In the Hotseat by Miles Nolan

In the first of a series of articles, Miles Nolan will be pacing the City streets to interview the head honchos of a range of broking firms. The first is Simon Melling, chief of Cenkos Securities

The clock has barely struck 9am and I am greeted by Simon Melling in a meeting room at his plush offices just behind Moorgate. A busy day lies ahead for the down-to-earth boss of one of London’s fastest-growing brokers – now with 102 clients it ranks in the top three according to Hemscott.

It’s been an interesting journey for 50-year-old Melling, who originally trained as an accountant at Peat, Marwick, Mitchell & Co, the forerunner to KPMG. After a three-year stint he moved to one of the firm’s clients, Singer & Friedlander, where he eventually became director of group financial services.

The role involved acquiring a controlling interest in Scandinavia-based investment banking operation Carnegie for £45 million, a move that ended in its flotation in Stockholm and a useful £200 million coming back to Singer.
The founders of Collins Stewart also came into Singer for help and it was this introduction to Andy Stewart that helped pave his future. Singer provided seed capital and in 2000 an MBO took place with a successful float later that year valuing Collins Stewart at £250 million – again yielding a substantial windfall for Singer.
He left to join Collins Stewart in 2001 and ended up being head of its private client broking arm.

Steadying the ship
Four years later, seeking a fresh challenge, Melling joined Capital Accumulation, owner of Moneywise and the private investor website www.iii.co.uk. The company was losing money so, in his role as finance director, he steadied the ship until he received a call from John Hodson, his old boss at Singer, who was then the chairman of Cenkos Securities.

A lunch was arranged and he quickly joined as COO and finance director in 2006, stepping up to CEO in 2009. Founded by Andy Stewart in 2005 and named after one of his more successful racehorses, Cenkos has been a huge success. One of its original co-investors was Paul Roy, a successful broker and co-founder of fund manager NewSmith Capital Partners.

Shortly after Melling arrived he was tasked with floating the firm on AIM, whereupon £15 million worth of NewSmith shares were placed with institutions. Now with 130 staff, the firm spans corporate finance, broking, research, market-making and fund management. He argues that the success has been driven by ‘sticking to its chosen market’ and nurturing ‘deep’ relationships with its clients.

Last year the firm raised over £1.3 billion for its clients, with the Anthony Bolton-managed Fidelity China Special Situations Fund raising almost half of this. Cenkos is a ‘distribution machine’ that has always been picky about the clients it takes on. It has offices in Edinburgh and Guernsey and it has a 50 per cent-owned fund management operation.

Retainer base
The group has a chunky annual retainer base of around £4 million so this almost pays its underlying cost base. He remains flabbergasted at the huge number of brokers serving the London market but has made no secret of his desire to expand. The broking world is a people business so as egos collide this can get in the way of deals. Cenkos did talk to Arden but rumoured talks with Fairfax never took place.

As Melling argues, ‘goodwill walks’, so he is more likely to attract individuals who ‘want to work’ for Cenkos. The original broking team that joined from Evolution has proved a big success, for example, and future expansion will either be ‘more of the same’ or perhaps a new leg to the business.

The outlook is positive, with the pipeline ‘pretty good’, both in terms of potential IPOs and secondary fundraisings. When not working he spends time at his second home in Normandy or with his three children. His interests include the arts, ballet and the works of quirky ceramics specialist Grayson Perry.