Fine Stockbrokers Find It Tough Going
The Age
Friday March 21, 2003
Fine stockbrokers find it tough going
Stockbroking continues to be a tough game for most participants, with many bleating that it's just too hard to make a dollar.
But there shouldn't be too many tears shed, as these were folk who lived through the greatest bull market in history and there must be plenty of fat put aside to live off.
The problem for many conventional brokers is that the services offered by cut-price internet brokers continue to improve and, into the bargain, clients are spared much of the drivel - posing as research - that is pumped out by many of the so-called full-service firms.
The chill winds are not just being felt by owners of unlisted firms: investors that came aboard the clutch of stock exchange listed brokers are also having a tough time of it.
Take Tolhurst Noall Group, a venerable amalgam of old names if ever there was one.
In the good ol' days, decades ago, outside investors would have killed to get a piece of the action of William Noall or D&D Tolhurst.
Nowadays punters can buy Tolhurst scrip for 20 in the hope that things will get better.
The firm recently filed its results for the December half-year and they showed that the outfit was a fair way from making even $1 of profit.
Tolhurst had a big increase in revenue - from $8.9 million to $13.1 million - but even with that level of sales coming through the door a $371,000 loss was posted.
Now, that was better than the $2.5 million loss booked in the previous corresponding period but it was still tough going on the cash-flow front.
On a cash-flow basis, receipts coming in from customers totalled $12 million but payments to suppliers and employees totalled about $14.3 million, leaving a $2.6 million deficit in operating cash flow after allowing for various other items such as interest and tax.
One positive influence on the latest results would presumably have been Tolhurst Noall's underwriting of the Michael Kroger-promoted Child Care Centres Australia which raised $9 million and immediately made small fortunes for some of those associated with the float.
That was a money-for-jam offering and Tolhurst presumably made good money out of it, although whether the firm owned any Child Care scrip at any stage is unclear.
The group did own something of something, as the accounts filed recently showed that $533,000 flowed from the sale of equity investments, and payments for purchases totalled $108,000.
Meanwhile, directors whose ranks include Peter Chapman and Ian Meredith Johnson said that most of the loss - $250,000 - was attributable to the ``tail of reconstruction expenses" that were incurred in the downsizing of the group in September.
They said the brunt of the downsizing fell on the group's private-client stockbroking business and it was necessary to retrench a substantial number of employees.
``The reconstruction has resulted in reduced transaction costs and higher efficiencies in all areas," directors said.
They added that the performance turnaround achieved so far in the continuing depressed market conditions would be maintained and improved in the current half-year.
Early in February directors told shareholders that the ``completion or otherwise" of a $1 million placement to interests associated with Andrew McDouall of New Zealand would be reported with the half-year's results.
Directors now say they expect the placement to be completed by the end of next month.
Get into insolvency work if you want a lucrative job
Would these be the best years ever enjoyed by deep sea diver John Menzies Spark and the crew at Ferrier Hodgson, the insolvency people?
Surely that would be the case what with the quantity of fees flowing from the Melbourne establishment's big collapse in the shape of Pasminco.
Spark and Peter Damien McCluskey got the voluntary administrators' guernseys in September 2001 and then they became deed administrators on October 4 last year. They remain in place.
What a job it has been, and lucrative too.
Get a load of the fees.
For the roughly 12-month period to last October, they were no less than $10,136,893.
That wasn't the end of it.
The bill from October to January totalled $2,168,920 and fees incurred and not yet paid for February totalled $524,357.
Creditors are getting a big eyeful of the amounts in the administrators' latest report and they're being asked to approve an additional fee limit.
The latest amount is $3.3 million plus GST, the fees the company doctors expect for April to September 2003 ``subject to the matters that evolve".
There's clearly a whole lot of work being done, for as Spark and McCluskey remark: ``We note that the timing of a float is likely to have a material effect on the level of our fees given the time-intensive nature of the work that will be required to be performed when a listing date is set down.
``We intend to seek this additional fee limit to avoid the need and cost of holding meetings of creditors on a constant basis, which only serves to diminish the ultimate return to creditors."
And there is a chance that even the new limit might not be enough.
The doctors reckoned: ``Should our fees exceed this limit, we will seek further approval from creditors at later meetings of creditors."
The moral of the story is: if your offspring wants to be an accountant, then direct her or him into the super-money arena . . . insolvency work.
© 2003 The Age
