Broking group Collins Stewart Tullett reported on Monday a surge in first half profits and said the planned demerger of its stockbroking business would completed by the end of the year.

However, Chief Executive Terry Smith told Reuters the second half was unlikely to be as strong for the group's stockbroking business.

The market's been a bit dull, he said, but added: We've got a good pipeline of deals for the second half.

Pretax profit in the first six months of the year rose to 102.7 million pounds from 39.9 million in the same period of 2005, driven by a strong performance from stockbroking.

Shares in Collins Stewart Tullett were up more than 2 percent at 800 pence by 07:31 GMT (8:31 British time).

Revenues in stockbroking were higher than expected, in the large cap and private client businesses, said analyst Geoff Miller at Bridgewell.

Miller said profit margins in the Tullett Prebon interdealer broking business were slightly better than expected and the demerger seemed to be on track.


Once the demerger is completed Collins Stewart will seek to return 300 million pounds to shareholders by March next year.

The return of cash depends on Collins Stewart obtaining a waiver from a capital adequacy test, which the firm said it had already received in principle from financial regulator the Financial Services Authority.

Smith said Tullett Prebon, the world's second biggest interdealer broker behind market leader ICAP , had continued to perform in line with expectations since the half year.

Smith, who will be chief executive of Tullett Prebon after the demerger, said the interdealer broker would look at bolt on acquisitions to expand its product range, including credit derivatives and energy.

He will become chairman of the demerged Collins Stewart, while Joel Plasco, who was chief operating officer of Tullett Prebon, will be chief executive of the stockbroker.

Shareholders, who will receive one share in Tullett Prebon and one in Collins Stewart, will receive details of the demerger by October 31.

The group increased revenue by 40.5 million pounds to 452.1 million pounds in the first half of the year, with Collins Stewart's stockbroking business accounting for 31.3 million of the increase.

Tullett Prebon's operating profit before exceptional items rose 13.7 million pounds to 62.5 million pounds, which the company said equated to an operating margin of 18 percent.

Tullett Prebon's interdealing broking business provides a marketplace where big banks trade bonds, derivatives and foreign exchange.

The rationale for the demerger is that the market could give a higher value to the two parts of the business if they are separately listed.