FT article: Extracts only23 Sep 2014 18:15
Panmure Gordon, one of London’s oldest stockbrokers, reported a small profit in the first six months of this year, an early sign that the City broker is beginning to turn around its fortunes after a “disastrous” US acquisition it has taken two years to recover from.
Pre-tax profits from continuing operations rose to £1.9m in the six months to June 30 from £335,000 in same period last year.
Panmure’s net commission and trading income increased 26 per cent to £5.4m during the six months, while corporate finance and related income increased 22 per cent to £11.5m.
The City of London’s brokers are coming under pressure from “unbundling” – European proposals that would stop banks from charging research out of dealing commissions, which have been endorsed by the UK’s Financial Conduct Authority and are likely to disproportionately hit small and mid-cap brokers.
Panmure plans to have another crack at the US market and has hired Nick Hiley to lead the distribution of its products into the US, from Canaccord Genuity, where he held a similar role. This time it will be different, says Mr Wale because “we’re not physically there and we won’t be buying a business at a vastly inflated price and letting it be remotely managed.”
Mr Wale said that while Panmure only worked on two IPOs in the first half of this year, it booked four IPOs in the last two months of 2013 and has more in the pipeline for the rest of this year.
In the past, Panmure’s rivals have criticised its top-heavy management structure, which meant that profits didn’t trickle down to more junior staff. Mr Wale said that this is “a fair criticism” but added that it has restructured its remuneration structure from a discretionary model to one linked to performance. He said: “We’re making the whole business transparent so you can see where people’s contribution lies [ . . .] It makes people healthily hungry.”
Mr Wale said he is surprised there hasn’t been more consolidation among the small and mid-cap brokers. “It’s still a hugely overbroked, fiercely competitive environment. On pure economics one would argue that there are too many players and not enough business in anything other than very strong markets,” he said.
Panmure held talks 18 months ago with Oriel Securities, which was later bought by US brokerage Stifel Financial Corp this year. Evolution Group had looked to acquire Panmure in 2010 but decided not to pursue a formal bid.
Deals are often difficult because of the cost of redundancy payouts, said Mr Wale. “We remain looking but there is no obvious match and no talks going on at the moment.”
Panmure reported diluted earnings per share of 9.8p compared with 0.92p last year and plans to pay a dividend in 2015.
Sign In
Follow the stocks
