The chief executive of the UK’s largest independent stockbroker Collins Stewart takes a deep breath and thinks for a moment. After a pause, Mark Brown, who is sitting in his large modern office with floor-to-ceiling views of the City, says: “I think we are about halfway towards getting the firm back to where it should be.”
When Brown arrived at Collins Stewart in October 2008, after heading smaller rival Arbuthnot Securities, the firm had been battered by the credit crunch.
Under its previous chief executive Joel Plasco, the broker embarked on a programme of global expansion that saw it build a presence in 14 regions – including the US, India and Israel – in just over two years. In 2007 alone, Brown says, the firm set up or bought nine businesses.
“My predecessor was a busy boy,” quips Brown, who has a flat Lancashire drawl, having been raised in the Pennines town of Wigan.
The 47-year-old is powerfully built, and you can still tell he played a lot of rugby in the all-action position of open-sided wing at university.
When the financial crisis hit, the stockbroker was left with a number of diverse units that had yet to be fully integrated. “There was not a lot of coherence to the business,” says Brown. As a result, the firm posted a £15.2m loss in 2008, compared to a £79m profit the year before. Sales slumped 25 per cent to £175.7m.
Brown says: “When I came in the future of the business was uncertain. I had to take quick action. I didn’t have much time to contemplate my navel.”
He closed a lot of the firm’s foreign offices, including its Wall Street investment banking unit?– less than two years after buying CE Unterbereg Towbin for $31.7m. In just four months, headcount fell by 100 to 700.
He also worked hard at integrating Hawkpoint, the mergers and acquisitions advisory business bought for £150m in 2006 – in fact, the firm’s name will soon be changed to Collins Stewart Hawkpoint.
The stockbroker says: “Overall we had to shrink the business by 15 per cent. Now the firm is located in Europe and the US, with a small unit in Singapore, which is well run and gives us an outlet in Asia.”
As a result of Brown’s swift action, the business swung back to a pre-tax profit of £18.4m in 2009.
When it posted its full-year figures earlier this month, pre-tax profit stood at £19m, thanks to the rebound of its US securities unit. Sales rose 16 per cent to £216m.
This is still below the £234m of sales the business made in the 2007 peak, but the group is back up to 800 staff again and Brown says he expects headcount to grow.
The business is split into four areas. Although Collins Stewart is known as a stockbroker, its most profitable unit is its wealth management division, which accounts for half of its operating profit.
Brown says: “This is a strong area for us because it brings in regular fees every year. It is the only area where we have bought something in the last 12 months.”
The unit plans to manage £10bn by 2012, and to that end it made two bolt on acquisitions last year. It snapped up rivals Corazon Capital – which has £382m under management – for £7m in cash and shares and Anderson Charnley – which manages £900m – for £5m. Collins Stewart’s wealth management unit currently manages £7.6bn.
The group’s other three units – trading and researching securities, Hawkpoint and corporate broking – roughly contribute equally to the rest of the firm’s profit.
However, Brown says his focus has been on corporate broking recently. “We have put a lot of investment here and hired some senior people because we think we can win more mid-cap corporate broking accounts.”
Brown believes the turmoil of the credit crunch has opened up a lot of space in this area over the last 18 months. He says Landsbanki’s Teather & Greenwood and Kaupthing’s Singer & Friedlander have gone, JP Morgan has cut staff in this area, and “no one quite knows what Hoare Govett under RBS [Royal Bank of Scotland] are up to.”
He estimates this leaves the field open to three big players in the market: Investec, Numis and Collins Stewart.
Like most listed companies, mid cap businesses have spent the last two years cutting costs and putting off investment. But Brown says things were “beginning to thaw towards the end of last year”.
“A lot of companies have cash on their balance sheet and I think we will see more spending this year.”
The stockbroker works on the assumption that one in seven of the 70 or so firms it has on its books will mount a big corporate action each year, which it will be able to help raise cash for. This rate of business will keep its broking unit profitable.
The firm’s fortunes look better than they were three years ago, when the beleaguered stockbroker was linked to a sale to Nomura. However, the Japanese investment bank later went on to bag a bigger prize when it picked up Lehman Brothers’ European assets.
Brown, who arrived after the Nomura bid talk, says that the firm is no longer looking for a buyer.
The business is also coping without the presence of City veteran Terry Smith who joined Collins Stewart in 1992 and spent 18 years at the firm. He was chief executive from 1996 to 2006 and its chairman from 2006 to 2010; during his tenure, the firm grew to become a powerhouse stockbroker. Smith left the business in December to set up a new fund management business, Fundsmith.
But Brown says that the iconic stockbroker has not become a stranger to the firm.
He says: “If there is something I need advice over, I can always give Terry a call.”
Brown adds: “If he had been running the business, it would not have got into the mess it did. But Terry was very helpful when I first came into the business.”
Although Brown is more optimistic about the future of Collins?Stewart he thinks there is some way to go.
“We are through the worst, but it will be a long, hard road ahead, of around three to five years. I believe we will prevail this year, but I expect every day to be a battle.”
In 2011 he will keep an eye on inflation and a possible second round of the Eurozone sovereign debt crisis, which may slow corporate spending.
But he won’t lose much sleep. “I don’t worry about things I can’t do anything about,” he says. “As they say in rugby, play what’s in front of you.”
Brown has done the dirty part of the job, cutting back staff and operations. Now he believes the firm is fit to compete against its rivals and to raise cash for growing companies across Britain. His shareholders will hope he is right.
CV | MARK BROWN
Work: Joined the CBI as an economist; economist at the Treasury; UBS/Philips and Drew and a market strategist in 1987; head of research at HSBC; variety of roles at ABN Amro, leaving as chief executive of equities; chief executive of Arbuthnot Securities from 2004 to 2008; since then, chief executive of Collins Stewart
Education: Loughborough University, read economics
Lives: Flat in Putney and a house in Somerset
Hobbies: Watches a lot of rugby, has a box at Harlequins. Skiing. Gardening: “I like to spend my Sundays there.”