Walker Crips is considering bolt-on acquisitions after reporting record half-year pre-tax profits and substantially boosting the cash on its balance sheet.
Speaking to Wealth Manager, chief executive Rodney Fitzgerald said the company was looking at acquisitions, including different types of businesses that would complement its offering.
‘We are being very careful about who we acquire, and for the right price,’ he said. ‘We are quite open to any financial services organisation that will add value. They could be bolt-on services as long as they add value and the value is clear.’
The firm has £7 million in cash on the balance sheet, after selling its fund management arm Walker Crips Asset Management – home to well-known managers Jan Luthman and Steve Bailey – to Liontrust earlier in the year. It also recently sold its unprofitable corporate finance division Keith Bayley Rogers, the results of which will appear on the group’s full year update.
‘We are now in a position of having cash, which will service us better through making an acquisition than earning a very low rate of interest in the bank,’ Fitzgerald explained.
While the firm has amassed cash on the balance sheet for the six months ended 30 September 2012, overall it posted an operating loss before exceptional items of £700,000, compared to a £800,000 profit in the same period last year. Fitzgerald attributed this to the unusually quiet markets this summer, which hampered income from broking.
‘Equity volumes are down in the market generally, and that meant a corresponding hit to our stockbroking commission income, which dented our overall performance to give us an operating loss,’ he said, adding that the business was bolstered by its structured product division and the York-based wealth management arm.
Despite the revenue fall in that division, Fitzgerald maintains stockbroking will remain part of the business ‘as it has done for nearly a century’ although he recognised it was pertinent to move towards a more fee-based business.
‘But given the retail distribution review, gathering of fees has a particular attraction, not only for regulatory reasons but also because it is perceived as better quality revenue.’
Attracting new advisers
To grow this side of the business, Walker Crips is making a concerted effort at taking on new resources. ‘The biggest thing we are doing is continuing to attract new advisers to bring with them their client base. That’s the big thrust of our strategy,’ Fitzgerald said.
However, the firm aims to move away from its traditional roots and is looking for a ‘different kind of adviser to the pure kind of private client stockbroker on which Walker Crips was built’.
‘They will be more asset gatherers and individuals that have a total commitment to their clients who are also going to bring in revenue generators and are defining our investment process at the same time,’ Fitzgerald explained.
He said there was ‘no limit’ to the numbers of new people he would consider taking on but that the business was ahead of its internal targets after hiring a number of people from Ashcourt Rowan.
‘I’m very pleased with the way that’s going and it just serves to confirm our view that Walker Crips is a very nice place for people to come and do business.’
The product offering was recently enhanced with the launch of a model portfolio range called the actively managed portfolio service in September, which Fitzgerald hopes will help boost assets from independent financial advisers (IFAs).
‘It complements our structured product offering which is also going after IFAs, and complements our regular offering.’
Against a difficult economic climate, Walker Crips has also moved to cut costs by moving its administrative services out of London to nearby Romford, Essex.
‘It’s a very cost effective space, which would save us £400,000 without losing any efficiency, in our view,’ Fitzgerald said. ‘It was a good halfway move as opposed to going full scale into using a clearing service administration.’