud and was party to an unlawful means conspiracy to cause it loss. It is also claimed that WCG,
WCSB are vicariously liable for any wrongdoing on the part of KBR. The potential quantum of the claim is in excess of £1m.

The claims are strenuously denied by the Directors and the Directors consider the claim to be without any merit, as supported by a legal opinion
obtained by WCG and WCSB, which advises that the claims are ‘weak’. A detailed response denying liability for the claims was submitted to the client’s
representatives in December 2016. The Directors have heard nothing further from the former KBR client since then and as there is no date of expiry for
the claim it will remain a contingent liability.

32. Subsequent events

There are no material events arising after 31 March 2018, which have an impact on these financial statements.

33. Prior year adjustment
An adjustment has been made to retained earnings brought forward at 1 April 2016, as shown in the Consolidated statement of changes in equity, to
correct the recording of portfolio management fees previously accounted for in advance instead of arrears of £218,000 at 31 March 2016 together
with the tax impact of £41,000. This has had the effect of increasing trade and other receivables by £435,000, increasing trade and other payables
by £217,000, increasing tax liabilities by £41,000 and increasing retained earnings by £177,000 as at 31 March 2016. Subsequent movements in the
year to 31 March 2017 increased receivables by £29,000, increased liabilities by £15,000, increased tax liabilities by £3,000, and increased earnings by
£11,000, as reflected in the adjusted Comprehensive income of £575,000 for the year to 31 March 2017.

An adjustment has been made to retained earnings brought forward at 1 April 2016, as shown in the Consolidated statement of changes in equity,
to correct the previous under accrual of employers National Insurance Contributions (NIC) on a performance related bonus scheme of £181,000
at 31 March 2016 together with the tax impact of £35,000. This has had the effect of increasing trade and other payables by £181,000, reducing
tax liabilities by £35,000 and reducing retained earnings by £146,000 as at 31 March 2016. Subsequent movements in the year to 31 March 2017
increased the liability by £54,000, reduced tax liabilities by £10,000 to and reduced earnings by £44,000, as reflected in the adjusted Comprehensive
income of £575,000 for the year to 31 March 2017.

A reclassification adjustment has been made on the consolidated income statement to commission payable and administrative expenses for the
year ended 31 March 2017, to reflect employed investment adviser profit sharing costs as an administrative expense, previously disclosed as shared
commission payable. This had the effect of reducing commission payable by £1,200,000 and increasing administrative expenses by £1,200,000, being
an increase of £1,138,000 in staff costs and £62,000 in other expenses. There is no impact on retained earnings or assets in the current or prior year as
a result of this change in accounting treatment.

34. Long-term liability – deferred cash consideration

Amounts due to personnel under recruitment contracts/acquisition agreements

2018
£000

197

2017
£000

372

These amounts are based on fixed contractual terms and the fair value of the liability approximates carrying value, due to the consistency of the
prevailing market rate of interest when compared to the inception of liability.

78
Financial statements

Walker Crips Group plc
Annual Report and Accounts 2018

Company balance sheet
as at 31 March 2018

Fixed assets
Tangible
Intangible
Investments

Current assets
Debtors
Trading investments
Cash at bank and in hand

Creditors: amounts falling due within one year
Other creditors
Shares to be issued

Net current assets

Total assets less current liabilities

Creditors: amounts falling due after more than one year
Other creditors
Shares to be issued

Net assets

Capital and reserves
Called-up share capital
Share premium account
Own shares held
Profit and loss account
Other reserves

Equity shareholders’ funds

Notes

38
39
40

43
44

47
47
47

2018
£000

1,762
4,181
17,575

23,518

683
579
605

1,867

(4,257)
(171)

(4,428)
(2,561)

Restated
2017
£000

Restated
2016
£000

158
4,418
17,425

22,001

1,164¹
570
1,034

2,768¹

(3,122)
(366)

(3,488)
(720)¹

376
3,953
17,425

21,754

926¹
518
2,187

3,631¹

(1,726)
(912)

(2,638)
993¹

20,957

21,281¹

22,747¹

(1,170)
–

(1,170)
19,787

2,861
3,674
(312)
8,896
4,668

(342)
–

(342)
20,939¹

2,826
3,502
(312)
10,255¹
4,668

(1,486)
(218)

(1,704)
21,043¹

2,595
2,279
(312)
11,813¹
4,668

19,787

20,939¹

21,043¹

1 Equity as at 31 March 2016 and 31 March 2017, restated (Note 53).

As permitted by section 408 of the Companies Act 2006 the Company has elected not to present its own profit and loss account for the year. Walker
Crips Group plc reported a loss for the financial year of £573,000 (2017: restated¹ loss of £842,000).

The financial statements of Walker Crips Group plc (Company registration no: 01432059) were approved by the Board of Directors and authorised for
issue on 31 July 2018.

Signed on behalf of the Board of Directors

R. A. FitzGerald FCA
Director
31 July 2018

79
Financial statements

Walker Crips Group plc
Annual Report and Accounts 2018

Company statement of changes in equity
year ended 31 March 2018

Restated1 equity as at 31 March 2016
Restated1 comprehensive income for the year
Restated1 loss for the year

Restated1 total comprehensive income for the year

Contributions by and distributions to owners
Dividends paid
Issue of shares on acquisition of intangibles

Total contributions by and distributions to owners

Restated1 equity as at 31 March 2017
Comprehensive income for the year
Loss for the year

Total comprehensive income for the year

Contributions by and distributions to owners
Dividends paid
Issue of shares on acquisition of intangibles

Total contributions by and distributions to owners

Called-up
share capital
£000

Share
premium
£000

Own
shares held
£000

Restated
Profit and loss
account
£000

Other
£000

Total
equity
£000

2,595

2,279

(312)

4,668

11,813

21,043

–

–
231

231

2,826

–

–
35

–

–
1,223

1,223

3,502

–

–
172

172

–

–
–

–

–
–

–

(842)

(716)
–

(716)

(842)

(716)
1,454

738

(312)

4,668

10,255

20,939

–

–
–

–

–
–

–

(573)

(786)
–

(786)

(573)

(786)
207

(579)

Equity as at 31 March 2018

2,861

3,674

(312)

4,668

8,896

19,787

1 Equity as at 31 March 2016 and 31 March 2017, restated (Note 53).

80
Financial statements

Walker Crips Group plc
Annual Report and Accounts 2018

Notes to the Company accounts
year ended 31 March 2018

35. Significant accounting policies
The separate financial statements of the Company are presented as required by the Companies Act 2006.

The financial statements have been prepared under the historical cost convention except for the modification to a fair value basis for certain financial
instruments as specified in the accounting policies below, and in accordance with Financial Reporting Standard 102, the Financial Reporting Standard
applicable in the UK and the Republic of Ireland, and the Companies Act 2006.

The preparation of financial statements in compliance with FRS 102 requires the use of certain critical accounting estimates. It also requires management to
exercise judgement in applying the Company’s accounting policies (see Note 36).

The financial statements are presented in the currency of the primary activities of the Company (its functional currency). For the purpose of the financial
statements, the results and financial position are presented in Sterling (£). The principal accounting policies have been summarised below. They have all been
applied consistently throughout the year and the preceding year.

The Company has chosen to early adopt the amendments to FRS 102, paragraph 34.22, which revise the disclosure requirements for financial institutions,
specifically in relation to the fair value hierarchy, as presented within Note 45. These amendments were approved for issue on 3 March 2016 and are
otherwise effective for accounting periods beginning on or after 1 January 2017.

