Close Brothers was hit hard by the turmoil in financial markets in the second half of 2009. But the results would have been very much worse without a stellar performance by its securities arm which includes stockbroker Winterflood, where profits rose 58 per cent to £18.7m, and the derivatives market maker associate Mako, which saw operating profits balloon from £4.5m to £17.4m.
There was a sharp fall in profits at the asset management division, though, as a result of a drop in funds under management from £8.2bn to £6.9bn. And higher banking division profits were offset by a sharp rise in bad debt provisions. Corporate finance also suffered as merger and acquisition activity dried up pushing it into the red to the tune of £2.9m compared with profits of £4.6m last time. There was a further hit from restructuring charges and a £19m good will write-off.
Close will undoubtedly continue to feel considerable headwinds from the depressed state of investment markets and the securities arm is unlikely to repeat its first-half performance. But corporate finance should see an upturn from its corporate restructuring business and asset management will benefit from recent restructuring.
Close looks well funded, with a core Tier 1 ratio of over 13 per cent, and Numis expects that full-year profits, pre-exceptionals, will drop from £138m to £101m with EPS falling from 67.3p to 51.4p.
| ORD PRICE: | 516p | MARKET VALUE: | £ 742m | |
| TOUCH: | 515 - 517p | 12-MONTH HIGH: | 707p | LOW: 387p |
| DIVIDEND YIELD: | 7.6% | PE RATIO: | 11 | |
| NET ASSET VALUE*: | 468p | |||
| Half-year to 31 Jan | Pre-tax profit (£m) | Earnings per share (p) | Net div per share (p) |
|---|---|---|---|
| 2007 | 69.8 | 31.4 | 13.5 |
| 2008 | 38.5 | 17.4 | 13.5 |
| % change | -45 | -45 | - |
Ex-div:18 Mar Payment:15 Apr *Includes intangibles of £146m or 102p per share | |||
