Millfield Group has reduced its losses and increased turnover by two-thirds while agreeing a £10m investment in its Lifetime wrap venture from Norwich Union.
The Aim-listed national IFA cut its losses by 4.5 per cent to £5.6m in the six months to September 2003 from £5.9m for the same period last year and saw turnover for the period increase by 65 per cent to £23.5m from £14.2m.
Norwich Union's investment of £10m in Lifetime values the wrap venture at around £18m, with the insurer's stake rising to 49.9 per cent.
Under the deal, Millfield receives £800,000 in this accounting period and a further £1.4m in the next.
Millfield is paying out around 67 per cent of its turnover as commission and sees an increase in RI numbers as the way to profitability against a background of administration expenses of over £12m in the six months to September 2003.
The firm's income-generating staff currently consists of around 600 RIs and 40 accounting professionals. The firm believes it can grow its total RI numbers to between 800 and 900 without major increases to its administration costs. The company says it has £8.2m cash in the bank Millfield finance & operations director Harry Roome says: “Our break-even point is around 650 advisers. We are not looking for drastic cuts in costs because turnover and revenue are rising fast.”
Durlacher analyst David Pannell says: “Millfield's losses are slightly worse than I expected but they should start being profitable in the next half-year. But I cannot see how that piece of software can be worth £18m if it has no customers and has not even been used yet.”