The Company has chosen to adopt the disclosure exemption in relation to the preparation of a cash flow statement under FRS 102.

Tangible fixed assets
Tangible fixed assets comprise fixtures and equipment and are recorded at the point at which payment is made at cost. Fixtures and equipment are stated at historical cost
less accumulated depreciation and provision for any impairment. Depreciation is charged so as to write off the cost or valuation of assets over their estimated useful lives
using the straight-line method on the following bases:

Computer hardware
Computer software
Leasehold improvements
Furniture and equipment

33 1/3% p.a. on cost
Between 20% and 33 1/3% p.a. on cost
Over the term of the lease
33 1/3% p.a. on cost

The gain or loss on the disposal or retirement of an asset is determined as the difference between the sales proceeds and the carrying amount of the asset
and is recognised in income.

Intangible assets
Client lists and Unit Trust Management Contracts
Client lists and Unit Trust Management Contracts Acquired client lists and businesses are recognised when acquired, generating revenue from clients and
investment managers are capitalised based on the expected future cash flows to be generated over the lives of the assets, discounted at an appropriate
discount rate. These costs are amortised on a straight-line basis over their expected useful lives of 10 to 20 years.

Acquired Unit Trust Management Contracts are capitalised as intangible assets based on an estimate of the expected future cash flows that those contracts
will generate over their useful lives of ten years. These costs are amortised on a straight-line basis over their expected useful lives.

Client lists are recognised when it is probable that future economic benefits will flow to the Company and the cost of the asset can be measured reliably
whilst the risk and rewards have also transferred into the Company’s ownership.

Impairment of non-financial assets
At each balance sheet date, the Company reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication
that those assets have suffered an impairment loss. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are
separately identifiable cash flows (cash-generating units). If there is an indication of possible impairment, the recoverable amount of any affected asset (or
group of related assets) is estimated and compared with its carrying amount. If the estimated recoverable amount is lower, the carrying amount is reduced
to its estimated recoverable amount, and an impairment loss is recognised immediately in profit or loss.

Taxation
The tax expense represents the sum of the tax currently payable and any deferred tax.

Current tax, including UK corporation tax and foreign tax, is provided at amounts expected to be paid or recovered using the tax rates and laws that have
been enacted or substantively enacted by the balance sheet date. Current tax charges arising on the realisation of revaluation gains recognised in the
statement of comprehensive income are also recorded in this statement.

Deferred tax is recognised in respect of all timing differences that have originated but not reversed at the balance sheet date where transactions or events
that result in an obligation to pay more tax in the future or a right to pay less tax in the future have occurred at the balance sheet date.

A deferred tax asset is regarded as recoverable and therefore recognised only when, on the basis of all available evidence, it can be regarded as more likely
than not that there will be suitable taxable profits from which the future reversal of the underlying timing differences can be deducted. Deferred tax assets
and liabilities are not discounted.

81
Financial statements

Walker Crips Group plc
Annual Report and Accounts 2018

35. Significant accounting policies continued
Own shares held
Own shares consist of treasury shares which are recognised at cost as a deduction from equity shareholders’ funds. Subsequent consideration received
for the sale of treasury shares is also recognised in equity with any difference being taken to retained earnings. No gain or loss is recognised on sale of
treasury shares.

Financial instruments
Financial assets and financial liabilities are recognised in the balance sheet when the Company becomes a party to the contractual provisions of the
instrument. Section 11 of FRS 102 has been applied in classifying financial instruments depending on the nature of the instrument held.

Deferred income
Income received from clients in respect of future periods to the transaction or reporting date are classified as deferred income within creditors until
such time as value has been received by the client.

Investments
Investments are recognised and derecognised on a trade date basis where a purchase or sale of an investment is under a contract whose terms require
delivery of the investment within the timeframe established by the market concerned and are initially measured at cost including transaction costs or at
fair value depending on the nature of the instrument held.

Financial assets are derecognised when the rights to receive cash flows have expired, or the Company has transferred substantially all the risks and
rewards of ownership.

Investments are classified as basic financial instruments and are measured at subsequent reporting dates at fair value. Where securities are held for
trading purposes, gains and losses arising from changes in fair value are included in net profit or loss for the period.

Investments in subsidiaries
Investments in subsidiaries are stated at cost less, where appropriate, provisions for impairment.

Valuation of investments
The fair valuation of the Company’s basic financial instrument investments is based upon the underlying market price and volatility which may be
subject to fluctuation from year to year (see Note 45 for further information).

Debtors
Accrued income and other debtors are classified as basic financial instruments and measured at initial recognition at transaction price. Debtors are
subsequently measured at amortised cost using the effective interest rate method. A provision is established when there is objective evidence that the
Group will not be able to collect all amounts due.

Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and demand deposits and other short-term highly liquid investments that are readily convertible to a
known amount of cash and are subject to an insignificant risk of changes in value.

Financial liabilities and equity
Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument
is any contract that evidences a residual interest in the assets of the Company after deducting all of its liabilities. Equity instruments issued by the
Company are recorded at the proceeds received, net of direct issue costs. Financial liabilities are initially recognised at fair value and classified as fair
value through profit or loss. No liabilities are held for trading.

Share-based payments
The Company makes no share-based payments.

For employees and account executives of a subsidiary of the Company, the share-based payment is accounted for as a capital contribution in the
respective subsidiary. The subsidiary will then take a charge to its income statement in respect of the share-based payment.

Shares to be issued
Shares to be issued represent the Company’s best estimate of the Ordinary Shares in the Company which are likely to be issued following business
combinations or the acquisition of client relationships which involve deferred payments in the Company’s shares. Where shares are due to be issued
within a year, the sum is included in current liabilities. Shares to be issued are dependent on the achievement of predefined targets and are treated
as a liability until they are allotted and issued, at which time they are reclassified within equity. The Company had recognised as a liability the sum
which has been issued and allotted to personnel associated with the Company in order to meet contractual commitments given as part of the recent
expansion of its client base

82
Financial statements

Walker Crips Group plc
Annual Report and Accounts 2018

Notes to the Company accounts continued
year ended 31 March 2018

35. Significant accounting policies continued
Leases
Rentals under operating leases are charged on a straight-line basis over the lease term even if the payments are not made on such a basis. Benefits
received as an incentive to enter into an operating lease are also spread on a straight-line basis over the lease term.

Going concern
Going concern
After conducting enquiries, the Directors believe that the Company has adequate resources to continue in existence for the foreseeable future.
Accordingly, they continue to adopt the going concern basis in preparing the financial statements. The Company’s business activities, together with the
factors likely to affect its future development, performance and position, has been rigorously assessed.

36. Key sources of estimation uncertainty and judgements
The preparation of financial statements in conformity with generally accepted accounting practice requires management to make estimates and
judgements that affect the reported amounts of assets and liabilities as well as the disclosure of contingent assets and liabilities at the balance sheet
date and the reported amounts of revenues and expenses during the reporting period.

Intangible and financial assets – judgement
Acquired client lists are capitalised based on current fair values. During the year the Company acquired several investment managers and the business
of their clients. By assessing the historic rates of client retention, the ages and succession plans of the investment managers who manage the clients
and the contractual incentives of the investment managers, the Directors consider a life of up to 20 years to be both appropriate and in line with peers.

Financial assets comprise equity investments which are held for trading, with fair value determined by the market price of each investment.

The determination of what constitutes ‘observable’ requires significant judgement by the Directors when using peer comparisons to rationalise our
assessments. The Directors consider observable data to be that market data which is readily available, regularly distributed or updated, reliable and
verifiable, not proprietary, provided by multiple, independent sources that are actively involved in the relevant market.

