Broker Collins Stewart reported strong growth in profits and turnover in its first set of results after December’s demerger of Tullett Prebon, its inter-dealer broker business.
Pro forma pre-tax profits were £64.8m up from £46.6m on revenue of £184.8m compared to £148.7m for the year to December 31. Pro forma operating profits before exceptionals were £55.5m as opposed to £43m. A first final dividend of 5p per share will be paid from pro forma earnings per share of 19.2p.
The results do not include a contribution from Hawkpoint, the corporate advisory firm which was bought just before Christmas.
Shares in Collins Stewart were up 5.6 per cent – or 13p – to 246p in early trading.
Terry Smith, chairman of the company, said 2006 had been the company’s best ever since it was set up.
Collins Stewart was founded in 1991 by Andy Stewart and Leigh Collins. In 2000 Mr Smith led a management buyout of the group and floated it on the London Stock Exchange. The business went on to buy Tullett and Prebon – both inter-dealer brokers – in 2003 and 2004. These businesses were demerged just three months ago.
Since then, two new non-executive directors have joined the board of Collins Stewart. Patrick O’Sullivan is also finance director of Zurich Financial Services and Iain Napier who is chairman of Imperial Tobacco. Paul Baines, chief executive of Hawkpoint, has also joined the board in an executive role.
The company said that it expected an increasing amount of funding for London listings to come from overseas as funds that invest in UK smaller companies did not have enough money to absorb the capital requirements of all these groups.
As a result it is looking to establish operations outside the UK, particularly in Asia and the US, to facilitate this. Collins Stewart already employs 70 brokers in the US.
The group also said it would increase its equity derivatives business, which is currently run from a desk in New York.
Collins Stewart’s securities business was buoyed by a strong backdrop in international markets with indices and volumes up in most of the markets in which it operated. It produced pre-exceptional operating profit of £14.1m up £10.2m) on revenue of £74.6m (£66.2m).
The capital markets division had a strong year despite the relative softness of Aim, London’s junior market, in the second half of the year. In total, Collins Stewart raised £1.9bn (£1.3bn) of new money for clients, advising on 81 transactions – of which 25 were for overseas companies. As of December 31, the company had 120 clients, 93 of which were on Aim. The group said it was aware of the media coverage of Aim concerning the quality of some smaller company flotations.
“Collins Stewart has always implemented a rigorous due diligence process for all new clients, particularly those from outside the UK,” it said. “The company routinely turns away companies which do not meet its selection criteria.” The capital markets business made operating profit before exceptionals of £28.3m (£23.9m) on revenue of £59.4m (£44.7m).
The third division, wealth management, made operating profit before exceptionals of £13.1m (£8.9m) on turnover of £50.8m (£37.8m) against a “benign” market background.
Hawkpoint – which was not included in the overall results – made operating profits of £15m (£7.7m) on turnover of £57.3m (£38.4m).