Merchant House Group's (MHG) structured products arm, Merchant Capital Ltd, has reported sales of £1.3m compared to £0.9m for the same period last year and £2.9m for the whole of 2011, according to the group's H1 2012 results.
Despite a strong start in 2012, Merchant Capital's performance was affected when it was forced to look for a new custodian for its structured products division after the Financial Services Authority (FSA) took action over Pritchard Stockbrokers, which was put into administration.
"In the structured products division of Merchant Capital Limited, following a strong start to the year, sales slowed following the difficulties previously reported around the loss and subsequent replacement of our custodian," said MHG in a statement.
According to MHG, despite the UK retail business going through a particularly difficult period which "is likely to remain so in the short term," the group's offshore structured products business has provided "a continuing source of sales."
Merchant Capital's director of structured products, John Gracey (pictured) told SRP that he firm is focusing on deploying resources to cover the offshore market.
"A new sales team has recently been appointed and we are expecting it to contribute to more diversified sales as it settles into the business," he said.
MHG's H1 2012 report states that client assets held by the previous custodian have been transferred in full to its new custodian, Reyker Securities Plc.
"Whilst some client monies remain to be released by the special administrator of the previous custodian, it is understood that the Financial Services Compensation Scheme protections will mean that no clients affected by the special administration will incur a loss," it said.
MHG also reported that its asset management division has been through a difficult period as a consequence of the suspension of the group's shares, as well as weak stock markets caused largely by the uncertainty in Europe. MHG saw four Ucits funds liquidated in 2012 as redemptions resulted in uneconomic fund sizes.
The group's options trading platform, PYXMarkets, which was launched in the second quarter of 2012, is expected to accelerate the promotion of this business following an initial period of low trading volumes.
In addition, since the beginning of the year, the group's independent financial adviser business has been focusing "on the reduction of its monthly running costs and on reducing the number of low profit advisers." As a result, revenues have increased by approximately 22% when compared to the same period last year.
MHG also stated that as a consequence of the regulatory and capital requirements, sufficient funding may not be received in the short term and that its Board is exploring all available options, "which may include asset or business disposals, and there is also a risk of cancellation of trading on the AIM [alternative investment market]," it said.