37. Loss for the year
Loss for the financial year of £573,000 (2017: restated1 loss of £842,000) is after an amount of £36,000 (2017: £35,000) related to the auditor’s
remuneration for audit services to the Company.

1 See Note 53.

Particulars of employee costs (including Directors) are as shown below:

Employee costs during the year amounted to:
Wages and salaries
Social security costs
Other costs

2018
£000

268
28
14

310

2017
£000

435
45
51

531

In the current year Employee costs are those of the Non-Executive Directors. A proportion of Executive Directors and the cost of the Group Profit Share
Scheme. The remaining Executive Director Employee costs are borne by Walker Crips Stockbrokers Ltd

In the prior year Employee costs are those of R. A. FitzGerald, the Non-Executive Directors and a proportion of D. Hetherton. The employee costs of the
remaining Executive Directors are borne by Walker Crips Stockbrokers Limited.

The monthly average number of staff employed during the year was:

Executive Directors
Non-Executive Directors

2018
Number

2017
Number

4
4

83
Financial statements

Walker Crips Group plc
Annual Report and Accounts 2018

38. Tangible fixed assets

Cost
At 1 April 2017
Write down
Additions

At 31 March 2018

Accumulated depreciation
At 1 April 2017
Eliminated on write down of assets
Charge for the year
At 31 March 2018

Carrying amount
At 31 March 2018

At 31 March 2017

39. Intangible assets

Cost
At 1 April 2017
Additions

At 31 March 2018

Accumulated depreciation
At 1 April 2017
Charge for the year

At 31 March 2018

Carrying amount
At 31 March 2018

At 31 March 2017

40. Fixed asset investments

Subsidiary undertakings
Debt Investments

Leasehold
improvements
furniture and
equipment
£000

Computer
software
£000

976
(659)
1,810

2,127

822
(659)
203
366

1,761

154

858
–
–

858

854
–
3
857

Client lists
£000

5,006
56

5,062

588
293

881

4,181

4,418

Total
£000

1,834
(659)
1,810

2,985

1,676
(659)
206
1,223

1,762

158

Total
£000

5,006
56

5,062

588
293

881

4,181

4,418

2018
£000

17,425
150

17,575

2017
£000

17,425
–

17,425

A complete list of subsidiary undertakings can be found in Note 54.

Debt Instruments comprises the firm’s investments in the junior debt of Topaz STL, a special purpose vehicle (SPV) which advances short term loans to
property investors. During the period to 31 March 2018 investments of £150,000 were made.

41. Debtors

Amounts due from subsidiary undertakings
Deferred tax asset
Prepayments and accrued income
Other debtors

1 Amounts have been restated and are explained further in Note 53.

2018
£000

111
140
43
389

683

Restated
2017
£000

7811
302
58
23

1,164

84
Financial statements

Walker Crips Group plc
Annual Report and Accounts 2018

Notes to the Company accounts continued
year ended 31 March 2018

42. Deferred tax asset/(liability)

At 1 April
Use of loss brought forward
(Charge)/credit to the income statement

At 31 March

1 Amounts have been restated and are explained further in Note 53.

2018
£000

302
(156)
(6)

140

Restated1
2017
£000

85
–
217

302

Finance (No. 2) Act 2015 enacted reductions in the UK corporation tax rate to 19% with effect from 1 April 2017 and 18% with effect from 1 April
2020. Finance Act 2016 enacted a reduction in the 18% rate to 17% with effect from 1 April 2020. These changes to corporation tax rates impacted
the deferred tax charge and closing deferred tax position for 2018.

43. Creditors

Accruals and deferred income
Amounts due to subsidiary undertakings
Other creditors
Amount due to personnel under recruitment contracts

44. Shares to be issued

Amount due to personnel under recruitment contracts/acquisition agreements

2018
£000

473
2,986
63
735

4,257

2018
£000

171

2017
£000

410
1,074
–
1,638

3,122

2017
£000

366

45. Fair value disclosures
FRS 102 requires a three-level hierarchy disclosure for categorising financial assets and liabilities carried at fair value and requires enhanced disclosures
about fair value measurement. The fair value hierarchy classifies financial assets and liabilities according to the source of inputs ranked according to
availability of observable market prices used in measuring fair value as follows:

Level 1 – The unadjusted quoted price in an active market for identical assets and liabilities that the entity can access at the measurement date. The

Company’s Trading investments fall within this category;

Level 2 – Inputs other than quoted prices included within Level 1 that are observable (i.e. developed using market data) for the asset or liability, either

directly or indirectly. The Company does not hold financial instruments in this category; and

Level 3 – Inputs are unobservable (i.e. for which market data is unavailable) for the asset and liability. The Company’s Basic financial instruments held

at fair value (within Fixed asset investments) fall within this category.

The level in the fair value hierarchy within which the fair value measurement is categorised in its entirety should be determined on the basis of the
lowest level input that is significant to the fair value measurement in its entirety.

The categorisation of the Company’s investments within the hierarchy is based upon the pricing transparency of the investments and does not
necessarily correspond to the Directors’ perceived risk of the investments.

The determination of what constitutes “observable” requires significant judgement by the Directors. The Directors consider observable data to be
that market data which is readily available, regularly distributed or updated, reliable and verifiable, not proprietary, provided by multiple, independent
sources that are actively involved in the relevant market.

The following tables analyse within the fair value hierarchy the company’s Investments measured at fair value:

At 31 March 2018

Financial assets held at fair value through profit and loss

At 31 March 2017

Financial assets held at fair value through profit and loss

Level 1
shares

579

Level 1
shares

570

Level 2
£000

–

Level 2
£000

–

Level 3
£000

150

Level 3
£000

–

Total
£000

729

Total
£000

570

Determining the fair value of the Company’s investments requires judgement and considers factors specific to the Investment. The valuation policies
applied by the Directors are detailed in Note 35.

85
Financial statements

Walker Crips Group plc
Annual Report and Accounts 2018

46. Risk management policies
Procedures and controls are in place to identify, assess and ultimately control the financial risks faced by the Company arising from its use of financial instruments.
Steps are taken to mitigate identified risks with established and effective procedures and controls, efficient systems and the adequate training of staff.

The Company’s risk appetite, along with the procedures and controls mentioned above, are laid out in the Group’s Internal Capital Adequacy Assessment
Process document prepared in accordance with the requirements of the Financial Conduct Authority (FCA).

The overall risk appetite for the Company and for the Group as a whole is considered by management to be low, despite operating in a market-place where
financial risk is inherent in the core businesses of investment management and financial services.

The Group considers its financial risks arising from its use of financial instruments to fall into three main categories:
(i)
(ii)
(iii)

credit risk;
liquidity risk; and
market risk.

Further information on the disclosures and policies carried out by the Company and the Group are made in Note 23 of the consolidated financial statements.

(i) Credit risk
Maximum exposure to credit risk:

Cash
Other debtors

2018
£000

605
502

1,107

The credit quality of banks holding the Group’s cash at 31 March 2018 is analysed below with reference to credit ratings awarded by Fitch.

