LDC pumps £12.6m into PTFS as profit falls 65%

Personal Touch Financial Services’ main shareholder, Lloyds Banking Group’s private equity arm LDC, injected £12.6m into the network last year, as the network suffered a 65 per cent drop in profit.

Speaking to Mortgage Strategy, PTFS chief executive Max Wright says the £12.6m will be used to invest in technology, particularly Toolbox, its back-office administration system. The cash injection meant the network had cash reserves of £16.2m at the end of December, up from £2.3m a year earlier.

He says: “When I came in in 2012 I talked to LDC about where we wanted to take the business and what the strategy was that we wanted to deploy. What we agreed was that we wanted to do was make sure the business was well capitalised so that it could deploy that strategy and take advantage of things we thought that we going to happen in the next three to five years.

“It was all about making sure we were well structured and make sure we could take advantage of things in the future. It was a strategic investment and nothing more than that.”

Despite the cash injection, the network’s accounts, published today, show profit fell 65 per cent in 2012. It posted a pre-tax profit of £399,431 for the year ending 31 December 2012, compared with a £1.1m profit the year before. However, turnover grew from £56.1m to £64.9m over the same period.

PTFS chief executive Max Wright says profits fell as the network was making internal investments in preparation for the Retail Distribution Review and the Mortgage Market Review, which will come into effect on 26 April this year.

He says: “If you think about 2012, we had the run up to RDR and we were investing in making sure we had all of the pensions guys ready for that and also making sure we have made the changes for MMR. So it was about internal investment and the fact we managed to post a small profit in that environment was very encouraging.

“We were spending what we were making to make sure we were offering the right service for the member and the customer.”

During 2012, PTFS undertook a review of the company’s strategy and it publicly stated it was looking to shed “dabblers”, meaning advisers who are not writing much business.

As a result of the restructure, appointed representative numbers fell 21 per cent from 733 at the end of 2011 to 576 at the end of 2012. The number of registered individuals within the network fell from 1,492 to 1,161 over the same period.

While AR and RI numbers fell, the annual average “productivity” of advisers increased from £38,000 in 2011 to £44,000 in 2012.

However, Wright says he is more interested in “the productivity of the members and not in the numbers of members”.

PTFS had £10.7m set aside for liabilities at the end of 2012. This is broken down as £9.5m as a clawback provision, £630,768 to deal with complaints and £618,688 for lease provisions. At the end of 2011, the provisions balance stood at £9.6m.