Hits: 9

S & U – FY Results 

Share Price 1767p

Mkt Cap £212m

Disclosure: No holding

  • Results PBT up 15% to £34.6m (FY17 £30.2m) EPS up 14% to 233.2p. (FY17 203.8p). DPS up 13% to 51p. Receivables grew 6% to £277m with modest gearing of 65%. The motor loan book is £259m , which is 93% of the loan book where risk adjusted margin fell from 26.7% to 24.6% due to higher impairments while the bridging business produced an inaugural profit of £838k (2017 £298k loss). The impairment charge in the motor book was £8.9% of the period end book (2017 7.7%). Outlook is realistic but optimistic
  • Estimates Results look a little ahead of the estimates with a 219p EPS consensus against 233p delivered.  The 2019 EPS estimates was for 233p so there is room to increase this going forward.
  • Valuation PER is 7.1X, yield 7%. ROE is 16% while the shares trade at 1.3X book value
  • Conclusion The shares have been cheap fore a while as the markets are waiting for the used car loan book to suffer impairments. They are ticking up.  As used car markets lag new by 2 years there may be another 6 months before we reach the point of maximum fear. The cheapness is tempting but I sense self discipline may be required.

Personal Group – FY Results

Share Price 337p

Mkt Cap £105m

Disclosure : I hold

  • Results Revenue up 22% to £55.3m (FY 17 A £45.2m). EBITDA up 5.8% to £11.4m (FY 17 £10.8m). PBT up 7.4% to £10.2m (FY 17 £9.5m) and EPS up 1.1% to 27.2p (FY 17 26.9p). Dividend up 1.3% to 23p . Net cash is £17.7m. Outlook is “well placed”. Divisionally the insurance business increased its EBITDA to £9,8m which is a 38% EBITDA return on net assets which accounts for 85% of EBITDA. Salary Sacrifice made a £1.2m EBITDA contribution (2017 £288k) and Saas contributed £196k (FY 17 £344k)
  • Estimates Revenue is a little behind the £59m hose broker estimate at £55m, but the EBITDA is in line and PBT is a little shy of the £10.6m estimate. Going forward estimates look for £10.4m PBT which is flat on 2017
  • Valuation PER 12.7X yield 6.9%. The dividend uses an 80% payout ratio
  • Conclusion The shares have fallen 40% since October aided by a downgrade on GDPR delays and supply chain rationalisation that didn’t go well. I am attracted to this by the very high returns the insurance business makes together with the unique disatribution network the company owns. If they can monetise this the company could develop from a mutt into a swan. But that will depend on the new CEO strategy who I will meet at the analyst meeting today.

JTC – Acquisition

Share Price 299p

Mkt Cap £332m

Disclosure – No holding

  • Results JTC acquires the Luxemburg based corporate and private wealth service provider Exequtive Partners for up to Euro 34m on an earn out. Last year EP made a profit of Euro 61k and EBITDA of Euro2.5m. 
  • Estimates The transaction is expected to be immediately earnings enhancing. Initial consideration is Euro 25m which is 10X EBITDA paid 72% in cash. This should add 11% to earnings while new shares initially issued are 2.7% of the market cap so the transaction look c 5-8% earnings accretive.
  • Valuation PER 13.8X and yield 1.8%
  • Conclusion Personally I am a little cycnical that organic growth is being manufactured through cross selling to acquisitions as the underlying market is not a growth market. Net debt is c £17m so they can keep the acquisition machine going for a while so the shares look good short term but at some point………………

STM – FY Results

Share Price 46.5p

Mkt Cap £27.4m

Disclosure No holding

  • Results For a £27m market cap the adjustments to revenue and PBt will make this not worth the effort for many. However flat revenues and profits mask modest underlying revenue growth to £20.5m and underlying PBT growth to £3.7m (FY17 £3.2m) delivering an improvement in margins to 18%. Net cash is £15.6m providing scope for further acquisitions and the dividend is up from 1.2p to 1.3p.  The outlook statement refers to opportunities for well funded operators and product development.
  • Estimates Results look in line. Going forward an 11% increase in earnings is expected
  • Valuation PER 8.6 yield 5.4%
  • Conclusion I believe the 3 year strategy is very exciting with opportunities for consolidation as well as geographical expansion. Just there isn’t much detail on that in today’s announcement.  I can’t see it getting traction short term but I suspect having had a period of investment in governance and with a growth strategy armed with a strong balance sheet the probabllity is in 3 years time we will wonder why we didn’t buy it 3 years ago.

jeremy@charltonillingworth.co.uk