Cashback on cards at trouble-hit Evolution

EVOLUTION Group is considering returning millions of pounds to shareholders in a move that would bring some much-needed relief after an annus horribilis for the stockbroker.

Despite a flurry of controversy, including a £500,000 fine imposed by the Financial Services Authority for market abuse, the broker said profits for 2004 would be in line with market expectations.

Chief executive Alex Snow pledged the company would look at ways of returning some of the £100m of cash it has on the balance sheet. 'We're carrying far too much capital and that is probably not in the best interest of shareholders,' he admitted.

Much of the cash pile resulted from its move in May to sell down its stake in patents company IP2IPO, generating £40.5m. Other asset sales and organic cashflow have built up the remainder.

The firm's advisers at Credit Suisse First Boston are examining the options, which include share buybacks and special dividends for investors.

Snow said it had been a tough year for the company, both in terms of the weak market and its own legion of problems. Evolution was criticised by fund managers for the dreadful performance of some companies it floated. A former analyst with the group was then fined £18,000 by the FSA for trading on inside information about a bid for Viz comic publisher I Feel Good.

Chairman Richard Griffiths faces a possible regulatory investigation into his own share trading of mobile phone company Incite. Snow said: 'We have made mistakes - we grew pretty quickly. But the proof of the pudding lies in what we have done about it. And we have done lots.'

Remedies have included a complete change of personnel and management in the trading division and the recruitment of a new head of risk to make sure such mistakes do not occur again.

Snow said the fact that profits will be in line with expectations despite all the troubles highlighted what a strong business it was.

The legal bill alone for dealing with the probe by the FSA and London Stock Exchange would have been enough to knock some brokers off course, he said. Snow would not divulge the amount the group has paid lawyers in the past year but said: 'Let's just say that 10 months' dealing with the FSA, the LSE and private shareholders is eye-wateringly expensive.'

Evolution Securities, the investment banking arm that specialises in smaller companies, had performed strongly last year thanks to transactions, including record fund-raisings. performed for corporate clients. But trading had been 'challenging' and would continue to be so in 2005.