The road travelled by London-based Smith & Williamson (S&W) towards a London listing of its shares has been long and winding.
First proposed as long ago as 2002 and then subsequently postponed in 2008 as a consequence of the onset of global financial crisis the prospect of a listing appeared to assume a much greater priority following the breakdown of negotiations about a possible merger with Rathbones around a year ago.
A public listing could provide S&W with additional capital to finance future acquisitions to help grow the firm as well as making it easier for existing shareholders to exit the firm and monetise any gains they have made.
Looking at S&W’s latest annual report and accounts, which was published on 2 July, however, one gets the impression that the prospect of a listing may be receding, however.
S&W certainly reiterates its intention to list. But the intention appears to be very nuanced, at least according to Andrew Sykes’ chairman’s statement in the 2018 annual report and accounts.
“In order to place the group in the best position to execute our longer term growth strategy, and to provide a more robust and liquid market in our shares, we have already announced an intention to prepared for a potential stock market listing,” he says.
The next two sentences qualify this intention significantly, however.
“This will not take place until we have completed our major investment in new technology platforms, and these are unlikely to complete before the second half of 2019. Inevitably, there will be no absolute certainty (emphasis added) as to the time it will take to complete this programme.”
And Mr Sykes could have added that by the time the new technology platforms have been installed market conditions may not be conducive to a listing. In other words it could be 2008 all over again.
But then does S&W really need to list?
Granted the current situation makes it difficult for existing shareholders, such as AGF Management, the Canadian financial conglomerate that is S&W’s largest shareholder, to realise their investments.
And it does limit S&W’s access to external capital which means that the firm can only realistically consider small acquisitions should it wish to become an industry consolidator.
Nonetheless, these constraints do not appear to have adversely affected S&W’s ability to grow or initiate the latest iteration of its growth strategy.
Take the progress achieved during the current decade, for example.
S&W has grown group operating income from the £167.7 million recorded in 2010 to £266.7 million for the year to 30 April 2018, a compound annual growth rate of 5.29 percent, or 5.05 percent in the case of its investment management and banking division.
Assets under management and advisement have grown from the £10.5 billion reported in 2010 to £20.1 billion, a compound annual growth rate of 7.49 percent.
Both metrics at the very least match and probably exceed industry peers on the basis of Compeer data.
The firm has also performed over the past five years well as far as an extensive range of key performance indicators (KPIs) covering profitability and growth, staff numbers and costs, shareholder returns and capital and liquidity management are concerned.
The dividend paid to shareholders increased by 38.46 percent from 2014 to 2018, an annual compound growth rate of 6.72 percent, for example.
Of course it could be argued that securing a listing will enable KPI results to improve even further.
Unfortunately, however, although S&W devotes considerable space to describing its “three pillar” growth strategy (“developing our people”, “working in unison” and “enhancing our technology”), it doesn’t translate this into specific KPI targets.
So the sort of growth envisaged and the margins, revenue and profit growth, much less returns on capital in a post-listing remain unknown.
Nonetheless, there is an irony of sorts here insofar as the firm intends to fulfil part of its strategy - the replacement of its core technologies - before embarking on the listing process.