A
BBB+

Analysis of other debtors due from financial institutions:

Neither past due nor impaired
Past due but not impaired

<30 days
>30 days
>3 months

2018
£000

377
228

605

2018
£000

389
–
–
–

389

(ii) Liquidity risk
The tables below analyse the Company’s future undiscounted cash outflows based on the remaining period to the contractual maturity date:

2018

Other creditors

2018

Within one year
Within two to five years

2018
£000

5,696

2018
£000

4,257
1,170

5,427

2017
£000

1,034
23

1,057

2017
£000

64
970

1,034

2017
£000

23
–
–
–

2017
£000

3,464

2017
£000

3,122
342

3,464

86
Financial statements

Walker Crips Group plc
Annual Report and Accounts 2018

Notes to the Company accounts continued
year ended 31 March 2018

46. Risk management policies continued
(iii) Market risk
Market risk is the risk that changes in market prices such as foreign exchange rates or equity prices will affect the Group’s income.

These relate to price risk breached on available-for-sale and trading investments and closely monitored using limits to prevent significant losses.

Fair value of financial instruments
The fair values of the Company’s financial assets and liabilities are not materially different from their carrying values as they have been revalued at
31 March 2018 using closing market prices.

A 10% fall in global equity markets would, in isolation, result in a pre-tax decrease to net assets of £57,900 (2016: £57,000). A 10% rise would have an
equal and opposite effect.

47. Called-up share capital

Called-up, allotted and fully paid
42,917,730 (2017: 42,386,423) Ordinary Shares of 6 2/3p each

2018
£000

2017
£000

2,861

2,826

During the year 531,307 new Ordinary Shares were issued and allotted to various personnel associated with the Company in order to meet contractual
commitments made by the Company as part of the ongoing expansion of its client base.

The Company holds 750,000 of its own shares, purchased for total cash consideration of £312,000. In line with the principles of FRS 102, section 11,
these treasury shares have been deducted from equity. No gain or loss has been recognised in the profit and loss account in relation to these shares.

The following movements in share capital occurred during the year:

At 1 April 2016
Shares issued to personnel

At 1 April 2017
Shares issued to personnel

At 31 March 2018

Number of
shares

38,924,046
3,462,377

42,386,423
531,307

42,917,730

Share
capital
£000

2,595
231

2,826
35

2,861

Share
premium
£000

2,279
1,223

3,502
172

3,674

Total
£000

4,874
1,454

6,328
207

6,535

Walker Crips is classified for capital purposes as an investment management group and performs an Internal Capital Adequacy Assessment Process
(ICAAP), which is presented to the FCA on request. Regulatory capital resources for ICAAP purposes are calculated in accordance with published rules.
These require certain adjustments to and certain deductions from accounting capital, the latter largely in respect of intangible assets. The ICAAP
compares regulatory capital resources against regulatory capital requirements derived using the FCA’s Pillar 1 and Pillar 2 methodology. The Group has
adopted the standardised approach to calculating its Pillar 1 credit risk component and the basic indicator approach to calculating its operational risk
component. Capital management policy and practices are applied at both Group and entity level.

Apart from share capital and share premium, the Company holds reserves at 31 March 2018 under the following categories:

Own shares held (£312,000) – the negative balance of the Company’s own shares, which have been bought back and held in treasury.

Profit and loss account (£8,896,000) – the net cumulative earnings of the Company not paid out as dividends retained to be reinvested in our core,
or new, business.

Other (£4,668,000) – the cumulative share premium on the issue of shares as deferred consideration for corporate acquisitions.

87
Financial statements

Walker Crips Group plc
Annual Report and Accounts 2018

48. Creditors: amounts falling due after more than one year

Amount due to personnel under recruitment contracts

2018
£000

1,170

2017
£000

342

Amounts due represent deferred cash consideration based on fixed contractual terms which means that there is no difference between fair value and
the carrying amounts.

49. Financial commitments
Capital commitments
At the end of the year, there were capital commitments of £nil (2017: £nil) contracted but not provided for and £nil (2017: £nil) capital commitments
authorised but not contracted for.

Lease commitments
The annual commitments under non-cancellable operating leases fall due as follows:

Within one year
Within two to five years
More than five years

2018
£000

736
2,807
2,571

2017
£000

416
404
47

50. Related party transactions
Key management are those persons having authority and responsibility for planning, controlling and directing the activities of the Group, or in relation to
the Company, the Company. In the opinion of the Board, the Group and the Company’s key management are the Directors of Walker Crips Group plc.

Total compensation to key management personnel is £993,000 (2017 : £1,241,000 restated) including employers’ NI.

51. Contingent liability
During the prior year, two Group companies, Walker Crips Group plc (WCG) and Walker Crips Stockbrokers Limited (WCSB) received draft proceedings
in respect of a potential claim, from a former listed corporate client of Keith Bayley Rogers & Co (KBR) a former subsidiary of the Group. The corporate
client alleges that its former Executive Chairman and his associates misappropriated assets of £5.6m from it between 2010 and 2014 and used these
assets to purchase and sell shares in the client through the brokerage of WCG, WCSB and KBR. The client asserts that WCG and WCSB acted dishonestly
to assist the Chairman to perpetrate the alleged fraud and was party to an unlawful means conspiracy to cause it loss. It is also claimed that WCG and
WCSB are vicariously liable for any wrongdoing on the part of KBR. The potential quantum of the claim is in excess of £1m.

The claims are strenuously denied by the Directors and the Directors consider the claim to be without any merit as supported by a legal opinion
obtained by WCG and WCSB, which advises that the claims are ‘weak’. A detailed response denying liability for the claims was submitted to the client’s
representatives in December 2016. The Directors have heard nothing further from the former KBR client since then and as there is no date of expiry for
the claim it will remain a contingent liability.

52. Subsequent events
There are no material events arising after 31 March 2018, which has an impact on these financial statements.

53. Prior year adjustment
An adjustment has been made to retained earnings brought forward at 1 April 2016, as shown in the Company statement of changes in equity, to
reflect consolidation of £400,000 of accumulated LLP Profits from Group Company Barker Poland Asset Management LLP, previously only recognised
in the Group Consolidated income statement. The loss for for the year to 31 March 2017, as shown in the Company statement of changes in equity
has been adjusted to reflect consolidation of £381,000 of LLP Profits for the year to 31 March 2017, from Group Company Barker Poland Asset
Management LLP, previously only recognised in the Group Consolidated income statement .This has the effect of increasing debtors and increasing
retained earnings by £781,000 as at 31 March 2017 and £400,000 as at 31 March 2016. The Group Consolidated income statement and Statement of
Financial position are unaffected by these changes.

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Annual Report and Accounts 2018

Notes to the Company accounts continued
year ended 31 March 2018

54. Subsidiaries and jointly-owned entities

Group

Trading subsidiaries
Walker Crips Stockbrokers Limited a)
London York Fund Managers Limited c)
Walker Crips Wealth Management Limited c)
Ebor Trustees Limited c)
Barker Poland Asset Management LLP a)
Non-trading subsidiaries
Walker Crips Financial Services Limited a)
G & E Investment Services Limited c)
Ebor Pensions Management Limited c)
Investorlink Limited a)
Walker Cambria Limited a)
Walker Crips Trustees Limited a)
W.B. Nominees Limited b)
WCWB (PEP) Nominees Limited b)
WCWB (ISA) Nominees Limited b)
WCWB Nominees Limited b)
Walker Crips Investment Management a)
TBWC No 2 Limited a)
TBWC No 3 Limited a)
Jointly controlled entities
JWPCreers Wealth Management Limited d)

