Collins Stewart shrugs off scandal as profits rise

Terry Smith, the chief executive of Collins Stewart Tullett, yesterday came out fighting against the allegations of insider dealing and share ramping that have rocked his company, revealing a jump in first-half profits at the stockbroker, despite the scandal.

Mr Smith said the outlook for the company's prospects was "encouraging" and market conditions were "favourable" as he revealed that pre-profits shot up to £29m from £12m in the first six months of last year on the back of its acquisition of the bond dealer, Tullett Liberty.

He maintained Collins Stewart's innocence of any regulatory misconduct, saying that the allegations against it were "ill-founded". They have come from a former employee, James Middleweek, who is suing Collins Stewart for unfair and wrongful dismissal in a £3m claim. He alleges that he was castigated for blowing the whistle on misconduct at the company. Mr Smith said the claims were "made by an individual whose credibility and motivation are highly questionable".

Shares in Collins Stewart have fallen by more than a fifth since the row erupted last month. Mr Smith yesterday said there had been no damage done to the firm but his optimism did little to convince investors. Shares in Collins Stewart closed down yesterday 3.8 per cent to 385.5p.

More than half its profits came from inter-dealer broking, into which Collins Stewart expanded with the £213m acquisition of Tullett Liberty, a major inter-dealer broker, this year.

The acquisition is paying off, as Tullett made a strong contribution to the first-half figures. Turnover leapt to £196.1m from £50m this time last year, with £139.3m coming from Tullett revenues.

Collins Stewart yesterday said that inter-dealer broking had been such a success for the company that it planned to expand this business and had already spotted further investment opportunities.

Revenues from equity broking rose 13 per cent, despite what the company described as "weak markets". While markets have recently staged a recovery, Mr Smith did inject a note of caution saying that the company "remained concerned about the sustainability" of its bounce back. He also said he could not see stability returning to the bond markets in the short term, but said these conditions would be beneficial to its broking activities.

The company is now waiting to hear further from the Financial Services Authority, which was handed a report detailing Mr Middleweek's allegations of goings on at Collins Stewart.

The regulator last week said it was investigating the report as a matter of urgency and has asked for further material from the company.

Mr Smith reiterated that the company has been cleared by the law firm Clifford Chance, which investigated Mr Middleweek's claims and concluded that the "evidence did not substantiate the allegations". He also said he would help the FSA in their inquiry but has yet to hear from the regulator.