Collins Stewart to return £300m to shareholders

Collins Stewart Tullett shareholders were told yesterday to expect the return of £300m in March, three months after its stock broking business is finally spun off.

The group is to be split into two to avoid the need for its Tullett Prebon inter-dealer brokerage to sit on £300m under new capital-adequacy requirements in force from January.

Terry Smith, the chief executive of Collins Stewart Tullett, said splitting up the group should also make the two halves more valuable and bolster staff morale. He said: "There's never been any synergies between the businesses. If anything, keeping the two together has given what people call a conglomerate discount on our rating. And there's the psychological benefit of incentivising people in a smaller business rather than a bigger group."

Mr Smith will continue as chief executive of Tullett Prebon, the second-biggest broker of trades between banks behind Michael Spencer's Icap, and become chairman of the Collins Stewart stockbroking business. Joel Plasco, chief operating officer at Tullett Prebon, will take the helm of Collins Stewart.

The return of capital will deliver Mr Smith about £13m. He will keep his 4.15 per cent holdings in Collins Stewart and Tullett Prebon.

Details of the planned split accompanied news that the group's profits were greater in the first six months of this year than in the whole of 2005. At £102.7m, profits before tax were £62.8m higher in at the same time last year, allowing for the interim dividend to be lifted by 67 per cent to 5p per Collins Stewart Tullett share. The shares rose 41p to 824.5p yesterday, valuing the group at £1.7bn.

The surge in profits was driven by a surprisingly strong performance by the Collins Stewart broking business, which made operating profits of £32.5m, £11.9m more than in 2005.

"The market was ludicrously strong in the first half," Mr Smith said. "You could float anything, and brokers did. Collins Stewart will obviously find the new issue market more difficult in the second half. But we are talking more difficult rather than anything worse than that."

Mr Smith plans to spend $100m (£53m) next year on further expansion in the US and India. "The biggest challenge is electronic broking. We're building it from scratch and we're quite proud that we are doing that organically from within these results."