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PosSol posts £7.4m loss and reveals plans to broaden offering

Positive Solutions has posted a £7.4m loss before tax for 2009 after making a £5.7m profit a year earlier.

The firm says the economic downturn impacted heavily on the business and also highlighted higher regulatory fees – primarily relating to a £1m FSCS levy – and one off costs to improve its governance and compliance controls.

The results include a £5m write-off relating to its Prophitshare share option. Chief executive Jim Reeve says the group was keen to create a clean starting point for its balance sheet to move forward with.

The results also reveal the firm is looking at broadening its proposition to support a number of different IFA business models over the next year.

PosSol has also seen its turnover decrease by 15 per cent in 2009 to £85.1m, from £100.7m in 2008. It says this is on the back of a depressed housing market, stock market volatility and the shift towards recurring income on the back of the RDR.

PosSol has introduced a Performance Improvement Plan to review all areas of expenditure in order to improve its efficiency. The firm says this discipline is set to continue into 2010.

The group also revealed that it invested £11.5m in a loan arrangement with parent Aegon due to lower interest rates on cash. After completing the transaction the group held £13.6m in cash.

Reeve says: “Although 2009 was a challenging year we achieved significant progress in asserting our position as a leading player in the financial advisory market. We invested heavily in strengthening our governance and framework, developing our capabilities and establishing key elements of our evolving business model.”

Reeve says the firm has recruited 234 IFA partners to the firm last year, while a further 98 joined in August 2010. PosSol says 110 members left between December 2009 and the end of June 2010 although this number excludes advisers who are still working their notice period.

He says: “We’ve taken actions that have resulted in some advisers seeing PosSol as a place they no longer want to work in and that is fine. The important thing is that at the end of September our IFA turnover is up 11 per cent on 2009 but adviser productivity is up 21 per cent. The shows the need to focus on high quality, professional advisers. Having lots of advisers selling low levels of business does not sound like a good business model to me.”

At the end of September the group had 1,507 IFA partners. Reeve says the vast majority of its adviser departures were those who wrote less than £25,000 of business, decided to retire or had long-term illnesses.

Reeve says he sees the value of the FSCS levy but that there will be failures going forward and that those costs must be allocated appropriately across the market.

He says: “I feel some of the distribution costs in the past have been inequitable and some of the IFAs feel unfairly burdoned with some of these costs.

Earlier this year PosSol appointed KPMG to check its partners pensions and investment sales, a move which advisers within PosSol said was”pulling the company to pieces”.

Reeve says the ongoing business review is essential to the business and that the group is keen to ensure it has provided suitable advice to its clients in the past.

He says: “We hope it will be complete in the near future and I do not believe there has been any evidence of systemic misselling within the PosSol business. We had to do it and it is for the long term benefits of the business.”

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Comments

There are 11 comments at the moment, we would love to hear your opinion too.

  1. Reeve says: “Although 2009 was a challenging year we achieved significant progress in asserting our position as a leading player in the financial advisory market’

    Yes a £7m loss really was significant progress considering all those years of solid increasing profits. The numbers dont lie and I would bet the ranch things will get worse. I wonder why the lent money to Aegon to ‘get a better return’ when the fixed income market provides better returns. Was it to stop the naughty hand in the till.

  2. I am always suspicious of inter company loans, especially from a minnow to a whale. Wonder if PosSol will get the cash back or if it will end inthe ” wash up” of a future sale process.

  3. “a Performance Improvement Plan to review all areas of expenditure in order to improve efficiency”. We can all fairly readily call to mind another organisation which might well benefit from a similar initiative, don’t we? Fat chance of that ever happening, though ~ they don’t have to make a profit. The more they lose, the more they charge the rest of us.

  4. OK anonymous we shall see wont we. Fact is that sometimes you need to make a loss of circa 8% of turnover to put right all that isn’t to ensure that we don’t have a Park Row situation.

    Do I take it that if PosSol demonstrates success that you will sell the ranch and come on board? Because competitors with vested interests say it, doesn’t mean it is true!

  5. Anyone who takes the time and trouble to actually read the accounts will see that £5 million of the ‘loss’ was deferred tax charge from 2005 when PS paid out on its ‘Profitshare’ scheme. The balance is loss of interest on cash deposits, and beefing up the compliance and T&C framework.

    The company still does not have a penny of debt and has £25 million in cash or cash equivilants – that makes it a pretty strong and well run business in my book.

    Yes, I have been with PS for 61/2 years, but I am very happy and proud to be part of a financially strong and well run business – I can comment as I am part of it.

  6. Well the only way PS will demonstrate a success is by a change of management and a return to the old values that the company was built on.

  7. David Snape said:

    Anyone who takes the time and trouble to actually read the accounts will see that £5 million of the ‘loss’ was deferred tax charge from 2005 when PS paid out on its ‘Profitshare’ scheme. The balance is loss of interest on cash deposits, and beefing up the compliance and T&C framework.

    -oh come on putting the loss down to a loss of interest on cash deposits, who are you kidding? £7m loss pure and simple.

    The company still does not have a penny of debt and has £25 million in cash or cash equivilants – that makes it a pretty strong and well run business in my book.

    -Do you honestly believe the company has £25m in cash or cash equivalents (correct spelling)? We are now 10 months on from the end of 2009, at the burn rate PS is going the coffers will be looking bare soon. Why do you think the company has loaned money to Aegon?

    Yes, I have been with PS for 61/2 years, but I am very happy and proud to be part of a financially strong and well run business – I can comment as I am part of it.

    -Making a £7m loss is nothing to be proud of. A terrible loss like this is not the sign of a well run business in anyone’s book. You can comment and you have but I think you have been sold a sucker.

  8. Anonymous – I assume you are part of PS or have been in the past?

    Do you also believe the world is flat and the moon is made of cheese?

    We in are operating in very different times from 10 years ago with a more aggressive and intrusive regulator – that is why the PS of old has changed, because it had to.

  9. The old management sold PS a rubbish system and now want to recruit us all to True Potential. How much will True Potential be worth when PS don’t renew their contract in a couple of years so all the ones who have went to True Potential thinking they will get a large handout then think again. Positive Solutions will never deal with them. TP owners will try and sell before then but hopefully this time the buyers will do better due dilligence than Aegon did.

  10. Anonymous – Posting without showing yourself, makes me think you may have a vested interest – is that the case? if not, show yourself.

    You seem to be indicating that I have a dose of ’emperors new clothes’ syndrome? I think not, but I suppose time will tell.

    Thanks for the spelling correction. I can spell pompous which is how I describe anyone who posts somethink like that.

  11. David Snape:

    Emperors should be Emperors’

    somethink should be something

    Good luck with the exams!!!

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