The registered office for subsidiary and associated undertakings is:

a) Old Change House, 128 Queen Victoria Street, London, England, EC4V 4BJ

b) St James House, 27-43 Eastern Road, Romford, Essex RM1 3NH

c) Apollo House, Eboracum Way, York, England, YO31 7RE

d) Genesis, 5 Church Lane, Heslington, Yorkshire YO10 5DQ

Country of
incorporation

Principal activity

Class and percentage
of shares held

United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom

United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom

Investment management
Management services
Financial services advice
Pensions management
Investment management

Financial services
Holding company
Dormant company
Agency stockbroking
Dormant company
Dormant company
Nominee company
Nominee company
Nominee company
Nominee company
Dormant company
Dormant company
Dormant company

Ordinary Shares 100%
Ordinary Shares 100%
Ordinary Shares 100%
Ordinary Shares 100%
Membership 100%

Ordinary Shares 100%
Ordinary Shares 100%
Ordinary Shares 100%
Ordinary Shares 100%
Ordinary Shares 100%
Ordinary Shares 100%
Ordinary Shares 100%
Ordinary Shares 100%
Ordinary Shares 100%
Ordinary Shares 100%
Ordinary Shares 100%
Ordinary Shares 100%
Ordinary Shares 100%

United Kingdom

Financial services advice

Ordinary Shares 50%

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Financial statements

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Annual Report and Accounts 2018

Notice of Annual General Meeting

THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. If you are in any doubt as to what action you should take, you
are recommended to seek your own financial advice from your stockbroker or other independent adviser authorised under the Financial Services and
Markets Act 2000.

If you have sold or transferred all of your shares in Walker Crips Group plc, please forward this document, together with the accompanying documents,
as soon as possible either to the purchaser or transferee or to the person who arranged the sale or transfer so they can pass these documents to the
person who now holds the shares.

Notice is hereby given that the Annual General Meeting of Walker Crips Group plc (the Company) will be held at Old Change House, 128 Queen Victoria
Street, London EC4V 4BJ on 5 September 2018 at 11.00 a.m. for the following purposes:

As ordinary business
To consider and, if thought fit, to pass the following resolutions which will be proposed as ordinary resolutions:

1. To receive and adopt the Directors’ report and audited financial statements for the year ended 31 March 2018.

2. To approve the Directors’ remuneration report excluding the summary of the Directors’ remuneration policy set out on pages 40 to 42 of the

Directors’ remuneration policy for the year ended 31 March 2018.

3. To declare a final dividend of 1.29 pence per Ordinary Share for the year ended 31 March 2018.

4. To re-elect as a Director Mr David Gelber.

5. To re-elect as a Director Mr Martin Wright.

6. To re-elect as a Director Mr Hua Min Lim.

7. To re-elect as a Director Mr Mark Rushton.

8. To re-appoint BDO LLP as auditor of the Company until the conclusion of the next meeting at which accounts are laid.

9. To authorise the Directors to set the auditor’s remuneration.

As special business
To consider and, if thought fit, to pass the following resolution which will be proposed as an ordinary resolution:

10. That the authority and power conferred upon the Directors to allot shares or to grant rights to subscribe for or to convert any security into shares
in accordance with Article 12 of the Company’s Articles of Association shall apply until the earlier of the conclusion of the next Annual General
Meeting of the Company or the date falling 15 months from the date of the passing of this resolution and for that period the Section 551 Amount
(as defined in Article 12(B)) shall be £946,162 (equivalent to one third of the Company’s issued share capital (excluding treasury shares) as at the
date of this notice). All previous authorities pursuant to Article 12(B) are revoked, subject to Article 12(D).

To consider, and if thought fit, pass the following resolutions which will be proposed as special resolutions:

11. That, subject to the passing of Resolution 10, the authority and power conferred upon the Directors to allot equity securities for cash in accordance
with Article 12 of the Company’s Articles of Association shall apply until the earlier of the conclusion of the next Annual General Meeting of the
Company or the date falling 15 months from the date of the passing of this resolution and for that period the Section 561 Amount (as defined in
Article 12(C)) shall be £283,848 (equivalent to 10% of the Company’s issued share capital (excluding treasury shares) as at the date of this notice).
All previous authorities pursuant to Article 12(C) are revoked, subject to Article 12(D).

12. That the Company be and is hereby granted pursuant to section 701 of the Companies Act 2006 general and unconditional authority to make

market purchases (within the meaning of section 693 of the Companies Act 2006) on the London Stock Exchange of ordinary shares of 6 2/3 pence
each in the capital of the Company (Ordinary Shares) provided that:

a) the maximum aggregate number of Ordinary Shares hereby authorised to be purchased is limited to 10% of the Company’s issued share capital

then in issue;

b) the minimum price which may be paid for any Ordinary Shares is 6 2/3 pence per Ordinary Share;
c) the maximum price (exclusive of expenses) which may be paid for any Ordinary Shares is not more than 5% above the average of the middle
market quotations for the Ordinary Shares (as derived from the London Stock Exchange Daily Official List) for the ten business days before the
purchase is made;

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Notice of Annual General Meeting continued

d) the authority hereby conferred shall expire at the earlier of the conclusion of the next Annual General Meeting of the Company or the date

falling 15 months from the date of the passing of this resolution; and

e) the Company may make a contract or contracts to purchase Ordinary Shares under the authority hereby conferred prior to the expiry of such
authority which will or may be executed wholly or partly after the expiry of such authority, and may make a purchase of Ordinary Shares
pursuant to any such contract or contracts. This resolution shall confer on the Directors all rights for the Company to make any such market
purchase of the Company’s own shares as are required under the terms of Article 11(B).

13. That the Company be authorised to call a general meeting of the shareholders, other than an Annual General Meeting, on not less than 14 clear

days’ notice.

By order of the Board

R. A. FitzGerald FCA
Secretary
31 July 2018

Walker Crips Group plc
Old Change House, 128 Queen Victoria Street, London, England, EC4V 4BJ
Reg No. 01432059

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Notes on resolutions
The following paragraphs explain, in summary, the resolutions to be proposed at the Annual General Meeting (the Meeting). Your vote is important to
the Company and all shareholders are encouraged to vote on all shareholder matters.

The Board considers that all resolutions proposed are likely to promote the success of the Company and are in the best interests of the Company and
its shareholders as a whole. Your Board unanimously recommends that shareholders vote in favour of them.

Resolution 1: Receipt of the 2018 Annual Report and Accounts
The directors’ and auditor’s reports and the audited financial statements of the Company for the year ended 31 March 2018 (the Annual Report and
Accounts) have been made available to shareholders and will be presented at the Meeting. The Annual Report and Accounts may also be accessed on
the Company’s website at www.wcgplc.co.uk. Shareholders may raise any questions on the Annual Report and Accounts under this resolution.

Resolution 2: Approval of the 2018 Directors’ remuneration report
In accordance with section 439 of the Companies Act, shareholders are requested to approve the Directors’ remuneration report (other than the
summary of the Directors’ remuneration policy set out on pages 40 to 42) which can be found on pages 35 to 42 of the Annual Report and Accounts
for the year ended 31 March 2018. The vote is advisory only and does not affect the actual remuneration paid to an individual Director.

The Directors’ remuneration policy was approved by shareholders at the Annual General Meeting on 6 September 2017 for a period of up to three
years and is, therefore, not required to be put to shareholders for approval at this year’s Meeting. It will be put to shareholders for approval again by no
later than the Annual General Meeting in 2020. The full remuneration policy can be found on pages 44 to 47 of the 2017 Annual Report and Accounts.

