Durlacher restructures with write-offs

Niche investment specialist and securities group, Durlacher is winding down its investment portfolio, following a £44.9 million full year loss. The group will return to its stock-broking roots with a restructuring of its broking and investment banking business.

The group will apply a substantial write-down to the base cost of the portfolio following a drop in turnover of 50% to £12.7 million for the year. The write-off of specific investments amounts to £17.1 million. This includes ventures such as Wapit and Wowgo and legal software firm, Epoque who all went into receivership earlier this year. Further disposals have included Shopsmart which was acquired by Indigo Square; Talkcast Corporation which merged its wireless marketing applications division with Xtempus; and Webrewards, acquired by iPoints.

In his statement, Geoffrey Chamberlain, who will step down as CEO early next year, said: “This is more in recognition of the dire state of the secondary funding market for early stage technology companies at present rather than a reflection of any lack of progress achieved by a number or our investee companies in strengthening their business proposition.”

However, the group will not relinquish all its private equity activity and plans to build a private equity division around the firm’s existing unquoted portfolio. The pace of new investments will be driven by the speed of successful liquidations from the current portfolio.

A significant chunk of Durlacher Research’s time over the year was spent working on its portfolio to help add value to existing investments and assisting in any fundraising where appropriate. Finance director, Graham Chamberlain said that raising new funds for these companies has been very difficult, almost impossible. “We spent most of our time over the last 12 months fretting over investments and the focus now is on trying to get back to more conventional revenue streams.”

As far as the brokerage division is concerned, the firm has put in a more conventional management structure, says Chamberlain. “Hans Stocker was appointed as director of retail client services in July and we have strengthened that department with the elevation of a number of managers who have been appointed to director level. We have also taken aboard a number of other people with advisory experience,” he said.

There will be more of a focus on the integration of skills within the business. Before, says Chamberlain each division was working separately. Now teams will be collaborating rather than working in isolation on different projects. An example of this will be the new private equity division whereby the firm hopes to develop a new revenue stream from servicing private equity and venture capital organisations and building its own wealth management products.

Regarding the firm’s joint-venture with German venture capital firm bmp, Chamberlain says nothing has changed and the firms are continuing to work together. “We’re both in the same position. Each of us is trying to hold onto what cash we’ve got. We’re looking for opportunities, but it’s all gone a bit quiet at the moment.” bmp have also had to retrench and have significantly reduced their headcount in an effort to conserve cash – see evcj September, page 18.