Interim Management Statement

RNS Number : 1382I

Evolution Group PLC

13 November 2008

 



    13 November 2008

The Evolution Group Plc

(the "Evolution Group", the "Group", the "Company")

Interim Management Statement

Evolution Group, the listed investment bank and private client investment management group, today presents its second Interim Management Statement ("IMS") for the financial year ending 31 December 2008, as required by the UK Listing Authority's Disclosure and Transparency Rule 4.3. This relates to the period from 1 July 2008 to today's date.

Group performance 

Market conditions have continued to be extremely volatile in the second half of 2008 making it difficult to forecast revenues and profits with any accuracy. The level of trading across the Group remains mixed but is likely to be significantly below that achieved in the first half. Equities markets have remained extremely unpredictable, and have impacted revenues in all our businesses that are exposed in one way or another to global equities markets.

In our securities businesses, Evolution Securities1 and Evolution Securities China2, trading has been extremely tough, impacting almost all revenue streams. Secondary market revenues have been resilient in commission income from equities, reflecting our success in growing FTSE 100 revenues and are significantly ahead of expectations in fixed income. We expect to develop our fixed income agency franchise further and have today confirmed the appointment of Guy Cornelius as Head of Fixed Income. However, primary revenues have been adversely impacted by the market uncertainty in the second half. Increasingly the confidence in the cost of equity has been eroded over this period, making corporate finance transactions extremely difficult to complete, both in advisory and fund raising. Our securities businesses are expected to be loss making in the second half and for the full year. We will continue to adjust our cost base in response to market conditions despite the investment in our secondary franchise.

In Williams de Broë3, our private client investment management business, trading has been more resilient yet has not been totally immune from falling equity markets. Management fees have been under pressure due to the indices in which we are most exposed being lower in the second half. Transaction income has been lower than expected due to uncertainty and volatility in equity prices during this period. Overall however, new client wins have continued to be accretive from our existing business and indeed from the opening of our new Edinburgh office which will increasingly strengthen the business for the future. Also during the period we announced the acquisition of the investment management team of Singer and Friedlander Investment Management Limited ("SFIM").  These developments demonstrate our previously stated commitment to continue to grow assets under management substantially in the medium term.

We have continued to adjust our cost base in areas of the business impacted by the current market conditions. However, our investment in the Edinburgh and SFIM private client businesses of Williams de Broë will result in increased operating and one-off costs in the second half of the year. 

Acquisition of Singer and Friedlander investment management team

As announced on 21 October, Williams de Broë reached agreement with the administrators of Kaupthing Singer & Friedlander Limited (in administration) ("KSF") and certain subsidiaries of KSF to acquire the investment management team of SFIM.

Although it is early in the process, we are pleased with this transaction, with the quality of the investment professionals within SFIM and with the high quality of client service that this team has brought with them. It has been a challenging time for both clients and employees, but we believe the fit with Williams de Broë is highly complementary and the early signs are most encouraging. We believe this acquisition will be accretive in 2009 and beyond.

Financial position

The Group remains extremely well capitalised. We have deliberately structured the Group to have a strong and highly liquid balance sheet through the effective management of working capital in trading portfolio assets and net trade receivables and through the retention of cash. This, combined with no debt, supports our aim of becoming a custodian of choice for clients and counterparties during these turbulent market conditions. Our balance sheet provides the necessary strength in times of market uncertainty and enables us to take advantage of strategic opportunities should they present themselves. In addition, we have taken and will continue to take the appropriate decisions to adjust our cost base in the light of the current market conditions.

Outlook

The outlook remains challenging. It is clear that both the revenues and return on capital within our sector are under increasing pressure. We therefore expect profit4 performance in the current year to be marginal. The challenge which we set ourselves across the Group is to focus our cost base around a reasonable expectation of recurring revenue streams, whilst assuming, at this stage, that purely transactional revenue streams will be extremely uncertain for the foreseeable future and into much of 2009. We look forward to continuing to build our Group around the core profitability of recurring income only. Despite turbulent market conditions, we are confident that the Group, with its strong balance sheet, good recurring revenue streams and demonstrable ability to execute value led acquisitions, is well-positioned to weather the current economic downturn.

Notes

1The results of Evolution Securities are defined as those arising from Evolution Securities Limited ("ESL") and its subsidiary Evolution Securities (US) Inc. ("ESUS").

2The results of Evolution Securities China are defined as those arising from Evolution Securities China Limited ("ESCL") and its subsidiary Evolution Watterson Securities Limited ("EWSL").

3The results of Williams de Broë are defined as those arising from Williams de Broë Limited ("WdB"), Williams de Broë Management Company Limited and from WDB Capital Limited, including the consolidated results of the WDB Capital UK Equity Fund.

4As represented by 'adjusted profit before tax' defined on page 14 of the 2007 Annual Report. 

Forward looking statements

This interim management statement may contain forward-looking statements with respect to the financial condition, results, operations and businesses of the Evolution Group plc. Such statements and forecasts involve risk and uncertainty because they relate to events and depend upon circumstances that will occur in the future. There are a number of factors that could cause actual results or developments to differ materially from those expressed or implied by forward-looking statements and forecasts. Forward-looking statements and forecasts are based on the Directors' current view and information known to them at the date of this statement.  

                -Ends-

For further information, please contact:

The Evolution Group Plc Alex Snow, Chief Executive Officer	020 7071 4300
Bell Pottinger Corporate and Financial Charles Cook Mike Davis	020 7861 3232

Notes to Editors:

The Evolution Group Plc

The Evolution Group is the holding company of Evolution Securities Limited, Williams de Broë Limited and Evolution Securities China Limited. Founded in April 2001 and originally listed on AIM, the Evolution Group joined the Official List in 2003 and now has a market capitalisation of over £165 million.

Evolution Securities Limited is a leading investment bank focused on mid-cap UK public companies. It provides a full range of investment banking services including equity research, institutional sales and trading, market making and corporate finance advice. Evolution Securities Limited has over 70 retained corporate clients. It is authorised and regulated by the Financial Services Authority.

Williams de Broë Limited is a leading private client investment manager, with offices in Bath, Birmingham, Bournemouth, Edinburgh, Exeter, Guildford and London. Williams de Broë is authorised and regulated by the Financial Services Authority.

Evolution Securities China Limited is a specialist Chinese investment banking business with offices in London, Hong Kong and Shanghai. It offers UK based institutional clients research and trading in listed Chinese stocks and provides Chinese companies access to the markets in London and Hong Kong. Evolution Securities China Limited is authorised and regulated by the Financial Services Authority.

 

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