Preliminary Results

Chief Executive’s Report

Overview

Our loss from continuing operations before taxation of £2.1m (compared to a like-for-like loss in the prior year of £2.5m) reflects a reduction in turnover, the costs of restructuring (which are approximately £0.7m) and an impairment of our available for sale investments of £0.3m.

As has been noted in the Chairman’s report, the disposal of a significant proportion of the Group’s investment in our Australian associate has necessitated the reporting of the losses arising in Australia as a discontinued operation.  On a combined basis, taking the results of the continuing operation with the 11 months of trading from the discontinued operation, the loss before tax is £2.4m compared to £4.0m in the corresponding period last year.

The year under review was a particularly difficult one for the stockbroking community.  I am pleased to say however, that WH Ireland has come through it in good shape.  This is due to a number of factors.  We took an early decision to implement a prudent but wide ranging and effective cost management programme across the business.  Secondly, we defined, communicated and focused on a clear and simple strategy.  At the same time we have worked to ensure our balance sheet is clean and appropriate for the business.  This has resulted in the realisation of some non-core assets to focus on cash.  I am pleased to say that as a result of these measures, your Company is very well placed to take advantage of any improvement in economic conditions.

Our overall turnover on continuing operations is down 8.2% on last year.  This compares with a reduction of 17.9% on continuing operations for the previous period.  Our cost management programme was appropriate and implemented in a timely fashion and whilst much of the reduction in turnover is due to the ongoing drought of IPO opportunities on the AIM market, it also reflects a general lack of confidence in the market as a whole. 

During the year, we reduced our holding in WH Ireland Australia Pty Ltd, our Australian associate, from 76.6% to 37.3%.  The share disposal was almost entirely taken up by the local management team, satisfying our objective of ensuring we have an appropriately motivated local team to take this business forward successfully.  We remain committed to maintaining a minority holding and still have ongoing and close relationships with our Australian colleagues.  However, the need for UK based management input into a business on the other side of the world has reduced correspondingly.

We are focusing our efforts on rebuilding our turnover and profitability.  To this end, we have set challenging but achievable objectives for the year ahead and have created a cost base commensurate with those objectives.  We believe that we have established a structure and a culture to achieve success.

Restructuring

This has been a “turnaround” year for your Company.  The restructuring programme had at its heart the need to create a cost base that was suitable for a business of our size.  Having defined the strategy for the business, it was important to ensure the whole of our team understood the direction of travel, so that (sometimes painful) decisions could be viewed in perspective.  As mentioned above, the restructuring programme has resulted in charges in the year under review of approximately £0.7m but it is anticipated that these actions will result in a total reduction of our cost base of approximately £2.1m per annum in the new financial year and beyond. 

Our headcount through the year has reduced by 43 in total.  We have parted company with some friends and colleagues who have been associated with the Company for many years.  I wish them all well for the future and for those that remain, I would like to thank them all for their patience and tolerance through what has been a very challenging year.  I hope and believe that the need for further headcount reduction is now behind us.

As part of our strategic review, one particular area that we examined in some detail was our back office and administration team.  It is all too easy in the financial services world to assume that outsourcing is a panacea.  Whereas on the surface it may appear attractive, a close understanding shows that this activity is an asset which both differentiates us from many of our competitors and which our clients especially appreciate.  We are able to provide a close and efficient level of service.  Whilst reducing the balance sheet cost of such a service might appear attractive superficially, a jewel in our crown would be lost.  Our decision to keep our back office has led to a programme of development and investment, including the recruitment of a highly experienced leader in Alan Kershaw (the new Operations Director in our main subsidiary) to take this business unit forward.  Our clear objective for this team is to build on its successes by acquiring further external administrative clients and to develop into a stand alone profit centre.  I am delighted that Alan has joined our team and his appointment is already yielding benefits.

Alan is the latest in a series of senior management appointments that have seen the entire team renewed since my appointment in September 2008.  I believe we now have a unified, professional and focused team capable of taking advantage of the enhanced platform that has been developed.  Our culture of transparency, trust and openness is being further encouraged.

