05/11/2008 - 22:00

Timing issues, market moves haunt Patersons

05/11/2008 - 22:00


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THE past and the future combined in the present to hit stockbroker Patersons Securities' profitability.

THE past and the future combined in the present to hit stockbroker Patersons Securities' profitability.

The Perth-based national broker's net profit was cut by more than 60 per cent to $3.6 million on revenue of $97.6 million, as Patersons absorbed the costs inflicted by a rogue trader in Canberra three years ago, as well as the expenses of establishing a new funds management division, which it sees as a long-term project.

Patersons executive chairman Michael Manford said the poor state of the markets also played a part in the poor result for the 2007-08 financial year, as it had done for many of the mid-tier brokers around the country.

Local competitor Hartleys booked a net profit of $16.75 million for the year to June 30 2008, up from $11.67 million the previous year, while Euroz experienced an 89 per cent rise in annual net profit to $41.93 million.

Mr Manford said the firm would look for opportunities to take on staff or assets in the current down-turn, believing it was well-positioned to do so having increased its expenditure on development and support functions within the private client business.

"Our strategy has been in place for a number of years, that will remain unchanged," he said.

This year, Patersons had to find $1.8 million from its own pockets to finalise most of the remaining claims from Canberra and pay legal costs. That came straight off the bottom line, whereas a previous $4.4 million settlement was covered by insurance.

Mr Manford was confident of the direction of the Patersons Asset Management, despite the decision to shelve a resources fund after it failed to reach its $50 million minimum subscription level and the lacklustre start of its 80:20 Equity Fund.

Both funds were launched to the market early this year. The 80:20 venture has raised $8 million, compared to a target of about $50 million, but Mr Manford said he still hoped to see that build to a $100 million fund.

"The timing was not perfect in terms of setting that up," he said.

Patersons has about $800 million in funds under administration and a further $240 million in managed discretionary accounts.

Patersons has also entered into a deed of company arrangement with a client that owes the firm $3.7 million.

In other broking news, DJ Carmichael & Co and Montagu Stockbrokers were reported earlier this week as holding merger talks.


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