Operating income for the total business increased by 9.0% to £266.7m (2017: £244.6m) and adjusted operating profit by 13.8% to £46.2m (2017: £40.6m). Tax and business services reported 8.9% growth to £119m, up from £109m in 2018, with significant growth in tax at 12% year on year, forensic accounting up 17% and corporate finance up 22%.

Funds under management and advice increased by 6.9% year-on-year to £20.1bn (FY 2017: £18.8bn); while funds under administration increased by 27.2% year-on-year to £11.7bn (FY 2017: £9.2bn).

The group has an ambitious five-year client-focused growth strategy which it is supporting with investment in new IT systems, continued commitment to attracting, retaining and developing high quality people, and integrated delivery of the group’s comprehensive range of client services.

Expansion plans

In terms of future growth, Smith & Williamson will continue to target potential firms for acquisition and has a strong balance sheet with net cash of £180m across the business.

‘We’ve always grown the business by growing organically, but we need to be more strategic than we were in the past. We need to consider opportunities in a consolidating environment,’ said David Cobb, co-chief executive of Smith & Williamson.

The firm is going ahead with plans to list with a view to providing finance for a larger acquisition which may need additional capital funding.

‘Part of the principal driver behind an IPO is to potentially have access to finance to handle acquisitions in the future,’ Cobb said.

‘The decision has been made to make all the preparatory work for an IPO, but this will be unlikely to complete before the second half of 2019.’

Performance

Kevin Stopps, co-chief executive of Smith & Williamson, said: ‘The key point is that it is a robust performance across all parts of our business and it is very rare that you get all of the business firing across all cylinders at the same time. We’ve reported as two divisions and broadly we have seen the same growth across the two businesses, fund management is up 9.3% and tax and business services has grown its revenue by 8.9%. It is nice to see both divisions growing at the same growth rate.’

The firm has a strong client base in private owner managed businesses and does not operate particularly in the FTSE listed market, unlike the majority of top 10 accounting firms.

While the firm is still actively looking for acquisitions and almost merged with another firm in 2017, growth has been primarily organic, hiring top talent from larger firms, particularly the Big Four.

‘We have invested across the piece, we have been able to attract high quality individuals from the Big Four and we have recruited direct partner hires. Our business is about driving long-term relationships with our clients. That is what differentiates us from many other firms,’ said Stopps. ‘We are not an audit led firm; that is how we differentiate ourselves from the other firms. Our focus is on owner managed businesses.’

Tax was up 12% primarily from the owner managed side of the business, as the firm has not particularly benefited from the spin-off from non-audit services as a result of the regulatory-led cap on audit business.

Explaining the 22% growth in forensic accounting year on year, he said: ‘I’m a great believer in momentum. We’ve been involved in some substantial projects and this has given us access to further work.’

He added: ‘This was another year of solid progress for the group. We delivered increased profitability, while also continuing to make material investments in our people and technology to support our future success.’

Brexit

With less than nine months until the March 2019 deadline for Brexit withdrawal, the firm is also aware of the potential risks for clients, although feels that it is somewhat protected due to the nature of its client base, the majority of whom have strong UK business interests, while the international clients tend to be using the firm primarily to manage their specific UK business interests. Smith & Williamson also has a subsidiary and a couple businesses, including a tax and accounting firm in Ireland, as well as a presence in Jersey. Post Brexit,

In terms of total clients, around 5% require EU passporting. Cobb said: ‘We are confident we can negotiate Brexit but we do need a transition deal. A hard Brexit would be boring.’  

Last summer, Smith & Williamson held discussions with Rathbone Brothers plc regarding a possible merger of the two companies, but the talks were terminated as the two parties were unable to reach an agreement that was in the best interests of both parties. In the 2018 annual report, Andrew Sykes, chairman of Smith & Williamson said: ‘We remain committed to our growth path as a strong independent firm.’

Smith & Williamson group’s Annual Report and Accounts

Report by Sara White