In a good summation of my career it seems the FTSE has now gone nowhere in 18 years. It closed at 6930 at the end of 1999 and the FTSE future is currently indicating an open of 6862. Of course this excludes dividends.

Boohoo got rumbled on watchdog last night for resetting the clock after adverts urged people that the offer ends at a fixed time. A statement out this morning reassures that they have taken the advertising standards authority guidance on board and the matter is closed. 

Monzo – Placing

Mkt Cap £1.02bn

  • Placing – This week Monzo raised £2m from its existing investors after launching its £20m crowd fund raise on Monday. Yesterday it opened the round on Crowdcube to its customers and raised the balance of £18m in just 2 hours 45 minutes.
  • Estimates – No
  • Valuation – Revenue in the year to February 2018 was £1.8m while the operating expenses of £35m resulted in a £33m loss.  So that’s a revenue multiple of 555X.  In the internet bubble we valued eyeballs when we couldn’t use financial metrics. Perhaps if we use current accounts as an eyeball equivalent the valuation is £1,000 per customer. That looks very reasonable against the valuation of Barclays 24m customers at £1,120 per customer
  • Conclusion If millennial customers are as valuable as Barclays customers this could be a unique opportunity. Or the millennials have just seized power from the fund managers. Sometimes I feel like I have travelled to a strange land where my plane has landed in a very pleasant field of opium poppies. So lets not worry about things like a bear market in equities.

M&A – Plenty

  • Global Risk Partners disclosed a rune rate of £35m EBITDA from £110m of insurance broking revenue having made 12 broking acquisitions this year thus increasing EBITDA 73%. Backed by Penta Capital
  • Qatar owned SEIB insurance brokers yesterday acquired the equine book of insurance business from Greenwood Morland Insurance Brokers for an undisclosed sum
  • M J Hudson acquired Amaces, a data analytics company in the Us for an undisclosed sum.

Impax Asset Management – FY Results 

Share Price 218p

Mkt Cap £284m 

  • Results The company reports AUM up 72% largely as a result of the US acquisition. Net inflows over the year to Sept 18 were 14% which were weighted towards the early part of the year with net inflows slowing post the acquisition of Pax. Revenue was up 101% to £65.7m and PBT up 150% to £14.6m delivering a 22% PBT margin. Adjusted EPS was 12.4p and the normalised DPS for the year was 4.1p. Since the period end AUM has declined to £12.2bn as a result of markets but inflows continue and performance is strong
  • Estimates At the period end the revenue run rate was £69m giving a revenue yield on the AUM of 56 bps. Forecasts to September 2019 assume £78m of revenue which will need better markets or strong inflows to achieve
  • Valuation Forward PER is 19.1X and yield 2.5%. EV/AUM is 2.3%. Cheap on an EV/AUM basis but because of the comparatively low operating margins the PER is high.
  • Conclusion The shares are up 311% over the last two years. Net inflows continue at a slower rate but with the shares looking expensive there may be cheaper stocks elsewhere in this market.

The market has now decided rates are not going high in the US as the long bond yield goes below 3% the 2-10 year spread is now the lowest in a decade which should help markets.  I can’t help but think how bearish the world is at the moment and suspect there could be an enjoyable post Brexit bounce in markets. The graph below is the 2-10 year US treasury spread.



  • AJ Bell deadline for IPO orders. Price range 154p-166p
  • Finncap shares start trading on the LSE. IPO price 28p

 Numis FY Results 

Share Price 277p

Mkt Cap £292m

  •  Results 5% revenue growth to £136m and following a 15% increase in the headcount a 17.4% reduction in PBT to £31.6m. EPS down 8.4% following share buy backs to 25.1p. Net assets £143m of which cash is £111m. 210 corporate clients with an average market cap of £829m. Outlook refers to more challenging markets in recent months.
  • Estimates Results are in line with the market estimate although EPS is a little ahead as the share buy backs have enhanced earnings . Going forward there is scope to increase the 25.8p EPS forecast although markets are harsher 
  • Valuation PER 10.7X. Yield 4.3% 
  • Conclusion Numis’ ROE is a healthy 28% due to its market leading position. The company is keen to point out Mifid 2 has had little effect.  And it looks cheap. However, I worry that the UK market may move towards the US model where companies employ investor relations consultants increasingly which may structurally put pressure on the primary fees that these businesses are so reliant on.  And with a high cost model this could leave the businesses exposed. 

