PIS parent's $21 million loss
Professional Investment Holdings (PIH), the parent company of Professional Investment Services (PIS), recorded a loss of more than $21 million in the 2008-09 financial year.
The group’s latest financial results reveal the extent to which the company suffered during the financial crisis and the extent to which it remains vulnerable to further shocks.
In his report to shareholders, PIH chairman Stephen Murphy pointed to the $20.3 million reduction in net financial advice revenue as a direct consequence of the financial crisis. He also acknowledged a “small number of rogue advisers” had necessitated a “significant provision for client claims”.
In November last year the group paid more than $5 million to compensate Westpoint investors. The group also paid $26 million in compensation to clients it advised to invest in a Sydney property syndicate — owned by a PIH subsidiary — which failed to perform.
Parramatta Site Developments, a company wholly owned by PIH, acquired the Sydney shopping centre site in September 2008 — an investment that was impaired in last year’s books by more than $10 million.
The group remains vulnerable to shocks — particularly any unexpected recall of debt facilities in the next 12 months or any further significant client claims or litigious events.
Regulatory interest in the group continues, with the Australian Securities and Investments Commission commencing a new review of the dealer group last financial year, including an examination of Great Southern and Timbercorp files.
The report states PIS potentially breached a condition of its licence last financial year, a matter the dealer group is discussing with the regulator.
PIH also breached a covenant in relation to a $11.9 million loan facility that supports its managed investment scheme (MIS) loans. A repayment deadline of September 2009 was renegotiated to November 2011, but $3.9 million of that must be paid before the end of October. The group expects this will be funded through $3.4 million of loans repaid by its MIS investors, while a PIH subsidiary company will stump up the remaining $500,000.
Murphy said no PIH company has an obligation to discharge a loan in full in the next 12 months, while the group had also recognised and provided for any other claims.
Murphy said the group’s directors “are of the opinion that the company will maintain itself as a going concern”
Five non-executive directors of PIH resigned last financial year, namely Anthony Mulligan, Stephen Trist, Benjamin Weinglass, Elizabeth Flynn and Grant Salmon.
Cash flow management saw staff and executives take pay cuts and many staff accept nine-day fortnights, Murphy said.
The group sold its Canadian advice business for CDN$2.85 million, scaled back its Chinese operations to one full-time employee and kept its Hong Kong operations to a minimum. The advice businesses in Singapore, New Zealand and Malaysia continue to create value, the group said.
PIS chief executive Robbie Bennetts received a total salary package of $684,000 last financial year, compared to $866,00 in the prior year, while managing director Grahame Evans received a package of $642,000 revised up from $565,000.
For more on the outlook for PIS in 2010 see this week's edition of Money Management.
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