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Citywire is reporting that M&G has put its platform (bought in 2020 from Royal London) up for sale.
Good to see they are quitting a losing strategy and not throwing more cash into it if it is unlikely to reach scale to break even…..better to sell it and then rent someone else’s infrastructure.
It is the results day and what they say about the cash generation and dividend direction that is important…..the XD adjustment should be irrelevant.
These are some of the questions to be asking
How much capital is generated over the next 3 years?
What is the dividend cover?
Will there be a buy back programme?
What are their plans for debt refinancing/redemption and the SII debt ratio?
They have expressed a desire for the debt ratio to be under 30%. It was last reported as 36% with the excess % largely due to the last buy back removing £500m of assets from the company. With debt costing 5-6% and the dividend costing 8-9% the pure financial play is to gear up and buy back more shares….but that requires a change in approach. The results will be interesting for many reasons.
The fund performance must have been excellent to raise AUM as it did…..which will help justification for positive value assessments.
This is a business that needs some serious reforms which may be expensive and painful for the company and the “partners”.
In 2021, the SP was £17. Wealth management was seen as the sexy high margin part of financial services because controlling access to clients was seen as the stickiest of fee bases……
What has gone wrong?
Clients being charged for no service.
Clients being charged high fees and early termination fees
Market pressures to reduce costs and fee charges.
Inflation
STJ reputation is a little tarnished and the Share Price has deflated…..
But there is still a decent business here, it has a large (wealthy) client base, once it has been transformed there should be a decent chance of a recovery of the SP…..but not back to £15-17, I am thinking 8-10.
The new CEO needs to be given time to set out his reforms and then implement them, so I dont see this share going above £7 in 2024 (absent M&A).
Buy in mid 2025 - if the new business starts to make some headway.
Growth likely coming more from expansion overseas than UK….the CMA review will give greater clarity over the UK potential….there will be scope for continued expansion, but more limited and larger M&A will be off the table.
Debt has grown driven by the AUS purchases…this should not be a problem as mgmt has learnt to keep its debt under control….
Total div for 2023 likely to be in the range of last year + up to 5% per share.
The cash cost is about £500m pa….why would they want to add up to 25m to the cash outflow.
Ideally they need to have more dividend cover so as low an increment that the main investors will let them get away with is in order.
Let’s see what the debt equity split is on any fund raise….
The story seemed to be that funds were needed to allow business transfers between the advisors/salesmen “partners”.
The older ones are retiring faster than new ones want to take up the business…..think the partners are going to be in for a shock as to the haircut they need to take because future fees are not going to match those of the past and their successors cant afford to pay the old rate.
Maybe there are guaranteed terms in their partnership agreement, in which case shareholders are going to take the hit.
No one will feel sorry…..best avoid until the situation is clear.
Pubs have reported stronger trading over the Christmas period….consistent across Marstons, M&B, ‘spoons.
Positive for the sector as a whole and for YNGs
Market is not impressed….SP change is 249/250 in the FT250.
Still ABDN has lots of liquid assets to maintain its dividend/shareholder returns as it can sell down its PHNX stake…..I think that will drag on PHNX for some time relative to other life assurance companies….
Market is appreciating the results.
A more positive picture….but one quarter does not make a trend.
I predict a lot of business for financial advisers this year from affluent customers wanting to protect themselves from future government actions while allowances are still present / generous.
Maximise Pension and ISA allowances, IHT protections. CGT planning.
Continues to be a burden to hold this share.
They have identified 150m of additional savings over the 75m already in progress….bloated cost base would seem to be a generous description unless there is a lot of wishful thinking in the target….which we may never know because management changes the business and “new costs” allowed for the new business..
The ii business seems to be doing relatively well compared to other parts of the group…..but whether this is worth the £1.5bn is debatable - I am expecting a hefty write down of good will at some point.
Recent results from brewers have been strong…it seems we Brits still like to visit the pub….and increasingly that involves food and other services.
The old fashioned boozers may become less productive as Gen z and Millenials dont drink as much….but closures are a property redevelopment play, so not much to worry about….
FT reporting that the BPA market is set to deliver £60bn of premium in the current year….
There is more than enough business to go round with participants reporting staffing as a limiting factor in how much business they can process….
1 Expect Just to continue to dominate at the smaller end (but this is largely automated for Just)
2 Expect Just to pick up a share of larger deals.
Look for the cumulative effect of writing volume at decent margin to show through….both in the value of future business and in free cash flow (6% of the VoNB each and every year for about 25-30 years)
Market perked up a bit on Friday and following through this morning as the TU was digested.
Hoping for a strong movement when the results come out.
Unbelievably this is 30% off from the high hit with the FDA approval of Fruq.
Re: Buy backs, there is still much spending to be done to get to cash flow positive from sales and royalties alone, but as they dont expect to raise more capital they are likely to end up in a position where they have excess capital….but that is an issue for a few years time.
In the short term they should buy in the market as treasury shares to meet share awards to staff and Directors.
I have bought this morning …there are expectations of 1 or 2 new players entering the bulk annuity market this year…..surely they will look at investing in Just as an entry route rather than set up a new entity and seek regulatory approval……
Just seems to be unloved /mis-trusted/misunderstood.
New business margin in excess of 8.5% would mean NB profit around £350m with £80m invested to support this business which should leave £250m for other purposes (including dividend / capital return / growth in 2024 and beyond)
The only fly in the ointment is £400m of funded reinsurance in 2023, so presumably there may be a small number of £bn in this business where Just retains some liability and is reliant on collateral arrangements to protect from the failure of the reinsurer….the FCA is investigating whether additional capital is required to make these arrangements robust…
Just has a dominant position in the smaller end of the DB transfer business and can move up the scale if it chooses - although margin may be lower on larger deals.
15% growth pa means a doubling of profit in 5-6 years…..
Surely at some point it must move up?
KKR playing hardball…..changing from a court scheme to a take over offer with a lower threshhold….
This increases the likelihood of a deal at the current price….as not too many holders will want to continue to hold illiquid shares in an unlisted company…..not sure that platforms would allow that for PIs.
New offer document expected next Wednesday.
Still possible that could come with a higher offer, but looks unlikely.
IS This sudden plunge is indicating the deal is in trouble?