PCF Group Plc – FY Results 

Share Price 37p

Mkt Cap £79m 

  • Results 50% portfolio growth to £219m with deposits of £191m. NIM was 8.2% and impairments maintained at 0.5% meant PBT was up 44% to £5.2m and EPS was up 33% to 2.0p.  Core Tier 1 ratio is a healthy 19.3% and the ROE increased from 8.7% to 10.3%. Dividend up 58% to 0.3p final. Outlook is confident. Azule has been acquired since the year end which will enhance the company’s European capabilities as well as adding profits which historically were £0.8m and PCF has also entered the property bridging market. They have hired the admirably named Gerald Grimes. 
  • Estimates Results are c 5% ahead of the 1.9p EPS estimate. The PAT estimate of £5.9m for the year to Sept 19 looks too low 
  • Valuation The company says it is a year ahead of its plans due to strong loan book growth. The medium term target is to provide a 12.5% post tax ROE which on taday’s equity of £42.6m would be post tax earnings of £5.3m. The shares trade at 14.9X this figure.  A 12.5% ROE may merit a valuation of perhaps 2X book value which is 40p per share 
  • Conclusion  It is unusual to see a bank grow its loan book at 50% while maintaining impairments at 0.5%. This is a very high quality situation with strong growth a confident outlook and reasonable valuation. Just the valuation is close to anticipating the company’s medium term targets.  It may be up with events until new strategic targets emerge.

Risk and Consumers

  • Convicts I found myself yesterday wondering why it felt so wrong that a goodly number of the convicts were sent to Australia for the offence of membership of a trade union.  In those days anything that interfered with the property owning classes was generally a transportable offence. While with the emergence of the middle classes they invented exams as a kind of trade union in order to restrict supply and so keep the prices of professional services up in accordance with the economic laws of supply and demand.  Which is why I had to learn the capital asset pricing model at university. Then I had to be examined on it to become an accountant. Then I was examined on it again to get my stockbroking exams (what was then the SFA). And then I had to be examined on it a fourth time to get my fund management exams with the IIMR.
  • What is risk? So when I learned at the excellent year end round up yesterday from Holly MacKay at Boring Money ( that in order to communicate with investors we need to relearn that CAPM, being based on the measure of risk called Beta, which is a measure of volatility is not actually what investors regard risk to be. In fact it is their level of understanding of a product which is their perceived risk I start to understand just how far away from the customer the investment industry has become.  Of course one of the problems is the regulator is regarding risk as volatility rather the consumers understanding of risk so the industry is obliged to put the regulators rules ahead of the customers rules so change becomes difficult when the regulator is also acting as effectively a trade union and restricting supply.
  • Solution It appears financial education is the easiest solution to this gap between the industry definition of risk and the customers definition of risk.  There is this year for the first time a GCSE in finance which is a good start. I am pleased to say I tried it and passed. Which was a relief. But I suspect that some of the fund management marketing departments should be focussing on financial education rather than selling themselves as planets, explorers, animals and hunters. This would undoubtedly reduce the perceived risk of their products and hence increase demand.


  • Zopa yesterday became the first Peer 2 peer to lender to be granted a banking license by the PRA. It will now enter a mobilisation phase ahead of full launch next year.  Zopa was valued at £300m in the latest fund raise and this will undoubtedly help the valuation. Trufin has a 14.9% stake in Zopa which was valued at £44.5m in the June 2018 interims which was 28% of the £159m NAV. The market cap is now £198m having fallen 10% in the least month.

