LONDON: Broking company Collins Stewart Tullett Plc., is demerging its Collins Stewart stockbroking business from the group and returning 300 million pounds to shareholders. The announcement came as the group announced its financial results — profits nearly trebling on higher revenues.
For the full year 2005, the firm’s pre-tax profit rose to 97.6 million pounds, compared with 34.2 million pounds in the previous year, on revenues of 798.1 million pounds, up from 583.9 million pounds.
Chief executive Terry Smith said in a statement that 2005 was another successful year in terms of progress with its strategic development and the financial performance with both the inter dealer broking and stockbroking businesses producing revenues and profits substantially ahead of the same period last year.
Smith said the demerger will make it easier for the firm to return cash to shareholders. Smith and the firm had won 300,000 pounds in legal damages from the Financial Times in 2005 over an article by the newspaper about alleged business practices by the firm.
Smith said the demerger is likely to be completed around the third quarter of the year. He will remain group chief executive of Tullett, which now owns a rival broking firm Prebon Yamane, and chairman of Collins Stewart. Shane Le Prevost, who became chief executive of Collins Stewart last year will continue to head that business.
Smith said Collins Stewart, which specialises in equities market making, will have a separate listing with a valuation of around 600 million pounds, while the Tullet interdealer broking business will be different and valued at around 1.3 billion pounds. The Tullett business functions as middleman between banks and other financial institutions that want to trade in bonds and derivatives.
The demerger is largely seen as a counter to the new rules on regulatory capital governing the amount financial institutions have to set aside to cover the risks they take.
Shares of Collins Stewart were down 8 pence at 713-1/2 pence, valuing the company at 1.51 billion pounds.