Q and A with Richard Killingbeck Chief Executive Officer of WH Ireland Group PLC (LON:WHI)

WH Ireland Group PLC (LSE:WHI) CEO Richard Killingbeck caught up with DirectorsTalk for an exclusive interview to discuss their half yearly results, industry challenges and profitability

 

Q1: You recently announced your half yearly results and you mentioned that there was an increase in discretionary funds under management and private wealth management, can you talk us through the progress made there?

A1: Most people who understand WH Ireland or know WH Ireland of old, will recognise us a stock brokers and certainly, that was the case up until two and a half years ago. Since I’ve been here, we’ve been trying to shift the needle if you like, to move the business, to move that division to more of a private wealth management division. The subtle differences being that we are still very much out for all of our clients but that we are trying to expand the discretionary offering, which is a fee paying offering, at a greater pace than either the advisory or the execution only offering, and both the last 2 offerings are very much if you like more clearly associated with stock broking services. So we made that pronouncement about 18 months to 2 years ago and I’m glad to say that the progress has been good and the discretionary assets that we recently reported of £830 million are nearly double that of nearly 2 years ago. The growth that has been driving that has been both new clients, who have been joining us with either teams or individuals that we’ve brought on board last 18 months, or indeed it is existing clients of the company who have moved to a new service proposition i.e. discretionary, but away from with either advisory or execution only.

 

Q2: You’ve shown further growth under corporate broking, what kind of industry challenges do you face within the corporate broking sector?

A2: Well you’re right, we’ve cemented our position, if you like, as the third largest NOMAD, we’ve reported 98 corporate clients and that has been a key driver for us, once again it’s helping to produce retainer income which is recurring by its very nature but also it emphasises and helps generate some economies of scale. The corporate side in particular because some of the European regulatory changes, in particular MiFID II, there’s a lot of change coming down over the next 18 months. The biggest single change and it hasn’t been finalised as yet, is the potential changes to the way secondary commission is paid, that is effectively fund managers giving stock brokers trades to execute for them. That forms a very small part of our actual revenue line, probably in any one year less than £100,000 out of about £10 million but in other houses, it is sort of maybe upwards or 30-35%, now under MiFID II that particular line of revenue is going to disappear unless the fund management houses pay for it themselves. So there’s a lot of regulator change coming down the pipe, I think we are relatively well placed to respond to that change and we can’t be complacent but I think other companies will have greater problems than we will in rising to those challenges. So at the moment, we are keeping a very close eye on opportunities or potential opportunities that might arise over the next 18 months.

 

Q3: With this RNS and the previous, you’ve mentioned a group focus on profitability, can you talk us through that?

A3: WH Ireland has had, I think most people have known that we’ve got and had quite a high cost base and there hasn’t been as much focus on profitability as there has been in the last 12-18 months and that focus on profitability has coincided with the new finance director who was appointed in March of 2013. So we’ve been doing a lot of work over the last 18 months and understanding where the costs are within the company, where the revenue is within the company and thus where the profits are or are not and it’s pleasing that for the first time we’ve been able to demonstrate a clean set of numbers but also much more granularity in both the visions and indeed at the group level that we are starting to make significant progress in refocussing the business on making profit. Now you might say well that surely is what you should have been doing anyway and of course it is smaller companies like us, there’s always been a lack of scale and what we’ve had to do and what we have been doing is identifying areas that we can cut out services that we do not need, offices that we do not need or do not contribute to the bottom line. So that exercise has been ongoing now for nearly a year but you’re starting to see the benefits of it in these first 6 months figures and I’m hopeful that you will start to see more benefits and more evidence of that change coming through in the second half of this year. I’ve also alluded in my Chief Exec statement that in 2016, there will be further efficiencies to be gained, primarily on the operational side. So the message is very clear, hopefully that the focus is on margins and margin improvements, we still have a long way to go but the journey has begun as they say.

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