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Merchant House won’t rule out IFA arm sale to raise cash

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Merchant House Group has not ruled out a sale of its IFA business as it considers ways to raise additional funds to shore up capital.

The group, which includes IFA arm Merchant House Financial Services and structured products arm Merchant Capital, posted an operating loss of £1.4m for the first six months of the year. This compares to a £500,000 loss for the same period last year.

Yesterday it announced the departure of its chief executive Chris Day who has stepped down with immediate effect. Managing director James Keane is assuming the chief executive role while Day will remain on the board of Merchant Capital, the company’s structured products arm.

Sales at Merchant House Financial Services are up 23 per cent from £2.2m to £2.7m, while sales at Merchant Capital are up 44 per cent from £900,000 to £1.3m.

Merchant Capital’s former custodian Pritchard Stockbrokers was suspended by the FSA from regulated activities in February. The company says Merchant Capital’s performance has been boosted by offshore sales.

Merchant House Financial Services is said to have made progress in reducing monthly running costs and reducing the number of “low profit” advisers.

Merchant House Group announced in June it had secured a £2m funding injection from turnaround investment firm Beia. But chairman James Holmes says capital adequacy remains uncertain. He says: “As sufficient funding may not be received in the short term, the board is also exploring all other options available to it, which may include asset or business disposals, and there is also a risk of cancellation of trading on AIM.”

A Merchant House spokesman says: “The group is exploring all possibilities which will potentially include disposals, but we are not saying what the core businesses are at this stage.”

Page Russell director Tim Page says: “Based on the numbers, it seems while Merchant House is doing its best to turn things around, it may have to sell off some assets.”

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Comments

There are 2 comments at the moment, we would love to hear your opinion too.

  1. When they say ‘low profit’ advisers I presume they mean ‘high loss’, given their financials? Turnover of £2.7m from 89 (as I type) RIs = @ £30k each

    I’d like to be the first (and last?) to offer a £1 for their IFA arm. It should be the best offer they ever get.

  2. Beia will want a return on its money and is unlikely to be prepared to wait too many years for it. Accordingly, MH will need to update its business model effectively and quickly.

    The FSA’s RDR Red Button Day is fast approaching and the days of flogging something before moving swiftly on to the next sale will very soon become an ever less sustainable business model.

    Any business isn’t already a good few years down the road of restructuring its client proposition towards ongoing service and recurring revenues instead of initial commission-based product sales may well find that transition very difficult to accomplish in just a matter of months. Has MH left it too late?

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