Securities

Our securities business incorporates Corporate Finance, Corporate Broking, Research and Institutional Sales. 

At the year end, we acted for 64 companies; 58 of which are on AIM, 3 PLUS market companies, 2 ASX companies and 1 fully listed.

We acted on a total of 15 transactions through the period and have in the past six months developed a significant pipeline of new business.  The principal difference in total fees earned during the year is more or less entirely attributable to the dearth of capital raising transactions.  During 2007/8 we acted on 20 transactions.

Like all stockbrokers, we have been exposed to the vagaries of the stock market cycle and have, in the past, enjoyed a strong performance when we successfully raised large amounts of capital for our client companies.  This year we have therefore been developing other income streams that are not so dependent on those stock market cycles.  In particular, we have developed our mergers and acquisitions (M&A) capability, our access to debt financing for client companies and are pursuing a sectoral approach, led by our strong research team, to develop a reputation for excellence in key areas.  This is a slow and careful process, but we are already starting to see the benefits from this diversification, as prospective clients appreciate that we can offer a broad ranging service.  These additional strings to our bow will be of value in any event but will aid our continuing and increasingly successful attempts to increase revenue into the business.  As the economy starts to recover, we are looking to add to our institutional sales and distribution capabilities to further enhance our competitive position.

Private Wealth Management

Our Private Wealth Management business incorporates Private Client Stockbroking, discretionary and advisory Portfolio Management, Fund Management and Financial Planning.  Lindsey Hamilton was appointed as Head of Wealth Management in September 2009 to implement the strategy outlined in last year’s annual report and accounts.  She brought with her a team of Financial Planners who have already made a positive impact to the business, as well as a structured approach to enhancing the connection between our private clients and our broad range of services and expertise.  Having successfully restructured the Group, we are about to embark on a marketing campaign to raise the profile of this part of the business and to take advantage of the current and anticipated demographic and regulatory changes.  In this respect, where others may struggle, I believe we are well positioned to benefit from the Retail Distribution Review.  Stockbroking remains at the heart of everything we do and we are setting ourselves challenging objectives to broaden our Wealth Management business to appeal to the mass affluent marketplace as well as our existing client base.

Our assets under management within the UK have risen since last year and now stand at £1,178m, an increase of 4.5% on last year end and testament to the loyalty of our client base through a difficult year.  We are also experiencing positive inflows from our third party administration clients and our nascent fund management business.

Going concern

The Directors believe that the Group has adequate resources to continue to trade for the foreseeable future and thus they continue to adopt the going concern basis in preparing the financial information.

Investment book

Our investment in Ultimate Finance plc, an invoice discounting business, continues to perform comparatively well in an economic environment that is beneficial for its business plan. 

Available-for-sale Investments

It is disappointing to note that, whilst making a significant contribution to Group profitability in previous years, the value of our investments book continues to be under pressure and has again not made a significant contribution this year (contributing a loss of £0.3m). 

The future

I stated at this point last year that “the general economic outlook is not rosy and stockbroking businesses will continue to be affected in the near to medium term.”  I believe this statement is as relevant now as it was twelve months ago but with some important differences.  Your Company is now managed on a sound cost basis to ensure its continuing stability; our balance sheet remains clean and appropriate for our business; there are genuine signs of improvement in the corporate pipeline within our Securities business; the Wealth Management proposition is defined, clear and is about to be rolled out to our existing and new clients; we have a committed, loyal and stable Board, management team and workforce; and there are signs of some general improvement in the wider economic environment. 

A business like ours relies on its people.  This may appear to be a trite phrase but it has never been more true than now, when our corporate and private clients rightly deserve and expect an ever closer relationship with your Company and its team.  We thrive when our clients thrive and we suffer when they do.  I would like to take this opportunity to thank all of my colleagues for their immense contribution over the past twelve months.  I am proud to be associated with each and every one of the WH Ireland team.  I thank them all and I look forward to working with them to continue to secure a successful future for the Company.

Richard Ford

Chief Executive