27th Oct 2006 07:01
Evolution Group PLC27 October 2006 The Evolution Group Plc Embargoed until: 27 October 2006 07.00 The Evolution Group Plc Trading Update The Evolution Group Plc ("Evolution" or the "Group"), the investment bank andretail fund management group, today announces a trading update. Acquisition update The acquisition of Williams de Broe was completed on 3 June 2006. Since theGroup reported its interim results in September 2006 it has largely completedthe integration of Williams de Broe's businesses. The integration of theinstitutional securities business into Evolution Securities Limited wascompleted on 24 July 2006 on time and to plan. The combination of the two private client businesses was completed on 6 October2006 with the transfer of client funds under management onto Christows'operating platform. At the same time Christows Limited was re-named and theprivate client fund management business is now branded Williams de Broe Limited. The process surrounding the acquisition and accounting for Williams de Broe,detailed extensively in the Interim Report, remains on track. The Group expectsto conclude this process during this final quarter and will be in a position toprovide full acquisition accounts within the Annual Report for the year ending31 December 2006 to be published in April 2007. As a result of the phased close-down process planned for the period from June toSeptember 2006, when the two businesses overlapped and operating platforms wereduplicated, additional operating costs of approximately £5 million have beenincurred. These will not recur in 2007. In addition, the restructuring andresultant redundancy programme, combined with the on-going effort required toresolve the accounting and reconciliation issues, before performing an orderlyclose down of the shell companies, means the Group will incur exceptional costsof some £5 million in 2006. Institutional securities The acquisition of Williams de Broe has progressed well in terms of both theequities and fixed income areas. Research and sales have benefited from theextremely good fit, better leadership, and a significantly better tradingplatform. Research based sales commissions are significantly ahead of the prioryear. Volumes of transactions in both our retail and institutional marketplatforms are significantly ahead of the prior year in all indices, with aparticularly strong showing in our penetration across the larger capitalisedFTSE 100 and 250 stocks and pan European clients. During the remainder of 2006and 2007 Evolution will continue to strengthen its secondary market platformwhilst repositioning its corporate finance department towards more advisorywork, with a strong focus on servicing our existing clients. However, the recent negative change in market sentiment towards IPOs and towardsthe AIM market in particular, has resulted in a reduction in forecast corporatefinance revenue for the final quarter of 2006. The Group recognises that AIM isa market suffering from some indigestion, due in part to the constraints oflimited shareholder access and capacity. This may lead to opportunities and someconsolidation. Evolution intends to be ready to take advantage of this andsupport the franchise it has built over the last five years. As a result of the significant improvement in the secondary business, primarycorporate finance transactions will account for a lower percentage of Groupincome next year. The Group's historic over-reliance on primary income, which attimes has been over 80% of total Group income, is not seen as a sustainablebusiness model.The Board recognised this changing business model more than twelve months ago,and agreed a strategy to address it. The recruitment of Andrew Umbers to runEvolution Securities was part of this change. His history and credentials arebased on successfully developing secondary franchises at BZW and then at CSFB.The successful acquisition of Williams de Broe was the culmination of months ofplanning, and a manifestation of this strategy. We have further strengthened oursecondary and primary businesses with high quality recruitment. This processwill continue. The Group has also strengthened the Board with the appointment of Mark Nichollsas a non-executive director. Mark ran the corporate finance department at SGWarburg for 10 years. It is the intention to strengthen the Board further. We aim to be the UK's leading independent securities firm. We are a company withreal strategic goals and ambitions. Private client fund management The progress made to date in integrating and re-branding the private client fundmanagement business to Williams de Broe Limited has been extremely encouraging.The combined private client business now trades from six branch offices andbegins the fourth quarter with assets of approximately £2.0 billion undermanagement. Capitalising on this progress and by continuing to invest in thisfranchise and brand throughout the remainder of 2006 and 2007, the Board expectssignificant further growth of client assets by the end of 2007 and as a result asignificant uplift in profitability. Overall impact on Group results The Group remains very well placed for the future. However, due to the presenceof significant non-recurring costs and the expected reduction in corporatefinance revenues, the Group expects to achieve a clean profit before tax in 2006of approximately £25m. When there are so many changes affecting our industry and ourselves, we areextremely mindful of our balance sheet. We want to be able to take advantage ofthe strategic changes affecting our industries and strengthen our businessfranchises at the same time. We will, however, via market purchases, distributecapital to the extent that our business plans permit and our reserves allow. In the meantime, the Group has two very strong core businesses both of whichhave well defined strategies and real direction. The Group's business model ischanging to be one of stability and balance. This is hugely important to ourshareholders, our clients and to our staff. The Board remains confident about2007. Martin Gray Chairman ENDS For more information please contact: The Evolution Group Plc Tel: 020 7071 4300Alex Snow, Chief Executive Officer Bell Pottinger Corporate and Financial Tel: 020 7861 3232Charles CookSarah Hilyer Notes to Editors: The Evolution Group Plc The Evolution Group is the holding company of Evolution Securities Limited,Williams de Broe Limited and Evolution Securities China Limited. Founded inApril 2001 and originally listed on the AIM, the Evolution Group joined theOfficial List in 2003 and now has a market capitalisation of over £310 million. Evolution Securities Limited aims to be the leading investment bank advisingsmall and mid-cap UK public companies. It has approximately 100 retainedcorporate clients, to whom it provides equity research, institutional sales andtrading, market making and corporate finance advice. Evolution SecuritiesLimited is authorised and regulated by the Financial Services Authority. Inaddition, it operates a US broker-dealer, Evolution Securities (US) Inc., whichis registered with the National Association of Securities Dealers and regulatedby the Securities Exchange Commission through which it brings US institutionalinvestors access to its UK based corporate clients. Williams de Broe Limited is a leading private client stockbroker and fundmanager, with offices in Bath, Birmingham, Bournemouth, Exeter, Guildford andLondon. Williams de Broe is authorised and regulated by the Financial ServicesAuthority. Evolution Securities China Limited ("ESCL") is a specialist investment bankingand securities firm dedicated to offering equity research, institutional salesand sales trading to a broad base of professional portfolio investors, as wellas Equity Capital Markets and Corporate Finance services, primarily to Chineseand Asian corporations. ESCL is headquartered in London with additional offices in Shanghai and HongKong, under the regulatory authority of the FSA and SFC. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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