Resolution 3: Final dividend
Shareholders are being asked in Resolution 3 to approve a final dividend of 1.29 pence per Ordinary Share for the year ended 31 March 2018. If you
approve the recommended final dividend, this will be paid on 14 September 2018 to all ordinary shareholders who were on the register of members at
the close of business on 31 August 2018.

Resolutions 4 to 7: Re-election of Directors
The Company’s Articles of Association require that at each Annual General Meeting, Directors who were in office at the time of the previous two
Annual General Meetings and who have not been elected or re-elected in that period must retire by rotation. A retiring Director is eligible for re-election.

This year, Mr Mark Rushton is retiring in this manner and is seeking re-election.

Mr David Gelber, Mr Martin Wright and Mr Hua Min Lim are retiring because each of them have been Non-Executive Directors for more than nine years.
Mr Gelber, Mr Wright and Mr Lim are seeking re-election.

The resolutions relating to the re-election of the Directors are proposed as separate resolutions numbered 4 to 7. The Board believes that the
performance of each of the Directors standing for re-election continues to be effective and each Director demonstrates commitment to the role.
As such, the Board determined that the Company would benefit by retaining the knowledge and experience gained by these Directors over the
previous years.

The biographies of the Directors eligible and standing for re-election at the Meeting are set out on pages 24 and 25 in the Annual Report and Accounts.

Resolution 8: Appointment of auditor
The Company is required to appoint its auditor at each general meeting at which accounts are laid before the shareholders and is usually appointed to
hold office from the conclusion of an Annual General Meeting until the conclusion of the next Annual General Meeting. BDO LLP have indicated their
willingness to continue in office.

Accordingly, shareholders are being asked in resolution 8 to approve the appointment of BDO LLP as auditor of the Company from the conclusion of
the Meeting until the conclusion of the next meeting at which accounts are laid.

Resolution 9: Remuneration of the auditor
The resolution also authorises the Directors, in accordance with standard practice, to set the remuneration of the auditor. In accordance with its terms
of reference, the Audit Committee will approve the terms of engagement and the level of audit fees payable by the Company to the auditor and
recommend them to the Board.

Resolution 10: Renewal of the Directors’ authority to allot shares
Resolution 10 will be proposed before the Meeting to confer authority on the Directors to allot shares, or grant rights to subscribe for or to convert any
security into shares, of up to an aggregate nominal amount of £946,162 (being one-third of the Company’s issued share capital (excluding treasury
shares) as at 30 July 2018). This resolution, which is an ordinary resolution, will replace the authority given to the Directors at the last Annual General
Meeting on 6 September 2017.

750,000 shares are held in treasury as at 30 July 2018 (representing approximately 2% of the Company’s issued share capital (excluding treasury
shares) on that date).

The Directors have no present intention to issue new Ordinary Shares in addition to commitments disclosed in the Annual Report and Accounts.
However, the Directors consider it prudent to maintain the flexibility to take advantage of business opportunities that this authority provides.

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Notice of Annual General Meeting continued

This authority will expire on the next Annual General Meeting of the Company or the date falling 15 months from the date of the passing of the
resolution, whichever is the earlier.

Resolution 11: Renewal of the Directors’ authority to disapply pre-emption rights
Resolution 11 will be proposed before the Meeting to confer authority on the Directors to allot equity securities for cash up to an aggregate nominal
amount of £283,848 (being 10% of the Company’s issued share capital (excluding treasury shares) as at 30 July 2018) as if section 561(1) of the
Companies Act 2006 did not apply. This resolution, which is a special resolution, will replace the authority given to the Directors at the last Annual
General Meeting on 6 September 2017.

The Directors have no present intention to make use of this authority and will only do so when satisfied that it is in the interest of the Company.

This authority will expire on the next Annual General Meeting of the Company or the date falling 15 months from the date of the passing of the
resolution, whichever is the earlier.

Resolution 12: Authority for the Company to purchase its own shares
The Companies Act 2006 permits a public company to purchase its own shares in accordance with powers contained in its Articles of Association and
with the authority of a resolution of shareholders. The Directors believe that the Company should be authorised to take advantage of these provisions
and therefore, pursuant to the power contained in the Company’s Articles of Association, it is intended to propose a special resolution at the Meeting
to confer authority on the Company to purchase up to a maximum in aggregate of 10% of the Ordinary Shares of 6 2/3 pence each in the share capital
of the Company at a price or prices which will not be less than 6 2/3 pence and not be more than 5% above the average of the middle market quotation
derived from the London Stock Exchange Daily Official List for the ten business days before the relevant purchase is made.

The authority was given at the last Annual General Meeting of the Company for a period expiring at the conclusion of the next Annual General
Meeting. It is the Directors’ intention that a resolution for its renewal will be proposed at each succeeding Annual General Meeting. The Directors will
only make use of the authority when satisfied that it is in the interest of the Company to do so. Shareholders should note that any Ordinary Shares
purchased by the Company will either be cancelled and the number of Ordinary Shares in issue will accordingly be reduced or will be held as treasury
shares.

Shareholders may further note that the total number of warrants and options to subscribe for equity shares in the Company that are outstanding as at
30 July 2018 is nil.

This authority will expire on the next Annual General Meeting of the Company or the date falling 15 months from the date of the passing of the
resolution, whichever is the earlier.

Resolution 13: Notice period for general meeting
The notice period for general meetings of the Company is 21 days unless shareholders approve a shorter notice period which cannot be less than 14
clear days. Annual General Meetings will continue to be called on at least 21 clear days’ notice.

Resolution 13, which is a special resolution, will enable the Company to call general meetings (other than Annual General Meetings) on 14 clear days’
notice. The Directors believe that this is in the best interests of the shareholders and it is intended that this shorter notice period would not be used as
a matter of routine for such meetings, but only where the flexibility is merited by the business of the meeting and is thought to be to the advantage of
shareholders as a whole.

The approval will be effective until the Company’s Annual General Meeting in 2019 when it is intended that a similar resolution to renew the authority
will be proposed.

Shareholder notes
The following pages provide more detailed information about your voting rights and how you may exercise them.

Entitlement to attend and vote
1. Pursuant to Regulation 41 of the Uncertificated Securities Regulations 2001, the Company specifies that only those members registered on the

Company’s register of members at:
 6.00 p.m. on 3 September 2018; or
 if this Meeting is adjourned, at 6.00 p.m. on the day two days prior to the adjourned meeting, shall be entitled to attend and vote at the Meeting.

Changes to the register of members after the relevant deadline shall be disregarded in determining the rights of any person to attend and vote at
the meeting.

Appointment of proxies
2. If you are a member of the Company at the time set out in Note 1 above, you are entitled to appoint a proxy to exercise all or any of your rights to
attend, speak and vote at the Meeting and you should have received a proxy form with this notice of meeting. You can only appoint a proxy using
the procedures set out in these notes and the notes to the proxy form.

3. A proxy does not need to be a member of the Company but must attend the Meeting to represent you. Details of how to appoint the Chairman of

the Meeting or another person as your proxy using the proxy form are set out in the notes to the proxy form. If you wish your proxy to speak on your
behalf at the Meeting you will need to appoint your own choice of proxy (not the Chairman) and give your instructions directly to them.

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Appointment of proxies continued
4. You may appoint more than one proxy provided each proxy is appointed to exercise rights attached to different shares. You may not appoint more

than one proxy to exercise rights attached to any one share. To appoint more than one proxy you may photocopy your proxy card or contact Neville
Registrars Limited to obtain an extra proxy card on 0121 585 1131.

