Market discounts Tolhurst goodwill

The investment in InterFinancial, a small corporate advisory firm, "failed to meet expectations"  boutique investment bank Tolhurst Financial said yesterday. Tolhurst bought the firm in July 2008.

As a result, vendors of InterFinancial missed out on additional earn-out payments.

Tolhurst paid the vendors $9.6 million in cash and issued six million Tolhurst shares (worth about another $3 million) for the business, which generated $5.6 million in revenue and $574,000 profit for the group.

Tolhurst's corporate advisory arm overall reported a pre-tax loss of $632,000 for the year compared with a profit of $1.36 million in 2007.

Tolhurst is otherwise now buying financial planner dealer groups, which are responsible for most of the 21 per cent growth in revenue over the year.

The group reported a 56 per cent fall in net profit to $1.9 million in the year to June 2008, though management prefers to measure profit on the basis of "adjusted EBITDA" which increased 13 per cent to $8 million. Actual EBITDA increased six per cent to $7.3 million.

Tolhurst are now carrying $30 million in goodwill and another $13 million in valuation of trademarks in the balance sheet (and with only $8 million or so in tangible net assets).

The market capitalisation of the group is only $36 million.