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Restructure costs hit European Wealth's profit as it reveals rebrand, again

Restructure costs hit European Wealth's profit as it reveals rebrand, again

Restructuring costs have hit profitability at European Wealth, which has posted a loss of £5.9 million, up from £0.75 million in 2016.

Despite the hit to its balance sheet and the aborted acquisition plans of a US based company earlier in the year, European Wealth, the boutique with £1.7 billion in assets under management (AUM), made upbeat statements in its results for the year to 31 December.

Among a number of changes, the firm announced that it will rebrand as KW Wealth from July 2018. This is the second time it has announced a rebrand, with the company having previously said that if the acquisition went through it would be renamed as Kingswood Limited. This has now been ditched. 

The company itself has had an overhaul since September, when new chief executive Marianne Ismail was appointed. She has set about restructuring the business, which has included reducing the number of regional offices to establish three hubs in London, Manchester and Kent. The back office is run through a fourth office in Cheltenham. Meanwhile, the group has managed to reduce £1.4 million in operating costs.

However, the restructuring resulted in £2.3 million of impairment charges.

Last year the company announced it had struck a deal to acquire US-based broker dealer platform Newbridge. However, it pulled out earlier this month. The aborted purchase cost the company around £490,000.

The deal was going to be funded through a convertible loan of $17.6 million (£13.3 million) provided by Kingswood, a substantial shareholder in European Wealth. While the deal has failed, the loan agreement remained, with £10.3 million of the facilities drawn.

The company noted that it converted £7 million of that in to ordinary shares while returning the rest to the lender, leaving the group debt-free with almost £10 million of cash. 

Elsewhere, the business said that the addition of funds in its fixed income division helped raised assets under management by 13% over the year to £1.7 billion.

Group revenue was also slightly up from £9.4 million in the previous year to £10 million in 2017.

Despite the aborted acquisition in the US, the group said that it is still looking for an entry into the American market through acquisitions.  

Commenting on her first results, Ismail (pictured) said: ‘Our activities have been firmly focused on creating a strong platform for growth. We have removed the debt, in turn bringing cash onto the balance sheet, reduced our operating costs, and have invested in software to ensure that our business reflects the needs of our customers.

'With this in mind we are confident that the losses incurred during the period due to these activities will position European Wealth ideally to create value for shareholders both organically and via M&A and we hope that the benefits will begin to be reflected in our interims.’

The company added that it is aiming to grow its investment manager and financial planner headcount from 23 currently to 50 over the next three years.

In a separate announcement, European Wealth revealed that it has appointed David Hudd, deputy CEO of Hogan Lovells, to its board as a non-executive director. He has been at Hogan Lovells since 1994 in a number of roles and he previously had stints at Banque Indosuez and Banque Paribas.

Chairman Buzz West said: ‘I am delighted to welcome David to the board of EWG. He brings a wealth of experience within the legal and financial sectors which will be of great value as we focus on driving growth. We aim to achieve this both organically, and by way of acquisition to capitalise on opportunities in the global wealth management industry.’

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