Walker Crips has blamed Brexit for a bleak profit warning issued on Tuesday, as industry experts anticipate other investment management and platform firms will face similar pressure on trading volumes.
In a trading update, wealth management firm said the ongoing political uncertainty surrounding the UK’s exit from the European Union had derailed its strategy for improving revenue and cost savings in the second half of 2018.
Broking volumes hit hard
On 27 November last year, the firm said in its interim results for the period to 30 September that despite disappointing first half results, its programme for implementing change through the introduction of new revenue streams and cost savings should provide for an improved second half performance.
However, in its latest trading update, the firm said: “The group continues to implement this renewed strategy, however, the ongoing political and economic uncertainty surrounding the UK’s exit from the EU and nervousness in the market remains a significant factor, affecting both the level of volume-driven broking commission earned and the intended launch date of planned new initiatives.
“As a result of the continued challenging market conditions, the group expects the full year performance to be much lower than the reported results for the prior year to 31 March 2018.”
In 2017, Walker Crips reported group revenues rose from £26.1m in 2016, to £29.2m, while underlying operating profit before tax and exceptional items, increased from £651,000 to £1.14m.
Other firms expected to suffer similar fate
Fundscape editorial director Gavin Fielding said he anticipated the problems to be in the stockbroking division rather than the wealth management arm of the business.
“Revenues do come under pressure when trading volumes go down,” he added. “There are platforms including D2C that rely on trading volumes and transactions to maintain revenue, so it may well be some broker reliant platforms are also coming under pressure.”
Gbi2 managing director Graham Bentley said he has observed other asset management firms with a significant dependence on the UK market are similarly cautious about the outlook for this year, particularly with the increased likelihood of a short extension to Article 50.
“It does appear that retail investment activity will remain depressed until we get more clarity either way,” he added.
Walker Crips is expected to report its full results for 2018 in July.
