The Birmingham office of Williams de Broe, part of the private client arm of stockbroker Evolution, is making a strong contribution to the group’s profit and revenue as West Midland investors regain their taste for risk amid signs the recession is ending.
Funds under management by the Birmingham team, led by Adrian Quin, grew by 15 per cent in the six months to June 30 against a 24 per cent fall in the FTSE All Share index over the same period.
“Birmingham has continued to see good growth in terms of funds under management,” Evolution group chief executive Alex Snow said.
Overall, the de Broe business, which is represented in six other towns and cities, including London, saw 50 per cent growth in funds under management to £4.2 billion at the half-year stage while adjusted operating profit grew by the same proportion to £1.2 million.
At group level, Evolution reported that its first-half operating profit had doubled to £9.1 million on income 50 per cent ahead at £52.6 million.
The firm said performance had been helped by strong growth in its expanded fixed-income business and that it had set its sights on growth in the United States.
Income from investment banking almost doubled to £33.9 million with growth from the fixed income business hitting record levels.
After expanding its fixed income business, commissions from the unit rose by 416 per cent to £16 million. Equities registered a 62 per cent increase in income, helped by hiring 45 staff from the former Dresdner Kleinwort securities business in May. Finance director Andrew Westenberger told Reuters that competition in fixed income had increased with tightening spreads. He said the company, which focuses on investment-grade and government bonds, was expanding into high yield bonds and emerging markets including Latin America.
Mr Westenberger said staff levels within the investment banking unit, which stood at 189 at the end of June, could rise by between five and ten per cent by the end of the year.
Analysts, though, say that to justify 40 per cent premium to its peers currently built into its share price Evolution needs to repeat the first-half’s strong showing in fixed income and equities and boost margins in its wealth-management business.
The broker trades at 2.6 times its net tangible asset value, according to Fox-Pitt, Kelton analyst William Howlett. Rival Canaccord Capital trades at 1.4 times, Numis 1.6 times and Collins Stewart 2.2 times.
Arden Partners analyst Sarah Spikes, who lifted her 2009 forecast by 21 per cent and her 2010 forecast by 47 per cent after the results, and said Evolution was set for strong growth into 2010.
Chairman Martin Gray said in the interim results statement: “We are now hopefully beginning to exit from the most challenging market and economic conditions experienced in generations.”
And despite the continuing British recession and uncertainty over the financial sector, he was confident the company “is sufficiently capitalised with a strong and liquid balance sheet to deliver future growth”.
Evolution shares closed on Friday one per cent down on the day at 146.6p, valuing the business at £332.72 million.