Brokers plot for survival and success

WA’S listed brokers have reported varied fortunes in recent weeks, furthering exposing differences in their views on how to survive the twin peril of prolonged uncertainty in markets and increased costs.

Online specialist Sanford Securities posted an after-tax loss of $147,000 for the September quarter, but mid-cap operator Euroz Securities has reported a $1.2 million profit in its latest half-yearly report.

Sanford’s result was a $364,000 improvement on the previous quarter, with the firm also posting its first ever positive EBITDA.

Hartleys Limited and Australian Heritage Group’s 50 per cent-owned DJ Carmichael & Co have both reported losses for the September quarter.

DJ Carmichael’s pre-tax loss was $528,000, a $791,000 turn-around from the previous quarter.

Hartleys improved its position by $3.1 million from the June quarter but still came in $1.7 million in the negative, with Hartleys Wealth Management contributing a $2.4 million operating loss.

While JDV and Hartleys Corporate Finance produced operating profits, redundancies were announced simultaneously with the overall result.

“The corporate finance and JDV profits can’t match those losses,” Hartleys chief executive officer Tim Moore said.

“I’ve had calls today – from competitors, internal staff, and even those staff affected – saying it was very appropriate action in the circumstances.”

DJ Carmichael managing director Rod Beeton, who moved from Hartleys earlier this year, said all firms would be looking at cost containment, though not necessarily redundancies.

Mr Moore, however, pointed to expected international staff cuts at Credit Suisse First Boston, JP Morgan Chase & Co and Goldman Sachs Group.

Euroz Securities, which welcomed Karl Paganin to head the firm’s corporate department just last week, is about to add an extra $3 million to its cash box, with an issue to be settled next week.

This will supplement $1 million worth of options exercised recently. With $11 million in the kitty, Euroz chairman Peter Diamond said the firm would expand its investment banking and corporate finance division, and capitalise on opportunities in the depressed market.

“This is the time to buy core assets, with valuations more realistic,” Mr Diamond said.

“We plan to maintain our low-cost scenario, plus stick with our niche. Now is not the time to change your plan.”

Sanford chief executive officer Steven Goh said the company, which now employed just half the number of employees it had at the peak of the dot.com era, had over the past two months consistently handled 11 per cent of the Australian options market.

This, Mr Goh said, put the company at the number three position for the top options traders.

Owning its own technology contributed in no small part to the company’s success, Mr Goh said.

Sanford was not at the mercy of what other technology suppliers could or could not offer, and could supply services such as online options trading ahead of other industry players.

The company’s wholesale service, Virtual Broker, was another example of this advantage, Mr Goh said, producing increased revenue of 11 per cent over the past quarter and expected to grow further.

Technology was always a big part of the business, Mr Goh said, and Sanford had been looking to commercialise part of its technology.

But the key to further survival was finding partners. Global financial services transaction technology provider OM and Sanford were keen to offer the first larger scale centralised back office and third party clearing service to the Australian broking industry.

Front-end partnerships were important, too, and were the answer to commercialisation and marketing in tough times, Mr Goh said.

“Structures are of paramount importance – albeit not as glamorous as the deals, personalities and brands that are often the main public face of the industry,” he said.

Hartleys will let go 44 staff, 10 per cent of the firm’s employees, at the end of November.