WH Ireland Group reporting first half year profit first time in five years

WH Ireland Group plc (LON:WHI) have reported their interim results for the six months ended 30th September 2020.

Highlights

Financial Highlights[1]

§ Revenue increased 15.2% to £12.35m (2019 H1: £10.73m)

o  WM revenue down 10.8% at £6.15m due to reduction in market levels

o  CIB revenue up 61.4% at £6.22m following the successful completion of transactions in H1

§ Adjusted operating profit[2] for the period of £0.50m (2019 H1: a loss of £0.91m)

§ Profit before tax of £0.33m (2019 H1: loss £1.44m)

§ Group regulatory capital solvency ratio (CET1): 15.11%[3] (31 March 2020: 13.08%)

§ Cash balance at £5.85m (at 31 March 2020: £2.58m)  

Divisional Highlights

§ Wealth Management:

o  Sale of Isle of Man office successfully completed in the period

o  Group AUM (excluding IOM) up 13.8% to £1.73bn (31 March 2020 AUM (excluding IOM): £1.52bn)

o  WM AUM held on SEI (UK) platform of £1.16bn with proportion managed on a discretionary basis now 60.0% (31 March 2020: 57.7%)

§ Corporate & Institutional Broking:

o  80 Corporate clients (31 March 2020: 76)

o  32 transactions completed in H1 raising £103.86m (2019 H1: £43.13m)

Commenting, Phillip Wale, WH Ireland Group Chief Executive Officer said:

“I am pleased to be reporting the first half year profit for WH Ireland for five years. Over the last six months, WHIreland has seen the benefits of the significant restructuring we embarked on 18 months ago; fixed costs have reduced over that period, whilst revenue has remained broadly flat as we have simplified the business.

Our Wealth Management business has remained operationally robust despite the significant market falls in March, and our Corporate and Institutional Business is showing strong momentum as we act for an increasing number of clients.

Whilst the uncertainty of the impact of Covid 19 on businesses and the wider economy continues, it is challenging to predict future performance, nevertheless, I believe the momentum we have seen in the first half, alongside a robust capital and cash position, gives us a strong platform for the second half.”

Chairman’s Statement

Further progress has been made in returning WH Ireland to a position of strength, despite the challenges facing almost all businesses over the last six months. The Group’s first profit for five years has been made possible because of the hard work, dedication and professionalism of the WH Ireland management team and employees, as well as the loyalty of our clients.

The restructuring of the Group, which is now largely complete, means that we can now focus on growing the business in earnest. The strong performance from Corporate and Institutional Broking (“CIB”) is particularly pleasing, and provides solid evidence of the progress that has been made in that business. Our ability to attract new clients has been illustrated in the period through winning our first corporate client with a market capitalisation of over £1bn, and executing, on a sole basis an IPO raising £25m, giving us confidence that our focus on delivering a high quality service is working.

The robustness of our Wealth Management (“WM”) platform, in a period which has seen considerable asset volatility, demonstrates that we have a platform from which we can grow our discretionary assets.

There remains much work to do in order for us to achieve our collective ambitions for both businesses and as we grow, we must ensure that we maintain our now strong cost discipline.  Whilst Covid-19 brings with it an uncertain economic backdrop, the performance in the first half, our capital and cash positions and our strengthened regulatory and compliance frameworks give the Board confidence that the Group is now well positioned to build further.

As we look to the future we remain ambitious for both businesses. Our aim is to increase discretionary assets in our WM division to £3bn and to double revenues in our CIB division over the next three years.

With good progress evident in the first half, the Board looks forward to the remainder of the financial year with some confidence, albeit in what remain highly uncertain times. We do that knowing that the business has reduced its risk considerably, whilst demonstrating an ability to increase revenue in this challenging environment.

Phil Shelley

26 October 2020

Chief Executive Officer’s Report

The first six months of this financial year has seen WH Ireland make further strong progress, building on the momentum we reported at the time of the annual results in July. We have delivered a small profit, with our continued focus on driving efficiencies ensuring a much-reduced fixed cost base. Group revenue has held up well, with a very strong performance from CIB supported by a resilient performance from our WM division, despite the sharp fall in asset values seen in March. This is all the more impressive given the requirement for all our employees to work from home for much of the period. On an adjusted basis, the profit for the period before exceptional items and discontinued operations was £0.50m (H1 2019: £0.91m loss) which is an impressive turnaround reflecting the impressive work of the firm over the past six months.      

We have worked hard to reduce risk across the Group, with further work undertaken to enhance our regulatory and compliance framework, and introduce a group-wide alignment of remuneration with our strategic ambitions for each division. This has reduced our fixed cost base. We have continued to align the interests of key employees with shareholders through variable remuneration: in CIB through profit share arrangements and in WM through the issue of share options and variable pay arrangements linked to retaining and growing assets.

WEALTH MANAGEMENT

The WM division has gone through significant change. Having completed re-pricing and cost initiatives, the first half of this financial year saw the conclusion of our restructuring programme for the division with the sale of our Isle of Man (“IOM”) business in August 2020. We believe this completes our restructuring programme for the division, and this enables us to concentrate our resources on growth.

The Assets under Management (“AUM”) of the WM division (excluding IOM) increased over the period, albeit from a level which showed the full impact of the very significant asset price fall in March 2020. Our efforts to transfer Advisory clients to our Discretionary model have continued, and the proportion of total assets under management in the Wealth Management Division on a discretionary management basis rose to 60.0% (31 March 2020: 57.7%).

OUTLOOK FOR WEALTH MANAGEMENT

In the second half of this financial year our focus will move to growing assets, as well as initiatives on brand, product and distribution. We are actively engaged in building a pipeline of potential individual and team hires, as well as potential inorganic opportunities to accelerate asset growth.    

CORPORATE & INSTITUTIONAL BROKING

The CIB division has 80 clients and has completed 32 transactions, raising £103.86m, including executing an IPO on a sole basis during the period, which raised £25m.

At the start of the period under review, we also sought to align the interests of the Company and employees in this division by amending the balance of fixed and variable compensation. This has led to a reduction in overall fixed costs and, alongside the alignment of variable compensation with profit, has reduced risk for this business.

PUBLIC MARKETS

We secured 12 new retained corporate clients in the six months ended 30 September 2020 with our retainer income continuing to increase. We completed 32 transactions for our clients in the period. This included 17 equity placings which demonstrates our strong distribution capability, even in these challenging times.

Our ability to provide high quality research distributed to a broad range of investment professionals, our excellent and unique distribution capability, and experienced corporate advice, is continuing to prove a successful combination for both existing and potential corporate clients.

PRIVATE MARKETS

In addition to our traditional public markets business, we continue to build out our platform for raising growth capital for private companies from VCT and EIS funds, as well as through the ‘Investor Forum’. We continue to believe this platform has significant long-term potential for the business and our clients.

OUTLOOK FOR CORPORATE & INSTITUTIONAL BROKING

We continue to build an encouraging pipeline of future opportunities across the business, notwithstanding the current backdrop. CIB continues to win clients and execute a wide range of transactions. To accelerate our progress, we are continuing to actively recruit further high calibre people to join the division.

LOOKING FORWARD

Despite the uncertain outlook, we look forward to the second half with some optimism. We have a growing pipeline of opportunities in both businesses, and are starting from a position of strength. There remains much to do to achieve our ambitious targets for the Group, but we have made a positive start in our pursuit of growth.  

Phillip Wale

26 October 2020

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