I am seriously regretting not taking profits last autumn on Aim-traded shares in WH Ireland (WHI:48p), a corporate brokerage and private client wealth manager (‘New broom at WH Ireland’, 21 September 2018). I rated the shares a hold at 107p at the time.
I was swayed after its largest shareholders Oceanwood Capital Management and Polygon Global Partners, and new shareholder M&G Investments (which acquired a 14 per cent stake at the time), backed a £2m placing of shares to support the new management team’s turnaround strategy. However, a change in WH Ireland’s fortunes is proving elusive, so much so that at the end of last year the company reported a £1.9m first-half underlying operating loss.
To compound matters, the directors have reported today that the challenging market conditions are continuing to impact the performance of both divisions and comparable operating losses for the second half will exceed those in the first half. In addition, they will book additional exceptional costs for the financial year to 31 March 2019. The ongoing losses have dented the company’s cash pile, so to satisfy future regulatory capital requirements WH Ireland is raising £5m in a placing of shares at 45p, a deep discount to the previous closing price of 64p and to my original entry price of 68p when I initiated coverage. The 11m shares being placed equate to more than a third of the 31.87m shares currently in issue.
I can’t recommend backing the placing as the bull case behind my original investment no longer holds, given that the directors do not believe there will be any improvement in trading in the immediate future. Supporting the placing would be a punt in the dark as there can be no certainty that WH Ireland will not continue to rack up losses. In the circumstances, I would advise selling your shares and exiting this holding. Sell.