Park Group – H1 Results and Strategy   

Share Price 78p

Mkt Cap £145m

 Results – Billings were up 3% and revenue reduces 10% to £27.4m in H1 as a number of low margin customers departed.  Pre tax losses were reduced from £1.9m to £1.5m after interest receivable increased a little to £0.8m from £0.7m.  Cash balances were £212m (2017 £199.6m). Dividend increased 5% and results are said to be in line with expectations. The new four pronged strategy will be revealed at todays investor day but the four prongs are around focus, ease of use, efficiency and a new product launch.

  •  Estimates – Estimates to March 2019 look for a 1% revenue increase and a 4% PBT increase for the year to March 2019.
  • Valuation – PER is 12.7 and yield 4.3%
  •  Conclusion  – This is a well invested platform which has weathered the headwind of falling rates for 10 years. It now looks like those headwinds will become tailwinds just as they are launching a new product about which there is little detail in the results. Were interest rates to increase by 0.5% this could add c 8% to earnings by my calculations. And if the new product gets traction the shares could be re rated.  With the well invested technology and the virtual card it could potentially get a technology type of rating. This could be an inflection point.

One pm – Trading Update 

Share Price 42.5p

Mkt Cap £37m

  •  Update  Trading is in line with expectations for the half year to November and the group expects to pay its maiden interim dividend which will be one third of the expected final dividend.
  • Estimates Forecasts look for 21% EPS growth for the year to May 2019 which is 7.55p per share
  • Valuation PER is 5.5X and yield 2.4%. The NAV per share is 56p on which the company produced a 16.7% ROE last year.
  • Conclusion A small cap lender can reach extremes of undervaluation. This has. 2X book value may be a normal valuation for a company producing a 17% ROE which is 112p per share, 163% above the current share price.

IG Group – Pre close update

Share Price 608p

Mkt Cap £2.24bn

  • Update Revenue in H1 is 6% lower than last year. The company confirms that since the regulatory changes in Europe group revenue has been 10% lower which is 20% lower within the ESMA regulated territory and 9% increase in the other regions.
  • Estimates Market forecasts appear to anticipate a 10% in group revenue for the year to May 19 do this looks in line with expectations
  • Valuation PER 11.7X yield 6.9%. Plus 500 trades at a PER of 8.3X and yields 10% while CMC markets trades at a PER of 9.6 and yields 6.5%
  • Conclusion It appears these companies have guided the market broadly accurately which is quite an achievement given the lack of visibility over the customers response to lower leverage limits.  The shares are very cheap and the sector may have a relief rally


  • The entertaining event of today is likely to be Mike Ashley presenting his vision of the High Street to the House of Commons. Take your seats at 3.30pm.
  • McColls Retail – Trading Update. EBITDA now expected to be £35m for the year. Full year like for like sales down 1.4% with higher tobacco sales implying lower gross margins.  Net debt improved at £100m. 59 stores refurbished producing 5% uplifts and 11 new openings while 66 were “removed”
  • RPC Group – Have terminated discussions with Bain Capital while discussions with Apollo are ongoing. The panel have extended the deadline to 21 December to make a bid.
  • MIFID 2 – I am hearing the Investment association have been to see the European regulator(ESMA) to present the case that Mifid 2 is not working for the investment industry. Allegedly ESMA suggested they talk to the FCA to present their case as Mifid 2 was driven by the FCA. If this is the case we are therefore faced with the prospect of a Brexit where the Europeans can repeal Brexit leaving the London investment management industry at a significant disadvantage against Europe and also the US where bundling of services continues. 

AFH Financial – Acquisition 

Share Price 383p

Mkt Cap £161m

  •  Acquisition – CTL3 together with 3 subsidiaries is being acquired for a max consideration of £10m bringing £530m AUM, and last year’s revenue was £4.7m of which PBT was £1.1m. Once integrated PBT is expected to be £1.4m
  •  Estimates – October 2019 revenue estimate is £76m from which £14.7m of after tax profit is expected. If we add the £1.4m PBT or £1,1m PAT this looks to be c. 7% earnings enhancing.
  • Valuation – PER is 13.7 for October 19 which post acquisition may fall to 12.7X with a 2.3% yield.  Harwood trades at 16X with a 2.5% yield
  •  Conclusion  – Having tracked all acquisitions since formation it appears that on average AFH have added c. 100% of the acquisition price to the value of acquired businesses/assets. This looks like more of the same.  The shares are only 5% off their highs but the earnings acceleration is making them look anomalously cheap.


