WH Ireland is anticipating an operating loss of £2.2m for the year ending 31 March as the effects of Covid-19 dealt a blow to corporate activity in February and March.
The loss is on revenue of approximately £21.3m, the firm said in a trading update published on Thursday. The company’s share price was down 7.4% at the time of writing.
It said the coronavirus pandemic had hit market levels and corporate activity with the business recording a loss in both February and March. As a result the company is not now expected to achieve monthly profitability by the start of the new financial year as previously anticipated.
The Covid-19 outbreak has dealt a blow to the firm that has spent the past year engaged in a significant cost cutting and restructuring programme – and had hoped to break even by the end of the financial year.
Speaking to Portfolio Adviser, WH Ireland chief executive Phillip Wale (pictured) said: “This crisis has obviously been a setback having got back to a run-rate profitability level entering 2020, but everyone has had a setback with this market.”
‘Decisive action’ taken on salaries
The company update said the board has already undertaken a number of additional “decisive actions” to better align costs with lower levels of revenue generation. In particular, it has accelerated the move to a greater element of remuneration being related to profitability, from 1 April.
Wale said the remuneration changes were “a bit more severe right now than we originally envisaged” but related more to the corporate broking side of the business than its wealth management operation.
“Basically we’ve taken some steps to reduce our fixed salary costs across the business and made them more linked to success,” he said. “People have taken salary sacrifice cuts in lieu of getting them back when the firm is profitable, and that helps preserve capital and keeps us healthy.”
He continued: “I haven’t fired 20 people or anything like that I’ve just accelerated what would have been more cost cutting had we not returned to profitability. I always wanted to change the remuneration policy so that it was really geared around success.”
Wealth management hit by tough conditions
Wale noted he and head of wealth management Stephen Ford had already changed the remuneration structure on the wealth management side of the business as part of an ongoing management reshuffle over the past year.
He alluded to the tough market conditions for wealth management since Covid-19 struck markets.
“Commissions have gone up dramatically in the last few weeks because people are a lot more active in markets that are so volatile, but the overall fees will go down because the amount of assets under management goes down as the FTSE falls.”
In July last year, Wale told Portfolio Adviser with £7.7m of cash on its balance sheet he believed the firm would be profitable by the end of the current financial year. This followed a loss of £11.3m in 2018.
