Still-private Wellington West opens the books

Nearly two years before it plans to go public, Wellington West Holdings Inc. has released an annual report complete with all of its financials.

The unusual move for a still-private entity is part of what the Winnipeg-based firm’s CEO, Charlie Spiring, calls being “a public company in training.”

“We talk about transparency all the time. Not just employees and partners but we want the whole Street to know just how transparent we are,” Spiring says. “It’s a preamble to the IPO. We wanted to get our numbers out there and get in the practice of being a public company.”

Wellington West Holdings is the newly formed parent company of Wellington West Capital and its other subsidiaries.

Spiring says he’s “pretty proud” of some of the figures in the annual report. They include consolidated revenues for its fiscal 2006, which ended June 30, of $101.7 million, up from $57.7 million the year before. Its AUA was $7.0 billion for its 2006 year, up from $5.5 billion in fiscal 2005.

Earnings before interest, taxes, depreciation and amortization (EBITDA) were $19.7 million, up from $10.8 million the previous year, and its consolidated net earnings rose from $2.31 million to $5.38 million over the same period.

Spiring says the numbers have since improved and he’s expecting AUA to be between $9 billion and $10 billion at the end of March.

Paul Bates, dean of the DeGroote School of Business at McMaster University, says the practice of private companies making their financial information public is much more common in the U.S.

“The concern among some Canadian companies is you’re giving away the secret sauce to the competition. American firms say, ‘we’re happy to give it to you. You can’t use it and make money the same way we do.’ U.S. companies tend to really give all of the disclosure that you could possibly imagine. It’s an interesting cultural difference,” he says.

Bates calls the move “courageous” and predicts it will endear Wellington West to its shareholders.

“The company is saying, ‘we’re laying it all on the line. Here’s the way we make money and why you should invest in us,'” he says. “Wellington West is being very transparent about the process. I think that’s an up-to-the-minute way of doing business.”

Spiring says the company is also getting a lot of mileage from the annual report, in particular when it comes to recruiting top-producing advisors. He says a half-dozen have already crossed the street since January and another 11 or 12 have signed up with the company and are in transition.

“We’re having a great start to the year,” he says. “When you can talk about the success, growth rates, profits and corporate initiatives, all those things add up to a pretty good story.”

Bates says Canadian financial players now can dig down into the “guts” of Wellington West and try to figure it all out.

“It’s a simple business in that it’s easy to understand and they’re following an approach American firms would do automatically. They may also attract American investors,” he says.

Spiring says publicizing its financials also silenced those who doubted Wellington West’s success.

“It’s hard to argue with audited financial statements,” he says.

The Winnipeg office of national chartered accounting firm KPMG signed off on the report.

Another key step in being a public company in training is the election of an independent board. Of the five members, only Spiring and Nancy Shewfelt, a senior vice-president who’s based in White Rock, B.C., work for the company.

The others are Brian Hayward, CEO of Agricore United, the Winnipeg-based grain company that just announced merger plans with James Richardson International; Richard Kroft, a former senator; and Gary Filmon, former premier of Manitoba.

Renée Alexander is a Winnipeg-based freelance financial journalist.

(03/09/07)