Overcoming distractions
WH Ireland is a stockbroker and asset manager with a substantial wealth management division which provides financial planning services.The true performance of WHIreland (“WHIâ€) is obscured by a raft of exceptional costs, some of which have been quantified and some of which, particularly double-running costs during the changeover of their back office systems, are just included under “administrative expensesâ€. So we consider the £0.4m operating profit before exceptionals to be very conservative.
The past twelve months or so have involved a long, hard slog to complete “Project Discovery†to transfer the Private Client back office administration to the SEI platform and restructure the front office while preparing for the well-intentioned but controversial MiFID II.
These costs have (unsurprisingly) pushed WHI’s statutory results into loss despite its achieving “pre-exceptional“ profits in the last 12 months, and swallowed £3m< of its cash. Last week WHI announced that it had agreed, subject to shareholder approval, to raise £2.4m through a placing of 2m new shares at 120p, the “market bid price†on Friday. This will add to the £10.5m cash in its interim balance sheet.
It is difficult to gauge what its profits would be in a “normal†year, since we need to add back not only the identified exceptionals but also the unquantified ones, the more than £1m of cost savings anticipated, and the opportunity cost of the time spent on preparations for MiFID.
So we continue to use a “sum of the parts†valuation giving £70m or 252p per share ahead of the proposed placing, £72.4m or 243p per share diluted.
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