For the second week St James Place takes a grilling from the Sunday Times. Last week was forged signatures. This week was high pressure sales tactics. Obvs there’s nothing to see here. And there was the usual article about Hargreaves Lansdown bonuses. St James is 11% down from its April High while Hargreaves is 17% down from its May high.

Quilter – H1 Results & Sale of Life Business  

Share Price 140p

Mkt Cap £2663m

Conflict Disclosure: No Holding

  • Results & Sale. Quilter reports 5% growth in PBT to £115m and the sale of the Life business for £425m cash to ReAssure.8.3%. The life business reported £26m operating profit within the £115m PBT. That is 4.1p EPS excluding the life business which is flat year on year. AUMA is up 8% over the 6 month period. Modest net inflows are reported over the period although Q2 suffered an outflow.
  • Estimates Pre tax profit was expected to be £226m for the full year of which more than 50% was delivered in H1 so after stripping out the life business the underlying wealth and platform business may have scope for upgrades.
  • Valuation Underlying H1 EPS was 4.1p If we simply doubled this the business would be on a rating of 17X but it also has £425m cash of which some will come back to shareholders dependent on capital requirements of the business. The company reports a solvency 2 capital ratio of 180% and holding company cash of £374m. If we assumed that £350m came back to shareholders the PER would reduce to 14.8X. The underlying dividend yield would be 4.5%.
  • Conclusion When the strategic review was announced on 4 July the sgares were 145p and I had guessed at a value of £600m for the life business which turned out to be £425m. I came to a SOTP of £3.6bn but that was assuming that the platforms business would be rerated towards the valuations of other platforms. If that happens perhaps a £3.4bn (178p) share price may be achievable. But head office costs were £17m in 6 months. The real upside would come from reducing this now the business is simplified. The group has an “optimisation” programme delivering cost reduction but with a 26% operating margin I suspect the optimisation programme should be directed to head office.

jeremy@charltonillingworth.co.uk