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TOP NEWS: Close Brothers profit halved by Novitas Loans provision

26th Sep 2023 09:47

(Alliance News) - Close Brothers Group PLC on Tuesday raised its dividend despite profit halving in its recent financial year due to a provision for its shuttered litigation funding business.

The London-based merchant bank said pretax profit fell to GBP81.1 million in the financial year that ended July 31 from GBP165.2 million the year before. Net interest income rose 2.5% to GBP592.6 million from GBP578.0 million, but non-interest income declined by 5.1% to GBP340.0 million from GBP358.1 million.

Administrative expenses rose by 2.8%. More importantly, Close Brothers took a GBP204.1 million impairment of financial assets, up from GBP103.3 million the year before. The impairments in the recent year included most significantly a GBP114.6 million provision in relation to the Novitas Loans business, up from GBP60.7 million the year before. Novitas provided litigation finance but has ceased lending.

Close Brothers also noted lower income from the Winterflood stock brokerage business, amid "subdued trading activity". Adjusted operating profit for Winterflood fell to GBP3.5 million from GBP14.1 million.

"Although performance at Winterflood reflected the continuation of challenging trading conditions, we remain confident in the track record of our trading business and are well positioned to retain our market position and benefit when investor appetite returns," Close Brothers said.

Overall, group adjusted operating profit fell to GBP113.5 million from GBP234.8 million.

More positively, Close Brothers said its loan book grew by 4.4% to GBP9.5 billion from GBP9.1 billion, and total client assets by 4.2% to GBP17.3 billion from GBP16.6 billion.

Close Brothers declared a 45.0 pence final dividend, up 2.3% from 44.0p, giving a full-year dividend of 67.5p, also up 2.3%, from 66.0p.

Looking ahead, the company said, "we have seen a good start to the 2024 financial year, and our underlying business is well positioned to maintain stable returns this year."

Close Brothers shares were down 3.6% to 821.50 pence on Tuesday morning in London.

By Tom Waite, Alliance News editor

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