James Hay’s parent company has warned that its profits will be hit by the costs of restructuring and a potential sanction by HM Revenue & Customs.
IFG Group has issued a statement to the London Stock Exchange to say it will be publishing its interim results next month.
It also explained that the level of exceptional costs the company faced in 2017 are expected to increase “materially”, which will hit its profits.
But it pointed out that its assets under administration grew to £29bn and it added more than 3,000 clients in the first half of 2017.
John Cotter, IFG Group chief executive, said: “It is pleasing that both businesses are strongly growing clients and assets, reflecting the quality propositions we offer to our clients.
“The pricing changes we have implemented will deliver growth in revenues in [the second half of the year], and the acceleration of the restructuring within James Hay reflects our confidence that the changes will deliver a more efficient, and more profitable, business going forward.
“We are focused on resolving the legacy issues within James Hay, which are distracting from the strong underlying performance of the businesses.”
IFG Group said it is incurring “material” legal and remediation costs in relation to legacy non-standard investments in which some of James Hay's clients invested, mainly a structured bio-fuels investment known as Elysian Fuels.
The company said it is locked in discussions with HMRC over a potential bill but any financial hit is unlikely to be resolved by the time its interim results are announced next month.
Elysian Fuels was sold as a scheme investing in renewable energy projects in the UK and the US, including in 2013 the launch of a bioethanol plant in Grimsby.
About £200m was invested in the scheme - which was marketed as suitable for experienced investors only, with a minimum investment of £50,000.
But investors face heavy losses all after Future Capital Partners (FCP), which sold and marketed the scheme, cut the value of the shares in the scheme from £1 each to zero.
FCP advertised in July 2013 as "targeting post-tax returns of ten times the initial investment over eight years".
James Hay has confirmed that its clients have invested a total of £55m in Elysian Fuels. Rowanmoor also confirmed it has some exposure, though would not confirm how much.
The firm received, in April 2017, assessment notices for sanction charges from HMRC for the tax years 2011 to 2012 and 2012 to 2013 in total for £1.8m in relation to Elysian investments.
The Sipp provider has appealed these charges and is in ongoing discussions with HMRC.
Meanwhile the IFG board agreed yesterday to accelerate the restructuring plan for James Hay to improve the “operational capability” of the business and reducing on-going costs.
damian.fantato@ft.com
