Light at the end of the tunnel
WH Ireland is a financial services company offering private wealth management, wealth planning, and corporate and institutional broking services.It has nearly completed a major transformation process at significant cost, £4m of which has been quantified in the accounts, but much of which, such as double-running costs while switching systems, has not. So we have eschewed profit forecasts in this period as they would be meaningless as a guide to the value of the company. 2018/9 will still be affected by last phase of the transformation process, but should be far less so than the previous few years.
The transformation had to start with creating a modern management structure with risk management and compliance embedded in it. Allied with this is the continuing strategy of improving the “quality†of revenue, making it more reliable and less subject to the vagaries of the market, so that it can provide the high level of service that its clients expect with less risk of falling into loss in a market downturn like 2007/8.
Forecasting is always difficult, especially about the future, so we tentatively offer a range of profit estimates of £1.5m to £1.75m for 2018/9 and £2.25m to £2.75m for 2019/20. The ‘sensibly cautious’ end of our ranges imply EPS of 4.36p and 6.5p in each financial year.
An earnings-based valuation of 172p (using the mean of Rathbone’s and Brewin’s PERs) is lower than our ‘sum of the parts’ valuation, although above the current price, because WHI has not yet exhausted the costs of the transformation process and the benefits are still in the process of accruing. Therefore we continue to advocate a “sum of the parts†valuation giving £72.4m or 243p per share.
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