Hits: 2


  • The same day as the FCA announced that insurance commissions on motor finance is not to be marked up by brokers two of the world’s largest insurance brokers Aon and Willis announced they were in talks only to declare they had dropped the talks a day later. Yesterday Wefox, the digital insurance broker providing CRM to its brokers and underwriters in order to harvest new business and providing AI to customers to determine the appropriate level of cover for customers raises $125m from a UAE based private equity investor. It seems the insurance broking world is now changing at an accelerating pace.

Funding Circle Holding Plc – Inaugural FY Results

Share Price 351p

Mkt Cap £1.21bn

  • Results The headlines read well with 55% revenue growth to £141m exceeding IPo guidance of 50%. Segment adjusted EBITDA of £7m is shown and a loss before tax of £50.7m while cash is £333m after the £300m of IPO proceeds. The outlook is strong with expectation of £200m of revenue in 2019. Marketing costs have been maintained at 41% of revenue.
  • Detail  The segment adjusted EBITDA is before £11m of central costs (up from £7.6m) because of the costs of being listed.  It is also before £24.5m of IT platform costs and £8.6m of share based payments.  And a further £11m of IT costs have been capitalised into intangible assets.  The loan loss provision stood at £2.5m which is 0.07% of the £3.15bn loan book
  • Valuation  6X 2019 revenue. The high margin (37%) lender Amigo Holdings trades at 5X revenue by way of comparison.
  • Conclusion  There is room to be sceptical about their creativity used in presenting numbers. The model of spending 41% of revenue in customer acquisition costs on the face of it seems doubtful although no where can I see the duration of the loan book. As this is SME lending it is likely to be relatively short duration which calls into question the wisdom of spending so much on marketing.  And the IT costs are also large while the loan loss provision looks low.  Well done funding circle management but it is beyond me.

Schroders – FY Results

Share Price 2785p

Mkt Cap £7.8bn

  • Results Net income up 3% to £2.1bn and normalised PBT down 5% to £761m while post exceptional PBT is down 15% to £650m. AUMA was down 6% to £421bn which is 2% net outflows and the balance from negative markets exchange rates etc. Dividend up 1% to 114p. Wealth Management net income grew 6% but this accounts for 13% of the business and asset management net income was up 2%. The outlook is “well positioned” and refers to headwinds facing the industry.
  • Estimates Forecasts assume flat revenues going forwards which looks conservative particularly in the lights of investments being made in Schroders Personal Wealth
  • Valuation PER 13.4X and yield 4.1%
  • Conclusion Schroders is investing into difficult markets. I suspect investors should do the same. I don’t recall Schroders trading as low as 13X.

Gresham House – FY Results

Share Price 446p

Mkt cap £111m

  • Results Such is the joy of small companies. AUM trebled over the year to £2.3bn. Revenue was up 125% to £14.5m and cash and liquid assets was £32.8m while there is also £10m of bank debt. A modest operating loss of £0.6m was achieved although there was also £2m of acquisition and restructuring costs which were exceptional. A 3p dividend was paid. Two acquisitions were made during the year of FIM Services and the assets of Livingbridge delivering £700k of synergies and the outlook statement refers to visibility of organic growth being identified for all platforms.
  • Estimates look for £22.3m revenue in the current year and £6.6m of PAT which is 27.9p EPS and a dividend of 4.8p
  • Valuation PER 16X  and yield 1%
  • Conclusion  Fund managers ride a lifecycle as the power of momentum is strong and effective. It looks like Gresham House is the new kid on the block with high margin specialist funds. While some fund managers trade at less than 16X this is a play on earnings rather than valuation and I suspect there is an exciting time ahead