5. A vote withheld is not a vote in law, which means that the vote will not be counted in the calculation of votes for or against the resolution. If no

voting indication is given, your proxy will vote or abstain from voting at his or her discretion. Your proxy will vote (or abstain from voting) as he or she
thinks fit in relation to any other matter which is put before the Meeting.

Appointment of proxy using hard copy proxy form
6. The notes to the proxy form explain how to direct your proxy how to vote on each resolution or withhold their vote.

To appoint a proxy using the proxy form, the form must be:
 completed and signed;
 sent or delivered to Neville Registrars Limited, Neville House, Steelpark Road, Halesowen B62 8HD; and
 received by Neville Registrars Limited no later than 11.00 a.m. on 3 September 2018.

In the case of a member which is a company, the proxy form must be executed under its common seal or signed on its behalf by an officer of the
Company or an attorney for the Company.

Any power of attorney or any other authority under which the proxy form is signed (or a duly certified copy of such power or authority) must be
included in with the proxy form.

Appointment of proxies through CREST
7.

CREST members who wish to appoint a proxy or proxies by utilising the CREST electronic proxy appointment service may do so for the Meeting and
any adjournment(s) of it by using the procedures described in the CREST Manual (available from https://my.euroclear.com/euilegal). CREST Personal
Members or other CREST sponsored members, and those CREST members who have appointed a voting service provider(s), should refer to their
CREST sponsor or voting service provider(s), who will be able to take the appropriate action on their behalf.

In order for a proxy appointment or instructions made by means of CREST to be valid, the appropriate CREST message (a CREST Proxy Instruction)
must be properly authenticated in accordance with Euroclear UK & Ireland Limited’s (EUI) specifications and must contain the information required
for such instructions, as described in the CREST Manual. The message, regardless of whether it constitutes the appointment of a proxy or is an
amendment to the instruction given to a previously appointed proxy, must, in order to be valid, be transmitted so as to be received by the issuer’s
agent ID (7RA11) by no later than 11.00 a.m. on 3 September 2018, or, in the event of an adjournment of the meeting, 48 hours before the
adjourned meeting. For this purpose, the time of receipt will be taken to be the time (as determined by the timestamp applied to the message by
the CREST Applications Host) from which the issuer’s agent is able to retrieve the message by enquiry to CREST in the manner prescribed by CREST.
After this time, any change of instructions to proxies appointed through CREST should be communicated to the appointee through other means.

CREST members and, where applicable, their CREST sponsors or voting service providers should note that EUI does not make available special
procedures in CREST for any particular messages. Normal system timings and limitations will therefore apply in relation to the input of CREST Proxy
Instructions. It is the responsibility of the CREST member concerned to take (or, if the CREST member is a CREST personal member or sponsored
member, or has appointed a voting service provider(s), to procure that his CREST sponsor or voting service provider(s) take(s)) such action as shall
be necessary to ensure that a message is transmitted by means of the CREST system by any particular time. In this connection, CREST members
and, where applicable, their CREST sponsors or voting service providers are referred, in particular, to those sections of the CREST Manual concerning
practical limitations of the CREST system and timings.

The Company may treat as invalid a CREST Proxy Instruction in the circumstances set out in Regulation 35(5)(a) of the Uncertificated Securities
Regulations 2001.

Appointment of proxy by joint members
8. In the case of joint holders, where more than one of the joint holders purports to appoint a proxy, only the appointment submitted by the most
senior holder will be accepted. Seniority is determined by the order in which the names of the joint holders appear in the Company’s register of
members in respect of the joint holding (the first name being the most senior).

Changing proxy instructions
9. To change your proxy instructions simply submit a new proxy appointment using the methods set out above. Note that the cut-off time for receipt

of proxy appointments (see above) also apply in relation to amended instructions; any amended proxy appointment received after the relevant cut-
off time will be disregarded.

Where you have appointed a proxy using the hard-copy proxy form and would like to change the instructions using another hard-copy proxy form,
please contact Neville Registrars Limited on 0121 585 1131.

If you submit more than one valid proxy appointment, the appointment received last before the latest time for the receipt of the proxies will
take precedence.

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Notice of Annual General Meeting continued

Termination of proxy appointments
10. In order to revoke a proxy instruction you will need to inform the Company by sending a signed hard copy notice clearly stating your intention to

revoke your proxy appointment to Neville Registrars Limited, Neville House, Steelpark Road, Halesowen B62 8HD. In the case of a member which is
a company, the revocation notice must be executed under its common seal or signed on its behalf by an officer of the Company or an attorney for
the Company. Any power of attorney or any other authority under which the revocation notice is signed (or a duly certified copy of such power or
authority) must be included with the revocation notice. The revocation notice must be received by Neville Registrars Limited no later than 11.00 a.m.
on 3 September 2018.

If you attempt to revoke your proxy appointment but the revocation is received after the time specified then, subject to the paragraph directly
below, your proxy appointment will remain valid.

Appointment of a proxy does not preclude you from attending the Meeting and voting in person. If you have appointed a proxy and attend the
Meeting in person, your proxy appointment will automatically be terminated.

Corporate representatives
11. A corporation which is a member can appoint one or more corporate representatives who may exercise, on its behalf, all its powers as a member

provided that no more than one corporate representative exercises powers over the same share.

Issued shares and total voting rights
12. As at 30 July 2018 (being the latest practicable day prior to the date of this notice), the Company’s issued share capital comprised

43,327,328 Ordinary Shares of 6 2/3 pence each. Each Ordinary Share carries the right to one vote at a general meeting of the Company. The
Company held 750,000 Ordinary Shares in treasury on 30 July 2018 and, therefore, the total number of voting rights in the Company as at
such date is 42,577,328.

Communication
13. You may not use any electronic address provided either in this notice of meeting or any related documents (including the letter with which this

notice of meeting was enclosed and proxy form) to communicate with the Company for any purposes other than those expressly stated.

Website giving information regarding the Meeting
14. Information regarding the Meeting, including the information required by section 311A of the Companies Act 2006, is available from www.wcgplc.co.uk.

Questions at the Meeting
15. Under section 319A of the Companies Act 2006, the Company must answer any question you ask relating to the business being dealt with at the
Meeting unless (i) answering the question would interfere unduly with the preparation for the Meeting or involve the disclosure of confidential
information; (ii) the answer has already been given on the Company’s website in the form of an answer to a question; or (iii) it is undesirable in the
interests of the Company or the good order of the Meeting that the question be answered.

Website publication of audit concerns
16. Pursuant to section 527 of the Companies Act 2006, where requested by members meeting the qualification criteria set out in that section, the
Company must publish on its website a statement setting out any matter that such members propose to raise at the Meeting relating to either:
(i) the audit of the Company’s accounts (including the auditor’s report and the conduct of the audit) that are to be laid before the Meeting; or
(ii) the circumstances connected with an auditor of the Company ceasing to hold office since the previous meeting at which the Annual Report and
Accounts were laid in accordance with section 437 of the Companies Act 2006.

Where the Company is required to publish such a statement on its website:

 it may not require the members making the request to pay any expenses incurred by the Company in complying with the request;
 it must forward the statement to the Company’s auditor no later than the time the statement is made available on the Company’s website; and
 the statement may be dealt with as part of the business of the Meeting.

