Ann: Trading Update and Interim Dividend, page-4

https://thewest.com.au/business/mar...rtleys-to-modest-first-half-profit-c-13394527


Rinehart buying helps Euroz Hartleys to ‘modest’ first half profit

Sean SmithThe West Australian
Mon, 29 January 2024 2:38PM



Credit: Ross Swanborough/The West Australian, Tim Bunney Managing Director and Andrew McKenzie Executive Chairman from Stockbrokers Euroz Hartleys inside their new offices in Perth.

Share buying for Gina Rinehart has helped Euroz Hartleys offset the weak dealmaking that has held the listed stockbroker and corporate adviser to a small interim profit.

The WA group on Monday flagged net earnings of about $1 million for the six months to December 31, down 66 per cent for the same period a year ago, as core revenue from its equity capital market arm fell a further 26 per cent.

Nonetheless, Euroz will still pay a dividend, albeit reduced from a fully franked 2.5¢ to 1.75¢ a share.

Brokers and investment banks are battling a slump in transactions across initial public offerings, takeovers and equity raisings that has savaged their most profitable income.

With a client base that is heavily exposed to the mining cycle, Euroz is reliant on raisings and deal-making by WA’s mainly resources mid-tier companies.

However, while it has raised money for the likes of Genesis Minerals, Imdex, Burgundy Diamond Mines, Patriot Battery Minerals and SRG over the past 12 months, demand for exploration and development cash has fallen off sharply over the past two years amid patchy equity markets and weaker commodity prices.

The bright spot in the December half-year was in share broking, where its revenue was up 26 per cent “on the back of strong block trading activity” - a chunk of it related to Mrs Rinehart’s plunge into WA’s lithium sector.

The broker bought up to $1 billion of stock in takeover targets Azure Minerals and Liontown Resources for Mrs Rinehart’s Hancock Prospecting in late-2023, helping the billionaire build key stakes in the companies as part of an undisclosed strategy in WA battery metals.

“Our trading revenues are a leading indicator for the underlying health of our business and your directors are pleased to see this improvement,” the firm told investors in Monday’s trading update.

It said “the past two years of subdued markets, low trading and equity capital market volumes had had a significant short-term effect” on the broking and investment banking sectors.

However, Euroz added that it had been able to “maintain modest profitability and improve our market position during these quieter markets”.

After finalising its merger with Perth rival Hartleys nearly 3½ years ago, Euroz announced participation in a record $918m of deals for the 2020 December half-year. That had shrunk to $667m for the 2022 period and was down to $497m for the same time last year.

The company on Monday said there were good signs for a recovery in 2024, with its pipeline looking “somewhat more promising”.

Executive chairman Andrew McKenzie is confident of a pick-up in demand for cash as companies seek to replenish their coffers,

The update came after Euroz shares closed 3¢ higher at 89.5¢.