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March 18, 2010

Collins Stewart Looks to Rebound

By James Ramage

Setbacks might have sidetracked Collins Stewart's U.S brokerage arm, but they have not stopped it from expanding its presence.

John Abularrage

If anything, Collins Stewart's U.S. office has been on a hiring spree the past six months. The effort to beef up its cash equities business has yielded the addition of 10 new trading pros over the last half-year.

Company officials say the current group of 22 sales traders and six position traders in three offices--New York, Chicago and San Francisco--is positioned to overcome bumps in the road that have impeded it in the past.

After the disastrous acquisition of CE Unterberg Towbin in July 2007 and a management shakeup a year ago, chief executive for North America John Abularrage, thinks Collins Stewart is on the right track with new trading and research talent.

The firm has re-shaped its research coverage to focus on large caps, said Abularrage, who arrived to head the 13-year-old New York office in January of last year. He previously ran the firm's London equities desk.

"We're not an organization that is entering the U.S. lightly," Abularrage said. "We're a publicly listed London company with more than $100 million on the balance sheet, and no debt. We're going to be here a long time." The parent's market cap is about $285 million.

Don Dillon, the U.S. office's co-head of sales trading and trading, explained current strategy at Collins Stewart: "The firm was very much siloed in the past, in terms of one individual here covering one account. We need to have multiple touch points on sales trading and trading into the larger accounts, to make sure we're leveraging everything that we've built here."

Traders are currently generalists, even though their number has expanded to six from two, Dillon said. Down the road, the firm will take a look to see if moving to sector trading makes sense.

Collins Stewart declined to offer an estimate on how much business the revamped research and trading effort would deliver. The firm is currently in a "closed period" prior to the announcement of its preliminary 2009 results, scheduled for mid-March.

The most recent financial report shows that revenue from U.S. operations for the six-month period through June, 2009, was 25 million pounds. This compares to 22.1 million pounds through the first six months of 2008--a 13 percent gain. The company's 2009 interim report also showed that the U.S. group operated at a loss of 2.8 million pounds.

The U.S. group has seen growth in its number of clients, Dillon said, though he declined to elaborate. And its research has allowed for "significant" upward movement on broker lists at existing clients, he added.

Still, how a revamped Collins Stewart comes out on the revenue front will be seen when the latest financial report is released later this month, which will detail the firm's profitability for the second half of 2009.

 

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