There has been some important newsflow from Aim-traded shares in WH Ireland (WHI:107p), a corporate brokerage and private client wealth manager.
Firstly, 21.86 per cent shareholder Kuwaiti European Holding has exited. Its holding of 6.52m shares has been effectively acquired by existing shareholders Oceanwood Capital Management and Polygon Global Partners, and new shareholder M&G Investments. The three institutions are also backing a £2m placing of new shares at 100p to increase WH Ireland’s core tier 1 capital ratio (11.2 per cent at end of March 2018) and ensure the company has adequate resources in place to comply with the FCA’s capital adequacy requirements. The fundraising bolsters pro-forma net funds to almost £9.5m, and is subject to shareholder approval at a general meeting on 10 October.
Their backing is significant as it comes after WH Ireland posted a thumping £2m operating loss in the last four months of the 16-month reporting period to end-March 2018 (new financial year-end) due to the resolution of legacy issues as part of a major restructuring of its private wealth management arm. I certainly wasn’t anticipating that, nor was the market. I wasn’t expecting chief executive Richard Killingbeck to depart either. He is being replaced by former Panmure Gordon boss Phillip Wale.
WH Ireland had previously reported an underlying operating profit of £423,000 on revenue of £28.5m in the 12 months to end November 2017. The company incurred around £2.5m of restructuring costs in the 16 months to end-March 2018 with the aim of generating £2m-worth of cost savings in the current financial year by targeting a greater proportion of higher-margin discretionary (accounting for more than two-fifths of assets under management of £2.56bn) and fee-paying execution-only mandates (a third of the total).
Clearly, Oceanwood, Polygon and M&G are taking the view that with the restructuring now complete, trading conditions more benign since the start of April and monthly fee income of £1.3m equating to 55 per cent of overall revenue, WH Ireland is finally in a position to capitalise on the hefty investment it has made in its platforms and IT infrastructure and create a scalable business.
Understandably, other investors have had concerns with the management changes and the hefty loss reported, which is why the shares are down by around 7 per cent since I last covered the company ('Running gains’, 21 May 2018). However, M&G Capital’s emergence on the share register with a 14.2 per cent stake is very interesting at this stage and is clearly a vote of confidence in the business. The fund manager wouldn't have taken such a large new position without having a degree of confidence that WH Ireland has turned the corner. We will have to await the half-year trading update from the company to ascertain whether that is the case. So, having first advised buying WH Ireland's shares at 68p ('Broking for success', 1 August 2011), it makes sense to continue to hold on to your shares. Hold.
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