Failed Saunderson House sale still affecting IFG

Dublin-headquartered IFG recorded a fall in the number of new clients recruited to its Saunderson House division after the sale process of that arm failed earlier this year.

The financial services company focused on the UK market said the volume of new clients in the Saunderson House arm dropped 7 per cent to 134, but total client numbers were up 10 per cent in the six months to the end of June compared to the same period last year.

Nevertheless, the botched sales process of Saunderson House meant the company had to give staff retention payments of £1.5 million (€1.67 million), as well as paying £100,000 (€111,000) for legal costs associated with the transaction.

The £1.6 million (€1.79 million) associated with Saunderson House formed part of a package of exceptional items including a termination payment to the former group chief executive, John Cotter, of €700,000 following his departure in April.

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Challenged

But the group's larger arm – James Hay – increased its fee income by 7 per cent to £20.3 million (€22.6 million) while interest income increased by £5.5 million (€6.1 million) helped by the Bank of England's interest rate rise.

In its half-year results IFG said revenue increased 16 per cent to £25.9 million (€28.9 million) while operating profit came in at £3.4 million (€3.7 million) – up from a £1.5 million (€1.67 million) loss for the same period last year.

Nonetheless, the business is still being challenged by legacy issues and it elected to avoid a shareholder dividend. “The board remains of the view that it is prudent to retain cash to cover the worst-cast outcome in respect of Elysian Fuels and other legacy matters that are yet to be resolved,” the company said.

The investigation by the UK revenue authorities into Elysian Fuels carries a maximum potential sanction of about £20 million (€22 million), although IFG believes their exposure is “materially lower” than that.

Separately, the company has set aside money to deal with legacy issues in its James Hay arm while also grappling with problems associated with the 2012 sale of its international business.

With the Elysian Fuels issue still floating on IFG’s horizon, the group is in the process of implementing a cost-saving initiative that could deliver about £1 million (€1.1 million) by June 2019. Costs associated with the investigation by the UK revenue is likely to reach £1 million both in 2018 and 2019, the company also said.

"The first four months of 2018 was a challenging period for IFG Group," said Kathryn Purves, the company's recently installed chief executive.

Good progress

“Since April we have made good progress on identifying and implementing our near term priorities; building two self-reliant businesses within an efficient group structure and resolving our legacy issues.”

Ms Purves flagged in her statement that the company will provide an update on the plans for the Saunderson House and James Hay divisions during the second half of this year.

Meanwhile, assets under management at the group with just under 60,000 clients rose 8 per cent in the period to £31.3 billion (€34.9 billion) against the backdrop of an industry where high net worth individuals are cautious about the potential fallout from Brexit, according to IFG.