Cicutti: What next for Towry?
In the spring of 2008, a young employee benefits director called Howard Finch gave an interview to a Scottish business magazine, in which he described his burgeoning career in glowing terms.
Howard told the magazine that his “climb to the top” had begun four years earlier, when he joined an IFA business called Aitchison & Colegrave, just as it was sold to Bradford & Bingley along with another advisory firm, JS&P.
As sometimes happens, the arrival of a new chief executive at the former building society brought about a new business plan, in turn leading to the sell-off of JS&P/Aitchison & Colegrave to a private equity firm, Palamon Capital Partners.
Happily, the sell-off also saw the arrival of a new boss to lead the merged entity. His name was Andrew Fisher. The magazine explained, Andrew “trained in the harsh world of fast-moving consumer goods at Unilever. He then progressed from selling margarine to selling money at Coutts (the Queen’s bankers) and specialised in turning around failing businesses.
“Andrew was treading water at Cox Insurance when he was tempted over to join JS&P’s board in November 2004 and was then offered the position of chief executive.” Fisher accepted, but only on condition that he was offered an acquisition fund to buy up other IFA businesses.
In the years that followed, JS&P went on an acquisition spree, buying between four and six IFA firms a year, including one “crucial” purchase, that of Towry Law, which led to an overnight jump in turnover from £13m to over £50m and saw JS&P rename itself after its former takeover target.
Andrew, clearly a very driven man, was apparently “scathing” of his IFA competitors: “Their advice is pretty poor and their business planning is even worse,” he told the magazine, adding that he intended to “fundamentally change the entire industry and then dominate it through good practice.”
The magazine noted in April 2008 that throughout all this upheaval, Howard Finch “continued to thrive”. Things were looking good: “All the staff own shares in Towry Law and the future is rosy. Andrew plans to float the company on the London Stock Exchange within two years, and expects Towry Law to be at £100m profit and £250m turnover when he does. All their shares will then become liquid. Some staff will even make serious money.”
Within 14 months, Howard had left to become a director of his own employee benefits consultancy.
As for Towry Law, under its margarine-to-financial-services boss, the company has had mixed fortunes since then, enjoying further acquisitions, including that of adviser firm Edward Jones in 2009.
Rumours of impending flotations have continued to follow Towry, not least a report in the Sunday Times in November 2010. The company’s then head of marketing Peter Foster, who left the company four months later, denied impending plans for a £500m IPO, adding that it might not happen for another 18 months and only “if market conditions are right.”
Andrew Fisher, however, was reported as describing the potential £500m valuation as “a bit light”. One or two commentators wondered how a firm with assets under management of around £4bn could justify such a valuation, even if - as Fisher has worked so hard to tell us - Towry’s income is focused on fee-earning, with just a little bit of trail commission.
Or maybe more than a little bit of trail. In its 2010 accounts, published in May last year, the company reported a turnover of just under £80m, up by 45 per cent on the previous year, with funds under management rising by a similar percentage. So-called “recurring income”, as distinct from fee-earning income, contributed 77 per cent of that turnover.
Even so, at an operating profit level, the firm recorded a loss of £5.5m, compared with profits of £19.7m in 2009. This is primarily due to the effects of “significant exceptional items” related to the takeover of Edward Jones.
Last week Towry faced further “exceptional items” relating to Edward Jones, when it was ordered to pay legal costs of up to £1.2m, including VAT, after losing a court case against IFA firm Raymond James and seven former Edward Jones advisers over its claim that they breached non-solicitation clauses in their employment contracts. Its own costs are not known.
In her judgment, Mrs Justice Cox said Fisher’s “description in cross-examination of the two businesses in fact being ’incredibly similar’ were inconsistent with the evidence. It appeared to be unnecessarily argumentative and I did not find his evidence on the matter helpful.”
Quite where that leaves the long awaited flotation of Towry is anyone’s guess. The publication of the company’s 2011 accounts in the next month or two may shed some light on the proposed IPO.
Happily for Towry, Fisher has always been committed to the continued success of the business. In an interview a few years ago, he described his position as the company’s chief executive as “the most wonderful job you can have”.
He added: “I have absolutely no doubt that unless they shoot me, I’ll never work for another company.”
Nic Cicutti can be contacted at firstname.lastname@example.org