WH Ireland is a stockbroker and asset manager with a substantial wealth management division which provides financial planning services. It covers the full range of stockbroking activities including private client investment management, execution-only dealing, research, institutional dealing, corporate finance, corporate broking and market-making. It is based in Manchester with branches in London, Birmingham, Bristol, Cardiff, Colwyn Bay, Craigie by Kilmarnock, Leeds and Malvern. The corporate finance division is particularly active in advising and raising money for Mining and AIM-listed companies. It has over £1bn of Assets Under Management and Control and private client investment management generates around half of group revenue and a majority of group profit.
Light at the end of the tunnel
From recovery to growth
Building on strong foundations
A strengthened balance sheet and the growth in funds managed for clients are the foundations for a recovery in WHI’s fortunes after a traumatic period for Small Cap stockbrokers. During 2015/6 the Private Wealth Management division increased AUM by 14% to £2,872m, well ahead of the 8% rise in the WMA Balanced index with a significant 32% increase in the more valuable Discretionary funds to just over £1 billion. The rise in markets since end-November suggests that AUM may well now be over £3 billion. Fee income has continued to grow to £12m or 47% of total revenue. Since the year-end WHI has sold its Manchester Head Office for £5.27m, £0.52m above valuation, repaid associated debt and thereby increased its cash reserves to more than £11m.
The arrival of KEH Group as a major shareholder, purchasing 23% of the share capital from a group of shareholders at 140p, a substantial premium to the then market price, is viewed positively. KEH Group’s CEO, Humphrey Percy, has joined the board as a non-executive director. Other recent appointments include Victoria Raffe joining WHI as a non-executive director, and last week’s news that Adam Pollock is joining as Head of Corporate Advisory and Broking.
Mattioli Woods recently paid 5.5% of AUM for a 49.9% stake in Amati which would imply a value of £56m, or 204p/share for WHI’s Discretionary AUM alone, i.e. ignoring its advisory and execution-only AUM, its corporate broking business, and the £11m of cash.
Our usual sum-of-the-parts valuation uses a more conservative 4% for Discretionary AUM, 2% for Advisory and 0.5% for execution-only giving £61.7m (ignoring the rise since 30/11/16) plus the excess of its £11m cash over regulatory requirements, so roughly double the current share price (a little more if you adjust for the rise in AUM since the year-end, a bit less if you don’t). That’s putting no value on its corporate broking division which ranks 3rd among NomAds. The FTSE rise since end-November would add more than 10p/share to a valuation, so trying to quote one to the nearest p would be spurious precision.