This week we have

  • Tuesday –                  Park Group Interims.              Lets not underestimate their sensitivity to increased rates  PER 12, Yield 4.3%
  • Wednesday –             Numis Full Year Results                     Shares are off 34% from their highs. Outlook must be trickier . PER 10.6, yield 4.4%

PCF Bank Full Year Results   Integration of recent acquisition will be important PER 12.3 Tield 1.1%

  • Thursday –                 Impax Full Year Results                     With AUM growth slowing and a little net debt perhaps the 14.7X PER will start to look up with events

Brexit vs St James Place – Which is cheaper ?

  • Comparison There has been an awful lot of noise about the cost of Brexit but a brief comparison of costs illustrates that Brexit is considerably cheaper than using St James Place Wealth management.
Brexit SJP
GDP/Income £2trn £28k
Net worth £10.7trn £500k
Charge 39bn 11.5K
% Revenue 1.95% 28%
% worth 0.36% 2.30%
  • In the table we have just included the £39bn The UK pays to the EU each year as the cost of Brexit but some estimates include an anticipated slow down in the economy which some say could cost £100bn a year. In which case the % Revenue figure would rise from 1.95% to 5%. And the % worth figure would increase from 36bps to 95bps. However this higher number is still lower than the SJP figure as a % net worth. Note also I have just used an average annual management fee for SJP and not included the many entry and exit charges which for pensions can be an extra 6% exit charge and up to 5% entry charges for some products
  • Conclusion It seems there should be more noise made about St James Place fees than there is about Brexit. Even though that wouldn’t be very British.


  •, Australia’s answer to Amazon in online retail has launched into mortgage selling in Australia.  One wonders how long until Amazon or Kogan enter the UK mortgage market.
  • The FCA has pushed back the launch of its credit information market study from Q4 2018 to June 2019 because it wants to prioritise its market study on general insurance pricing.  While general insurance underwriters may be protected as they are earning a competitive return on risk capital one has the feeling that broker commissions, particularly for add on products are high and brokers may well be vulnerable.  Marsh Maclennan could well have acquired JLT to mark the last of the glory days of insurance broking.
  • The Intu bid has fallen through after House of Fraser has closed a lot of stores failing to agree terms with landlord Intu


XPS Pensions – H1 Results

Share Price 165p

Mkt Cap £336m

  • Results Following the Punter Southall acquisition revenue is up 113% to £52.2m, PBT adjusted up 62% to £8.6m and Adjusted EPS up 8% to 4.2p. Dividend raised 10%. The outlook statement refers to confidence and new client wins in H2 but then says full year results are expected to be “broadly” in line. Balance sheet net assets are £148m but intangibles are £207m leaving negative net tangibles. Net debt is £47m.
  • Estimates FY March 19 estimates look for £113m revenue and £21.2m PBT, EPS of 10.3p. 46% of revenue has been delivered in H1, 40% of PBT. As cost savings from integration come through along with new client wins those numbers could be achievable.
  • Valuation PER 15 and yield 4.5%
  • Conclusion The company looks set to benefit from the CMA review into the investment consulting market but the valuation looks up with events.

Premier Asset Management – FY Results

Share Price  202p

Mkt Cap £213m

  • Results Adjusted PBT up 28.6% to £18.9m, EPS up 41.7% to 12.1p, the quarterly dividend is up 28% to 10.25p. The outlook says flows have been slower in the new year as markets have become tougher.
  • Estimates These results look very modestly ahead of consensus but given slower flows noted forecasts may not change at this stage
  • Valuation PER 12.4 and yield 4.95%
  • Conclusion The shares are 33% down from the high in July and now look reasonable value subject to markets