WH Ireland is now well capitalised with supportive long-term backers and has a clear route to growth, says CEO elect Phillip Wale.
Wale (pictured) joined the firm from Cantor Fitzgerald Europe on 1 August, following the shock departure of the previous incumbent Richard Killingbeck.
While still waiting for FCA approval to confirm his appointment, Wale has already had to deal with a £2 million capital raise, which saw M&G take a 12.4% stake in the business last month.
At the same time, the firm’s long-term backers, Polygon and Oceanwood, increased their holdings from 27.6% to 29.3% and 17.8% to 25.5%, respectively, while its Kuwaiti investors exited their 21.9% position.
‘The Kuwaitis’ stake came up for sale. We went to see both hedge funds [Polygon and Oceanview] and some other investors I know. We felt a long-only institutional investor was a good fit,’ Wale says.
‘[M&G Recovery fund manager] Tom Dobell knows the space very well and he really understands this business. Our shareholders are long-term investors. They’re not looking for a 50p rise in the share price, they’re backing a three to five year growth story.’
He says that the placement, WH Ireland’s second of the year after a £2.4 million cash call in February, will be a ‘final raise’ as the company works through the systems issues it has been battling with for the last two years.
This all followed a £1.2 million fine from the Financial Conduct Authority (FCA) for control failings in February 2016. Since then the firm outsourced its back office functions to SEI, but announced a £1.6 million loss in January as platform costs mounted and a further profit warning was issued in May.
‘It’s not happening as quickly as we thought. We need to be able to move people over so we are not having to pay to run two systems,’ Wale says. ‘It’s weighed on earnings, the implementation and migration of clients. There are no more fines or investigations and the regulator has given us a clean bill of health.
‘It’s really now about recovering that halt in growth and making sure we don’t lose more money on legacy systems.’
Wale is committed to maintaining both WH Ireland’s wealth management and corporate broking divisions and expanding through a combination of organic growth and acquisitions.
The hiring trail
On the wealth side the focus is on discretionary assets. He is open to hiring teams from rivals and potentially expanding the firm’s regional footprint, with it having no presence in the North East.
Building scale is key, he says, with the firm a relative minnow, with £2.6 billion of assets under management, of which £1.15 billion is discretionary.
‘There is a critical level we need to get to. We have the infrastructure now to run double our current assets under management (AUM) without hiring another person,’ he says.
Wale also expects to soon announce a new head of wealth to replace Roddy Buchanan, who left over a strategy disagreement in July.
Acquisitions are likely further down the line when WH Ireland is deeper into recovery mode. Its recent problems have seen its share price fall by 20% since the start of the year to 96p and to a level which Wale believes is ‘materially undervalued’.
‘We have a market cap of £30 million and we generated £30 million of revenue last year. If you value the discretionary fund management business at 3% of AUM, then the value would be £33 million, but we also have £9 million of cash in the bank,’ he says.
‘When we’re looking at acquisitions, the stuff that is all discretionary tends to be very highly valued. There is a lot of pressure on companies with a lot of smaller clients.’
He adds: ‘We’ve had a couple of companies approach us and I want to talk to them when our market cap is reflective – we’ll keep an eye on it. We have new systems in place and from here should have a reasonably clear path of growth. If we do get growth in the share price we can use that as currency.’