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Just Group – FY Results

Share Price 57p

Mkt Cap 599m

Conflict Disclosure: No Holding

  • Results IFRS PBT was £369m (2018 £86m loss). Adjusted operating profit increased 4% to £219m. Far more significant is the statement that the group expects to be organically capital generative in 2020 and thereafter. Capital coverage post market falls remains at 141%. Organic capital generation in H1 was £36m as new business strain halved due to strong pricing and lower sales.  New business profit was £182m (2018 £243m) and in force profit was £84m (2018 £72m).
  • Estimates The share price will be more correlated to the capital generation than earnings estimates but in profit terms the £219m is well ahead of the £183m consensus
  • Valuation The net asset value is £2.3bn which is 220p/share. ROE is expected to be 6% this year.
  • Conclusion I am not understanding why the company doesn’t close to new business to increase the capital generation, or a bidder doesn’t acquire it for that purpose.  However, today’s re assurance over capital generation should get the shares closer to their fair value which looks to be c 100p.
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Brooks Macdonald– H1 Results

Share Price 1725p

Mkt Cap £281m

Conflict Disclosure: No Holding

  • Results With AUM up 12% over the 6 months to December revenue rose 8.1% to £55.8m. Underlying PBT was up 28.6% to £11.7m representing a 21% operating margin. EPS up 30% to 68.7p and DPS up 10%. Outlook is confident they will deliver growth ambitions, but short term uncertainty.
  • Estimates With market moves all forecasts are subjective currently. The consensus of £24.4m for Brooks looks high with 48% of this being delivered in H1 and 20% market falls.
  • Valuation On current estimates PE 12.5, yield 3.4%
  • Conclusion The headlines refer to investment in talent while there has been a headcount reduction of 50 people. Typically the AUM outflows will follow with a time lag.  It may be a little early but one for the watch list to buy on the outflows.
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Funding Circle – FY Results

Share Price 61p

Mkt cap £191m

Conflict Disclosure: No Holding

  • Results. Loans under management grew 19%. Revenue was up 18% to £167m and adjusted EBITDA loss was £27.5m.  Loss before tax was £49.9m, in line with the cash outflow, but including exceptional the reported loss was £84.7m. Segment adjusted EBITDA is a meaningless figure as it strips out broker origination costs. With slowing growth the company is now expecting to halve EBITDA losses and trading is said to have started the year well. Cash is down from £333m to £165m
  • Estimates The company is forecast to be loss making over the forecast horizon.
  • Valuation NAV is £319m.
  • Conclusion Bear markets arrive periodically to cleanse poor capital allocation. It is hard to see this stock surviving.
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Arrow Global- FY Results

Share Price 180p

Mkt Cap £327m

Conflict Disclosure: No Holding

  • Results PBT up 28% to £51.3m and underlying PBT was down 5% to £78.1m. Leverage reduced to 3.4X. Underlying ROE is reported at 29.5%. FUM of Euro 838m is targeted Euro 2bn by end of 2020. Outlook is well positioned.
  • Estimates PBT looks modestly behind consensus of £82m.
  • Valuation PE 4.9X, yield 6.9%. NAV was £201m
  • Conclusion I am enduring a bi polar relationship with this stock. As the proportion of the revenues derived from fund management increase it has the potential to deliver multi bagger returns. Then I find myself worrying about the debt markets they operate in. If this bear market restricts competition in their markets it may soon be a good time.