The main reason I recommended buying into this special situation was to follow the lead of chief executive Paul Compton, who joined the company in January 2011. Mr Compton was previously the co-manager of hedge fund Tosca Asset Management's Mid Cap fund, the second best-performing long/short equity hedge fund in Europe in 2009. Before that, he was head of capital markets at broker Collins Stewart between 2002 and 2007. And, undoubtedly, he was making progress by focusing the business on two core activities: providing high-quality investment advice to the UK private client market; and corporate broking advice and equity fundraising for the UK smaller company market.
However, Mr Compton was not only buying shares in WH Ireland, but had a penchant for doing the same on his own account in other listed companies, which led to a clash with other members of the board and ended up with his resignation in mid-December. While there is no suggestion of any specific wrongdoing by Mr Compton, the FSA is understood to have looked at the transaction reports supplied by the broker. The former boss also dumped his sizeable 5 per cent shareholding in WH Ireland at the time of his unexpected exit. In light of these events, it was hardly a surprise that investors headed for the exit, too, which prompted a savage markdown in the share price. However, in recent weeks the price seems to have stabilised at around 62p, albeit still adrift of my buy-in prices.
New broom
Still, despite a stomach-churning ride, I am not giving up on the company. That's because the business is in safe hands with its new boss, Richard Killingbeck, who joined WH Ireland in mid-September 2012 as head of the company's private wealth management arm to accelerate the growth of that business. Boasting over 25 years of experience, he is a well-known figure in the industry, having started his career at Cazenove Partners in 1984 before joining Morgan Grenfell and subsequently spending 11 years at Singer & Friedlander Investment Management in a number of roles, including chief investment officer and head of its investment management business.
Mr Killingbeck took the reins in mid-January this year, having significantly strengthened WH Ireland's private wealth management arm following the acquisition of the client list of Pritchard Stockbrokers and expansion of its regional network of 19 offices. The majority of former Pritchard clients have now migrated over to WH Ireland and, at the financial year-end, assets under management was in excess of £1.6bn. Moreover, following a review, "a greater focus on fee-generating income will be a key aspect of the development of the business in the year ahead".
In fact, the company has just announced another smart-looking acquisition of Tenebris, the private wealth management business and related assets of investment bank Seymour Pierce which was placed into administration earlier this month. Assets under management relating to Tenebris clients are valued at £270m and generated a £200,000 profit in the financial year ended 30 September 2012, but WH Ireland has been able to buy this business from the administrators for a paltry £25,000 in cash.
Progress is also being made in WH Ireland's corporate broking business, which "had a successful year against the backdrop of tough underlying market conditions". In fact, following 25 new quoted corporate clients wins, taking the total to 83, the broker is now one of the top three nominated advisers on the London market. On another positive note, the company revealed in a pre-close trading update last month, ahead of full-year results at the end of March, that "institutional trading commissions are now on a rising trend". So, with equity markets surging even further since, it is only reasonable to assume that these trends have been maintained.
Valuation
Investors will have to wait a few more weeks to find out how well WH Ireland traded in the financial year to November 2012, but on the basis that the company was profitable at the half-year stage and boosted turnover from £23.2m to £25m in the 12-month period, there should be enough positives from the results announcement to think that profits will be on an upward curve again in the current year to November 2013.
Moreover, since net cash of £3.1m accounts for a quarter of shareholders' funds of £12.5m, and the market value of the company is only modestly higher at £14.5m, the shares are rated at a level where any good news on profits and prospects should be well received by investors. In fact, having posted half-year adjusted EPS of 2.12p, even if WH Ireland only matches the second-half performance from the prior year when it reported adjusted EPS of 3.18p, the rolling 12-month PE ratio is less than 10 once you strip out a cash pile worth 13p a share. At 62p, I am happy to hold WH Ireland shares for recovery.
■ Finally, I will be taking a four-week break during April to complete a book on 'Profitable stockpicking', my follow-up to Trading Secrets: 20 Hard and Fast Rules to Help You Beat the Stock Market. The book will be published in early summer.
MORE FROM SIMON THOMPSON ONLINE...
Since the start of this year I have written no fewer than 33 online articles, all of which are available on my homepage. These include articles on the following companies:
Anglo Asian Mining ('Glistening investment loses its shine', 18 February 2013)
Communisis ('A fundraising well worth backing', 18 February 2013)
Town Centre Securities (A high yield property play in the north, 18 February 2013)
API ('A conundrum to solve', 15 February 2013)
Daejan Holdings ('Buy the breakout', 14 February 2013)
IQE ('Time to dial into profit', 13 February 2013)
Mountview Estates ('Chart break out for a solid income play', 12 February 2013)
Bellway ('Seeking Alpha', 11 February 2013)
Marwyn Value Investors ('A highly profitable arbitrage play', 11 February 2013)
Netplay TV ('A share set to hit the jackpot', 11 February 2013)
