Bosses at ailing wealth manager WH Ireland believe the business can break even by the end of the current financial year despite reporting an “alarming” £11.3m loss for the previous year.
The Aim-listed firm blamed revenues, one-off costs and increased exceptional items for a “challenging” year ended 31 March 2019.
Revenue at the company was £23.7m for the year but it posted an operating loss before tax of £6.2m and a loss of £4.1m due to exceptional items. The latter included one-off costs of £1.5m and impairment charges of £2.6m.
Overall losses of £11.3m, compared with £2.9m for the 16 months to 31 March 2018,
Issues needed addressing
But WH Ireland chief executive Phillip Wale told Portfolio Adviser the losses were a result of issues that needed addressing “for the good of the group”.
He said: “We have a headline number, which is alarmingly high, of £11.3m loss of which £4.1m is exceptional items that needed addressing, either in terms of the way businesses were being amortized or write-offs that we felt weren’t aggressive enough, so that we had a completely clean balance sheet going forward.
“The other losses, the £6m number, are largely non-recurring items. So, one-offs and the cost of replacing people – we have reduced our headcount by over 20% – and of the disappearance of legacy and duplicate systems.”
Wale joined the business last July from Cantor Fitzgerald and immediately implemented an aggressive cost-cutting exercise which saw a 20% reduction in headcount during the year and a near 100% change in senior management. In June, headcount stood at 159, down from 178 at 31 March 2019 and 192 at 31 March 2018.
The turnaround starts here
Cash on the balance sheet amounted to £7.7m which WH Ireland head of wealth management Stephen Ford (pictured) told Portfolio Adviser is enough to “turn the business around”.
He said: “The board saw this coming up and that was the real reason behind the £5m capital raise last year. So, after these results, we still retain £7.7m in cash as at the year end, which we believe with our financial forecast, gives us enough capital to turn this business round.”
Wale believes the firm’s aggressive cost-cutting measures are enough to make it profitable by Q4 of this year because by then its legacy systems will be fixed.
He added: “We are anticipating a breakeven run rate this financial year, which would be a huge step for this firm given the results announced over the last four years.”
The pair estimates a cost saving of £350,000-400,000 a year from moving assets from its legacy platforms, Perhsing and Figaro, to its favoured provider SEI.
“Closing those platforms is now within grasp and that’s been a big, big weight around the business,” said Ford.
DFM business
Assets in the wealth management business remained stable at £2.5bn, with £1.25bn in its discretionary assets, but the business posted a loss of £1.5m compared with a profit of £4.2m in 2018.
The firm has identified three areas to address with the wealth management business: reduce the cost base, retire its legacy platform systems and custodians; and simplify its charging structure.
Wale said the wealth management business would welcome additional assets under management and hinted that it could perhaps become a consolidator, particularly with the health of its shareholder base –
Ford also said the firm’s Navigator MPS range which was soft launched last year is currently being reviewed.
He said: “We have two or three model portfolios in the business and we’re basically looking to combine them into Navigator and refresh Navigator. That is very much an inward-looking project at the moment. Once that’s done, we’ll start thinking about how we bring that to market.”
WH Ireland’s share price is currently trading at 40p which Wale said is probably at its “rock-bottom level” as a fairer value is more like £1.25.
He said: “I think we look extremely cheap. And why is that? Because the firm’s been loss making for years, and diluting every year through capital raises. This should be the rock bottom level and probably why we’ve got such a robust shareholding in the form of the three big institutions that are willing to back us.”
