Middleweek dispute dents Collins Stewart

Terry Smith, the chief executive of Collins Stewart Tullett, yesterday reported profits at the stockbroker had more than doubled to £70m thanks to its acquisition of the bond trader and a revival in stock market flotations.

But it was a year that saw the company surrounded by controversy, and Mr Smith revealed that nearly £5m was knocked off the company's bottom line from its dispute with a former employee. The company is fighting an unfair dismissal action from James Middleweek, a former analyst at the company who has made a number of serious allegations about its conduct. Collins Stewart has so far spent £2.6m on litigation costs and has set aside another £2.3m for further legal bills. Mr Smith said "hell would freeze over" before he settled with Mr Middleweek.

The company is also one of a number that is embroiled in a dispute with the Financial Services Authority over split-capital investment trusts. The FSA wants 21 companies to subscribe to a collaborative scheme to compensate investors. Collins Stewart and 17 others believe the FSA has not produced evidence to support its allegations.

Despite these distractions, Collins Stewart reported that the acquisition of Tullett Liberty, the bond broker it bought for £251m in March 2003, had been a great success. It accounted for 91 per cent of the increase in its group turnover, which jumped to £474m from £96m in 2002.

"We bought a business that was already in good shape," Mr Smith said. "There is further potential for acquisitions in the inter-dealer broker market. We have the finances and do not have any competition concerns."

Turnover at Collins Stewart was up 33 per cent to £128m, a record result for the company, with operating profits on its stockbroking and corporate finance business of £44m, up 42 per cent on 2002.