NCB profits fall 93% as turmoil takes toll

PROFITS PLUNGED by 93 per cent at NCB last year, as financial market turmoil took its toll on the stockbroker.

Figures at the Companies Office show the firm, which is 25 per cent owned by Seán Quinn, posted pretax profits of €956,000 for the 12 months to the end of November 2008. This compared to profits of €13.5 million for the previous year, with revenues also falling dramatically.

In 2007, the firm had income of €58.7 million, but this tumbled by 34 per cent to €38.9 million in 2008. NCB chief executive Conor O’Kelly said the drop in profits and revenues was mainly attributable to the 66 per cent decline in the value of Irish shares last year.

The broker gains much of its income from commissions on share trades, and these commissions will automatically fall as share values decrease.

“It was horrific but it was in keeping with market values,” said Mr O’Kelly, adding that the speed of the market downturn meant the firm struggled to cut its costs to match income, which was falling to 2004 levels.

Over the past year, it has reduced staff numbers from 200 to 135. Remaining staff have been invited to voluntarily take a pay cut of up to 20 per cent and to win back the difference based on their performance.

The wage bill at NCB, which is 75 per cent owned by its employees, fell from €28.9 million to €22.5 million in 2008. Directors’ pay dropped from €3.6 million to €2 million, while overall operating costs fell by 12 per cent during the year.

Mr O’Kelly said this strategy has left costs more in line with revenue, helping the company to strengthen its financial position. The firm was debt-free at the end of 2008 and had cash of €23 million on its balance sheet.

Mr O’Kelly said doing business in the last quarter of 2008 and the first quarter of this year was akin to “standing on quicksand”. “It was an extremely scary time,” he said, characterising much of market sentiment since then as “survivor relief”.

He said that while business had been quite profitable within the past six months, the coming period would also be difficult.

“The challenges are immense, even if you’re optimistic,” said Mr O’Kelly. He expects, however, that NCB will return to its long-term profitability levels of between €6 and €10 million within a few years.

The accounts do not break down contributions between NCB’s different divisions but it is thought the firm’s corporate finance wing helped to offset pressures elsewhere.

The 2008 accounts include a dividend payment of €6 million but this relates to an intercompany transfer rather than a payout to shareholders, who did not receive a dividend last year. Shareholders’ funds amounted to €40 million at year end, down from €45 million 12 months previously.