Smith New Court shoots ahead of forecasts to pounds 95m: Market-maker shrugs off turbulence

SMITH New Court confirmed its place as one of the City's most successful securities houses with profits way ahead of expectations at pounds 95.2m for the year to 29 April 1994, up from pounds 38.7m last time.

SNC shrugged off February's turbulence in the bond and equity markets, making pounds 64m in the second half against pounds 31m in the first. Analysts had predicted pounds 60m for the year.

The market-maker paid a final dividend of 8p, which with the interim of 2p raised the total 66 per cent over last year. Earnings per share rose from 34.3p to 70.2p. The shares put on 4p to 373p.

The balance sheet was strengthened as shareholders' funds almost doubled to pounds 212m, which included a pounds 47.7m rights issue last June. Return on capital rose to 48 per cent from 31 per cent last time, compared to an average of 23 per cent for the City's four other largest investment banks.

The balance in SNC's business has shifted since Big Bang in 1986, with income from international business increasing from 20 per cent in 1986 to 57 per cent. Then UK market-making contributed 96 per cent of income compared with 48 per cent today.

Sir Michael Richardson, chairman, said he expected both trends to continue, and that trading so far this year was satisfactory, although slightly better in international than in UK markets.

SNC would not reveal staff bonuses but Sir Michael said the firm paid at the top end of City rates, comparable to its rival SG Warburg. Senior staff receive up to 30 per cent of their bonuses in shares which are handed over after three years, as long as they are still with the firm.

Although there had been some poaching of staff last year, when Nomura snapped up SNC's banking and oils research teams, Sir Michael insisted that the firm's concentration on team spirit had been an important factor in its success.

Staff numbers grew by roughly a hundred over the year to 1,522 - compared with 509 in 1986. The increase included a new British convertibles team and another dozen staff for the derivatives business.

Sir Michael, a director of NM Rothschild, said there were no plans to alter the merchant bank's 20 per cent stake in Smith.