Acquisition Mondays

  • Equiniti acquires Denver based Corporate Stock Transfer Inc.  No price is disclosed and no financial details on the target but the company tells us it is very compelling.
  • AFH acquires Groom Associates in Warwickshire for £321k cash up front and up to £294k in deferred consideration. On 30 September the company said it was to focus on organic growth, so this is a surprise.
  • Knights Group acquires Emms Gilmore Liberson in Birmingham, for £4.7m of which £3.03m is payable up front which represents 1.18X turnover and 7.8X PBT. Following synergies a margin uplift from 15% to 20% is expected. This looks to be c 5% earnings enhancing. Knights trades at 3.4X turnover which translates to a PER of 19.8X.

Other News

  • DFC Holdings Plc, which demerged from Trufin as it was applying for a bank license announces the CEO has left following an investigation into his personal conduct. The company continues to trade well with gross new lending above £50m in September but this is likely to delay the bank license.

River & Mercantile – Q1 Update

Share price 250p

Mkt cap £213m

Conflict Disclosure: No Holding

  • Update AUM up 5% to £41.7bn with net inflows of 3% in the quarter to September. The AUM increase target for the year is 12% so 40% of this has been achieved in Q1. Performance revenues in Q1 are estimated at £0.5m. The pipeline is strong.  No update is provided on the advisory business but at the results two weeks ago the company believed it was set to benefit from investment into new offices and headcount.
  • Estimates Forecasts are showing flat revenues in the current year but strong PBT growth after a year of investment.  Given AUM grew strongly in H2 to June 2019 this looks too low.
  • Valuation The PER is 13.9X and yield 6%
  • Conclusion  Companies that are emerging from a period of investment frequently seem to perform well in my view as markets don’t look through the profit impact of investment. With a new board, new structures, new board members and new offices as well as the large number of mandate pitches available as a result of the CMA review it is possible that in two year’s the market may mistake this for a growth stock.

jeremy@charltonillingworth.co.uk