Tue 24 Apr 2012
Panmure Gordon & Co. plc today announces preliminary results for the year ended 31 December 2011.
• Underlying operating loss adjusted for significant one-off costs of £10.54m (2010: £6.04m)
• Statutory loss of £31.47m (2010: £7.43m) includes significant non-cash items including full impairment of goodwill relating to ThinkEquity and associated write-off of deferred tax asset
• UK regulated entity’s capital comfortably exceeds regulatory requirements
Operating and business highlights
• Agreement to divest control of ThinkEquity from Panmure Gordon reached since period end
• Appointment of Phillip Wale as Chief Executive since period end
• Action taken to reduce UK costs substantially with benefits accruing in 2012
• Appointed to 17 new corporate clients in reporting period; total number of clients currently 77
• Top 5 broker status in 2011 Thomson Reuters Extel Mid & Small Cap survey
• Opened Singapore office to facilitate business opportunities with increasing number of Asia-focused companies seeking access to UK and European capital markets
Ed Warner, Chairman of Panmure Gordon commented:
“We have made an encouraging start to 2012, having agreed to divest control of ThinkEquity, which has historically been responsible for a significant proportion of statutory losses incurred in recent years, whilst also substantially reducing UK costs. I am delighted that we have secured a new Chief Executive, Phillip Wale, since the period-end whilst retaining the services of Tim Linacre, who will remain on the board and with the business as chairman of investment banking.
“While markets remain cautious, we believe the UK business is now right–sized. We are focused entirely on serving our institutional and corporate clients and in the first quarter of this year we have seen an increase in commission levels and the establishment of a good investment banking pipeline.”
Tim Linacre, Chief Executive
Philip Tansey, Chief Financial Officer 020 7459 3600
Billy Clegg/Ed Gascoigne-Pees 020 7831 3113
Grant Thornton Corporate Finance (NOMAD)
Gerry Beaney/Salmaan Khawaja/Jen Hatter 020 7383 5100
2011 was a very difficult year for our industry and for Panmure Gordon. The continuing effects of the global financial crisis were seen in low levels of commission and the deferral or cancellation of investment banking transactions.
We experienced a particularly challenging second half and took decisive action across the Group accordingly.
After an encouraging first half, our US business, ThinkEquity, recorded substantial losses in the second half. ThinkEquity was acquired in 2007, just before the onset of the financial crisis. Since then, market conditions have changed beyond all recognition and it was the view of the board that the business would fail to achieve an acceptable level of profitability in the foreseeable future as a subsidiary of Panmure Gordon. After an approach from management, agreement was reached for a management buy-out of ThinkEquity after the year end. Following US regulatory approval, Panmure Gordon will initially retain a shareholding in the business and we wish the team well for the future.
The results we announce today reflect a number of extraordinary costs associated with ThinkEquity, in addition to its underlying loss for the year. Some extra one-off redundancy costs were also incurred in relation to the decisive action taken to reduce UK costs at the end of 2011. As a result, what remains is a more efficient business better able to return to profitability.
In difficult markets, Panmure Gordon’s reputation helped to attract 17 new corporate clients during the year, bringing our total number of clients to 77. These clients provide the bedrock for future investment banking deals.
Panmure Gordon’s international focus remains strong, despite having agreed to divest control of ThinkEquity. Our clients are increasingly active internationally and our new office in Singapore will be a valuable conduit for Asian clients seeking access to United Kingdom and European capital markets. Our connections to the India and Middle-East markets through Ambit Capital and QInvest also provide further opportunities.
During the year Simon Heale stood down as a non-executive director and I thank him for the time and commitment he put into the role. During the year Lesley Watkins and Philip Tansey were welcomed as directors, as non-executive chair of the audit committee and as chief financial officer respectively and both have already proved to be strong additions to the board.
In November of 2011, Tim Linacre notified the board of his intention to stand down as Chief Executive before the end of 2012. The board commenced a thorough executive search programme and I was delighted to announce the appointment of Phillip Wale as our new Chief Executive on 18 April 2012. Phillip has more than 30 years’ experience in the City, including service at Goldman Sachs and Commerzbank and most recently as Chief Executive of Seymour Pierce. Tim Linacre has been with the firm for over 20 years and has been Chief Executive for nine, most of which have been in particularly challenging conditions. When he took over as Chief Executive, Panmure Gordon was a subsidiary of WestLB. He engineered the move to Lazard and the subsequent merger with Durlacher to create the independent business of today. I am delighted that Tim will be staying on the board and with the firm as chairman of investment banking when Phillip joins in the summer.
While the results of 2011 were very disappointing, the agreement to divest control of ThinkEquity and the cost-reduction exercise carried out in the UK are among the many reasons to be encouraged by the firm’s prospects. Despite continuing low market volumes, the UK business has commenced the year well and we look to 2012 with increased confidence.
23 April 2011
CHIEF EXECUTIVE’S REVIEW
As the Chairman’s statement makes clear, 2011 was an exceptionally difficult year for the firm. Those difficulties are fully reflected in the results we announce today.
After an encouraging start to 2011, the markets entered a further excessively turbulent phase in the second half of the year caused by Eurozone and global economic concerns. This led to a sharp fall in commission levels and the deferral or cancellation of a significant number of investment banking transactions on both sides of the Atlantic in the last three months of the year.
We took decisive action to reduce costs, alongside the decision to divest control of ThinkEquity since the year end.
Panmure Gordon remains totally focused on serving its institutional clients, its London listed corporate clients and those seeking to come to the London market. In spite of the year’s extraordinary challenges, the firm continued to grow its corporate client list which now stands at 77. During the year Panmure Gordon maintained its position as a Top 5 UK broker in the highly regarded Thomson Reuters Extel 2011 Mid & Small Cap survey.
The past few years have been extremely challenging and I thank colleagues for their efforts. With over 20 years at the firm so far, with the last nine as Chief Executive, I look forward to working with Phillip Wale when he joins in the summer to drive the firm’s profitability and continue to improve our market share.
Given the size of the statutory loss in the reporting period, in the table below we break out the significant one-off costs primarily associated with ThinkEquity in its final year within the Panmure Gordon Group; a year which saw significant impairments and write downs.
As the table shows, the largest one-off cost reflected in the statutory accounts is the £16.8m impairment of the full carrying value of goodwill associated with ThinkEquity. Additionally, based on ThinkEquity’s history of continued losses, the Company reviewed the level of deferred tax assets held in the US business and wrote-off the previously recognised entire amount of £3.4m.
UK US Swiss Consolidated Consolidated
2011 2011 2011 2011 2010
£‘000 £‘000 £‘000 £‘000 £’000
for period (4,189) (26,882) (402) (31,473) (7,431)
Adjusted for significant one-off costs
US deferred tax
asset written off – 3,413 – 3,413 –
impairment – 16,841 – 16,841 –
charges 516 4 – 520 1,252
intangibles – 164 – 164 141
loss adjusted for
one-off costs (3,673) (6,460) (402) (10,535) (6,038)
The board has not recommended a dividend for the year.
We have made an encouranging start to 2012, having agreed, subject to regulatory approval, to divest control of ThinkEquity, which has historically been responsible for a significant proportion of statutory losses incurred in recent years, whilst also substantially reducing UK costs. While markets remain cautious, we believe the UK business is now right–sized. We are focused entirely on serving our institutional and corporate clients and in the first quarter of this year we have seen an increase in commission levels and the establishment of a good investment banking pipeline.
23 April 2012
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