Mark Brown: Stockdale Securities boss warns on boom or bust year for brokers

The stockbroker to AIM companies that changed its name from Westhouse in January

A trader works on the floor of the New York Stock Exchange (Getty)

This year will be boom or bust for London’s stockbrokers amid punishing market conditions, a City broker has warned.

Stockdale Securities remained mired in the red last year, according to accounts just published, and chairman Mark Brown said brokers will need to do deals or risk going to the wall: “There’s a lot of blood out there and it feels to me that you’re going to get another wave of consolidation and failure this year.”

The chairman of Stockdale, the stockbroker to AIM companies that changed its name from Westhouse in January, said the current climate reminded him of the start of the decade, when the industry had its last wave of takeover activity and failures.

In 2010 Icap’s foray into cash equities flopped, followed the year after by the sales of Evolution Securities and Collins Stewart to Investec and Canaccord Genuity respectively. In 2013, Seymour Pierce was bought out of administration by Cantor Fitzgerald.

But Mr Brown struck an upbeat tone after restructuring helped the small-cap outfit narrow losses to £1m in the 12 months to 30 September, from the £1.5m loss it made in the previous nine months.

Given our decisive action,  we will be around come  what may

&#13; <p> </p>&#13;

Stockdale generated £10.2m in annual revenues, but on a pro rata basis revenues were down from the £8m it made in the nine months to September 2014.

Stripping out restructuring costs, the broker made its first underlying operational profit in five years.

“Given the decisive action we’ve taken, we will be around come what may,” said Mr Brown, who declared that the company had been profitable in the first quarter of this year.

Small-cap brokers are having to cope with a number of headwinds, including a lack of flotations, dwindling commissions, and regulatory changes.

Already this year, Panmure Gordon has waved goodbye to its chairman and its chief executive following a profit warning in December. Canadian stockbrokers Canaccord and GMP Securities have also been under severe pressure, with GMP forced to close its London office.

The benefits of Stockdale’s restructuring in September – which included cutting jobs, capping the salaries of the highest-paid staff and moving its City office from Heron Tower to Aldgate, which cut rent costs in half – are expected to be reflected in this year’s results.

With the changes, Stockdale, which now employs just 35 people and four consultants, will focus on work for its institutional clients, meaning its research analysts will now only cover house stocks or potential new business.