Gerrard reaps rewards of getting out of gilts

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The Independent Online
A 138 per cent rise in earnings from derivatives broking and fund management helped to push profits at Gerrard & National, the financial group, ahead by pounds 4m to pounds 14.4m in the first half.

Brian Williamson, Gerrard's chairman, said the company's move out of gilts market making last April now looked 'inspired' because of the poor performance of that market.

But the move, coupled with buying the remaining third of its booming GNI Holdings derivatives operation, was more to do with a diversification of the group away from dealing profits in order to improve quality of earnings, he said.

Dealing profits this time fell by more than two-thirds to pounds 11.3m for the six months to 30 September 1994, and will decrease as a share of profits, Mr Williamson said. Gerrard's figures were slightly flattered by a two-month change in year end from 5 October.

Philip Gibbs, an analyst with BZW, said: 'It's a very impressive set of figures. They have avoided any major difficulties in the broker, and the improvement in the derivatives operation is little short of spectacular.'

Mr Gibbs added that Gerrard's successful withdrawal from gilts market making might prompt others to abandon this increasingly competitive area.

The interim dividend was increased from 6p to 8p. Mr Williamson stressed this was simply a rebalancing exercise between the first and second half dividends because Gerrard could now be more confident of quality of earnings in the second six months of each year. The total dividend is likely to grow by the usual 0.5p.

Star of the show was derivatives broking. Gerrards does not take big proprietorial positions in derivatives, where rival groups have made big losses this year.

Funds under management grew to dollars 274m from dollars 194m at the end of Jaunuary 1994. Mr Williamson said that the derivatives funds founded five years ago were growing well, and the Lloyds premium fund launched a year ago had grown from pounds 250m to pounds 450m.