Nominated person
17. If you are a person who has been nominated under section 146 of the Companies Act 2006 to enjoy information rights (Nominated Person), you

may have a right under an agreement between you and the member of the Company who has nominated you to have information rights (Relevant
Member) to be appointed or to have someone else appointed as a proxy for the Meeting. If you either do not have such a right or if you have such
a right but do not wish to exercise it, you may have a right under an agreement between you and the Relevant Member to give instructions to the
Relevant Member as to the exercise of voting rights. Your main point of contact in terms of your investment in the Company remains the Relevant
Member (or, perhaps, your custodian or broker) and you should continue to contact them (and not the Company) regarding any changes or queries
relating to your personal details and your interest in the Company (including any administrative matters). The only exception to this is where the
Company expressly requests a response from you.

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Form of proxy

For use at the Annual General Meeting (the Meeting) of Walker Crips Group plc (the Company) to be held at Old Change House, 128 Queen Victoria Street,
London EC4V 4BJ on 5 September 2018 at 11.00 a.m. and at any adjournment thereof.

I/We (name(s) in full) ……………………………………………………………………………………………………………… (BLOCK LETTERS PLEASE)

Of (address) ……………………………………………………………………………………………………………………………………………………

being (a) holder(s) of shares in the above-named Company HEREBY APPOINT (see Note 3):

(name(s) in full) …………………………………………………………………………………………………………………… (BLOCK LETTERS PLEASE)

Of (address) ……………………………………………………………………………………………………………………………………………………

or failing him (or in the event that no person is named) the Chairman of the Meeting to act as my/our proxy and to vote for me/us on my/our behalf
at the above mentioned Meeting and any adjournment thereof, and I/we desire this proxy to be used as directed below or, failing any direction(s) as
regards the Resolution(s), the proxy will abstain or vote at his discretion.

For

Against

Vote withheld

Enter the number of shares in relation to which your proxy is authorised to vote
or leave blank to authorise your proxy to act in relation to your full entitlement (see Note 4).

Please also mark this box if you are appointing more than one proxy (see Note 5).

The manner in which the proxy is to vote should be indicated by inserting ‘X’ in the box provided:

1) To receive and adopt the Directors’ report and audited financial statements

2) To approve the Directors’ remuneration report

3) To declare a final dividend of 1.29p per Ordinary Share

4) To re-elect David Gelber as a Director

5) To re-elect Martin Wright as a Director

6) To re-elect Hua Min Lim as a Director

7) To re-elect Mark Rushton as a Director

8) To appoint BDO LLP as auditor

9) To authorise the Directors to set the remuneration of the auditor

10) To authorise the Directors to allot shares

11) To disapply pre-emption rights1

12) To authorise the Company to make market purchases of its own shares1

13) To authorise the Company to call a general meeting of shareholders on not less than

14 clear days’ notice1

1 Special resolution.

Signed: …………………………………………………………………………………………………… Dated: ………………………………………………………
(for a company see Note 8 to this form of proxy)

96
Financial statements

Walker Crips Group plc
Annual Report and Accounts 2018

Form of proxy continued

Notes:
1. As a member of the Company you are entitled to appoint a proxy or proxies to exercise all or any of your rights to attend, speak and vote at a

general meeting of the Company. You can only appoint a proxy using the procedures set out in these notes.

2. Appointment of a proxy does not preclude you from attending the meeting and voting in person. If you have appointed a proxy and attend the

meeting in person and vote, your proxy appointment will automatically be terminated.

3. A proxy does not need to be a member of the Company but must attend the meeting to represent you. To appoint as your proxy a person other
than the Chairman of the meeting, insert their full name in the space above. If you sign and return this proxy form with no name inserted in the
box, the Chairman of the meeting will be deemed to be your proxy. Where you appoint as your proxy someone other than the Chairman, you are
responsible for ensuring that they attend the meeting and are aware of your voting intentions. If you wish your proxy to make any comments on
your behalf, you will need to appoint someone other than the Chairman and give them the relevant instructions directly.

4. If the proxy is being appointed in relation to less than your full voting entitlement, please indicate the number of shares in relation to which they
are authorised to act as your proxy. If left blank your proxy will be deemed to be authorised in respect of your full voting entitlement (or, if this
proxy form has been issued in respect of a designated account for a shareholder, the full voting entitlement for that designated account).
5. You may appoint more than one proxy provided each proxy is appointed to exercise rights attached to different shares. You may not appoint

more than one proxy to exercise rights attached to any one share. To appoint more than one proxy you may photocopy your proxy card or contact
Neville Registrars Limited on 0121 585 1131 to obtain an extra proxy card. Please indicate the number of shares in relation to which they are
authorised to act as your proxy (which, in aggregate, should not exceed the number of shares held by you).

6. To direct your proxy how to vote on the resolutions mark the appropriate box with an ‘X’. To abstain from voting on a resolution, select the relevant
‘Vote withheld’ box. A vote withheld is not a vote in law, which means that the vote will not be counted in the calculation of votes for or against the
resolution. If no voting indication is given, your proxy will vote or abstain from voting at his or her discretion. Your proxy will vote (or abstain from
voting) as he or she thinks fit in relation to any other matter which is put before the meeting.

7. To appoint a proxy using this form, the form must be:

 completed and signed;
 sent or delivered to Neville Registrars Limited, Neville House, Steelpark Road, Halesowen B62 8HD; and
 received by Neville Registrars Limited no later than 11.00 a.m. on 3 September 2018.

8. In the case of a member which is a company, this proxy form must be executed under its common seal or signed on its behalf by an officer of the

company or an attorney for the company.

9. Any power of attorney or any other authority under which this proxy form is signed (or a duly certified copy of such power or authority) must be

included with the proxy form.

10. CREST members who wish to appoint a proxy or proxies by using the CREST electronic appointment service may do so by using the procedures
described in the CREST Manual. To be valid, the appropriate CREST message, regardless of whether it constitutes the appointment of a proxy or
an amendment to the instructions given to a previously appointed proxy, must be transmitted so as to be received by our agent Neville Registrars
Limited, Neville House, Steelpark Road, Halesowen B62 8HD, CREST ID (7RA11) by 11.00 a.m. on 3 September 2018. See the notes to the notice of
meeting for further information on proxy appointment through CREST.

11. In the case of joint holders, where more than one of the joint holders purports to appoint a proxy, only the appointment submitted by the most
senior holder will be accepted. Seniority is determined by the order in which the names of the joint holders appear in the Company’s register of
members in respect of the joint holding (the first-named being the most senior).

12. If you submit more than one valid proxy appointment, the appointment received last before the latest time for the receipt of proxies will

take precedence.

13. For details of how to change your proxy instructions or revoke your proxy appointment see the notes to the notice of meeting.
14. You may not use any electronic address provided in this proxy form to communicate with the Company for any purposes other than those

expressly stated.

97
Financial statements

Walker Crips Group plc
Annual Report and Accounts 2018

Officers and professional advisers

Directors

Executive Directors
S. K. W. Lam FCPA (Aust.), Chartered FCSI – Chief Executive Officer
M. J. W. Rushton – Chief Investment Officer
R. A. FitzGerald FCA – Group Finance Director

Non-Executive Directors
D. M. Gelber – Chairman
H. M. Lim
M. J. Wright – Senior Independent Director
C. Bouch FCA – Audit Committee Chairman

Secretary
R. A. FitzGerald FCA

Registered office
Old Change House
128 Queen Victoria Street
London EC4V 4BJ

Bankers
HSBC Bank plc
London

Solicitors
Charles Russell Speechlys LLP
London

Auditor
BDO LLP
London

Registrars
Neville Registrars Limited
Neville House
Steelpark Road
Halesowen B62 8HD

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Walker Crips Group plc
Old Change House
128 Queen Victoria Street
London EC4V 4BJ

020 3100 8000
www.wcgplc.co.uk
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