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Close Brothers' rise in profits was once again boosted by a stellar performance in asset management, where profits doubled to a record £78m, driven by exceptional investment gains and performance fees of £43m. The company added that realisation gains are likely to be lower in the year going forward. Funds under management grew by 11 per cent to £9.1bn, as new funds raised totalled £2.05bn, easily outweighing redemptions and withdrawals of £1.69bn.
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Profits at its corporate finance division were up 29 per cent at £22m, with merger and acquisition activity accounting for 70 per cent of income, although it may be tougher to repeat the same level of M&A income this year.
Meanwhile, the securities side, which includes market makers Winterflood and Seydler, has been bolstered after the year-end by the purchase of a 49.9 per cent stake in exchange-traded derivatives market maker Mako. Profits were a little lower mainly as a result of a non-trading related provision of £3m, but the good news is that after three years of decline Winterflood enjoyed an improvement in margins.
UBS expects full-year pre-tax profits of £160m and EPS of 75.7p.
| CLOSE BROS.(CBG) | ||||
|---|---|---|---|---|
| ORD PRICE: | 822p | MARKET VALUE: | £1,211m | |
| TOUCH: | 821-822p | 12-MONTH HIGH: | 1,083p | LOW: 700p |
| DIVIDEND YIELD: | 4.5% | PE RATIO: | 9 | |
| NET ASSET VALUE: | 511p | |||
| Year to 31 Jul | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|
| 2003 | 77.9 | 35.7 | 26.0 |
| 2004 | 101 | 45.1 | 27.0 |
| 2005 | 112 | 49.8 | 28.5 |
| 2006 | 157 | 74.1 | 32.5 |
| 2007 | 190 | 90.4 | *37.0 |
| % change | +21 | +22 | +14 |
Ex-div: 3 Oct Payment: 6 Nov *Not including special dividend of 25p a share, payable on 6 Nov |
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Close Brothers runs a well-diversified business and is also paying a 25p a share special dividend. It also has up to £200m in excess capital, but conditions going forward may be tougher, and trading on a forward PE ratio of 11, the shares are fairly priced.
Last IC view: Good value, 1,032p, 9 March 2007
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-IC-1.5.4a-prod - 31/10/2008 13:11:34 - carlos.princz
