Sampo announced a Q1 20 pre-tax profit of €162m, -65.9% yoy. Mandatum Life recorded a loss of €-16m, while If P&C was resilient but its earnings declined by 34.8% to €129m. The impact of COVID-19 was significant on claims but revenues recorded growth. To preserve its capital position, the Board decided to propose a lower dividend for shareholders, at €1.5/share vs. €2.2 initially. This will allow a Solvency II ratio of 187% to be reached by the end of April 2020.
Companies: Sampo Oyj-A Shs
A calm end pf the year for Sampo. The insurer posted an annual profit before tax of €1,541m, -26% yoy and broadly in line with estimates. The revised dividend strategy, with higher payout ratio at 70%, does not mean higher cash for shareholders. It is the way to rebalance the decrease in net profit with a lower contribution from Nordea. Now, the dividend distribution capacity depends on If P&C. A situation comparable to the pre-2015 period.
Sampo has posted a 9M 17 profit before tax of €1,073m, down 35% yoy (€92m in Q3 19, -81% relative to Q3 18). This decline is caused by the low interest rates that affected the performance of Nordea and Topdanmark. Mandatum Life’s figures should be adjusted by the exceptional €197m contribution from the cooperation agreement with Danske Bank in 2018. The insurer will be less generous with its shareholders in 2019. Our model will be revised down.
A positive set of H1 19 figures. The company performed well in both the Life and P&C businesses, which recorded respective pre-tax earnings of €137m and €440m. The performance of the Life branch needs to be seen within the context of a €197m exceptional in the H1 18 coming from the cooperation agreement with Danske Bank. We have recently adjusted our model to factor in a lower dividend stream from Nordea. No significant change is expected in our positive opinion.
Sampo will distribute one Nordea share for each ten Sampo shares held as an extra dividend. This decision aims to decrease the insurer’s stake in the bank below 20% to benefit from more favourable regulation in terms of the Solvency II. This move will not have a significant impact on the internal dividend stream and Sampo would be able to distribute a strong dividend.
Sampo repoted a Q1 19 profit before tax of €475m, up 6.7% yoy. P&C’s pre-tax profit increased by 2.6% to €198m, while the Life business posted a pre-tax profit of €72m. The Solvency ratio declined to 130%, hit by higher capital requirements on Nordea. The bank’s contribution to earnings dropped significantly to €83m. However, Topdanmark’s exceeded 19%. Sampo announced that it would make a decision concerning its capital position before the end of the year. Our model will be refined.
Sampo posted an annual profit before tax of €2,094m (-15.6% yoy). If we take into consideration the FY 17 non-recurring item of €706m, the pre-tax profit recorded a 17.9% increase. The insurer succeeded in offering a more balanced earnings structure, with a lower contribution from the If P&C arm. The dividend stream from Nordea and Topdanmark is estimated at €677m in 2019. We appreciate the insurer’s performance and our estimates will be revised up.
Sampo posted a 9M adjusted profit before tax of €1,643m. All business lines posted growth. The profitability of the Life business remains extremely sensitive to interest rate movements, and lower additional technical reserves allowed the offsetting of the drop in investment income. The P&C operations remained resilient with an expected sustainable dividend stream to the group. The money-laundering affairs of Nordea and Danske Bank are not good news and should be a concern, but our positive opinion will be kept.
Sampo repoted H1 18 profit before tax of €708m, up 63% yoy. The figures were boosted by the contribution from the cooperation agreement with Danske Bank which amounted to €197m. P&C’s pre-tax profit increased by 3% to €415m (up 1% to €222m in the Q2) and it achieved a good combined ratio of 85.8%. The contributions of Topdanmark and Nordea to earnings amounted to €105m and €388m, respectively. We will adjust our estimates to integrate the higher Life business performance.
Sampo repoted a profit before tax of €445m, up 3.5% yoy. P&C’s pre-tax profit increased by 7% to €193m, while Mandatum, the insurer’s Life arm, posted a Q1 18 pre-tax profit of €73m vs. €54m a year before. The group’s solvency ratio stood at 145.7%. The mark-to-market results dropped due to a weaker SEK and weak investment markets. Topdanmark’s contribution to the group’s earnings is now important after the consolidation of its figures. We will adjust down our estimates.
Sampo announced its intention to increase its stake in the Swedish bank Nordax to 36.25%, through a co-investment initiative with Nordic Capital Fund VIII. This acquisition will allow the Finnish insurer to have access to a new generous dividend-paying company that would help it to keep a strong payout ratio in the following years. The funding scheme should not be complicated as Sampo has access to a steady dividend stream from its subsidiaries and participations.
Except for the integration of a higher contribution from Topdanmark, after the changes in accounting treatment, Sampo’s figures were not exceptionally good. The insurer’s profitability is under pressure and its capital position is not so comfortable, but not in threat either. The decision to distribute NOK2.60/share was a surprise for us. Rising interest rates is good news for Sampo, but it is already integrated in our forecasts. Slight changes are expected in our model, excluding the dividend payout which will be revised up.
Sampo posted a Q3 17 profit before tax of €1,181m, up 162% yoy and bringing the 9M 17 profits to €2,046m (up 52% yoy). This performance was recorded thanks to non-recurring profit incurring from the change of Topdanmark’s accounting status from an associated company to a subsidiary. Excluding this element, the pre-tax profit amounted to €1,340m, flat relative to 9M 16. The adjusted ROE stood at 13.8%.
By business area, P&C posted a pre-tax profit down 3% to €603m in 9M 17 (€202m for the Q3 17, down 2% yoy). The combined ratio stood at 85.9% in September 2017 vs. 84% a year before. Net premiums reached €3,463m in 9M 17, up 2% yoy (up 4% in Q3 17 at €881m). 9M 17 net income from investments increased by 45% to €173m (+17% in Q3 17 to €46m). Total claims stood at €2,068m, up 4% relative to September 2017 (€689m in Q3 17, +2% yoy). Staff costs increased by 6% to €406m (+2% in Q3 17 to €135m). The contribution of Topdanmark’s net profit amounted to €90m (€35m in 9M 16). Mandatum Life reported a 9M 17 pre-tax profit of €180m vs. €157m a year before with a good Q3 (+20% to €64m). Premium income jumped in Q3 17 by 17% to €207m, but the negative trend since the beginning of the year is still present with a 9M 17 decrease of 6% to €630m. Sampo’s share of Nordea’s 9M 17 net profit amounted to €491m. The bank’s Core Tier 1 ratio strengthened to 19.2%. The group’s Solvency II ratio stood at 156%.
Sampo posted a Q2 17 profit before tax of €435m, down 9% yoy and bringing H1 17 profits to €865m (-3% yoy). The ROE stood at 14.1% vs. 10.9% a year before.
By business area, P&C posted a pre-tax profit up 4% to €453m in H1 17 (€252m for the Q2 17, up 14% yoy). The combined ratio stood at 86.5% in June 2017 vs. 83.7% a year before. Net premiums reached €2,583m in H1 17, up 1% yoy (stable in the Q2 17 at €1,040m). H1 17 net income from investments increased by 58% to €127m (+70% in the Q2 17 to €75m). Total claims stood at €1,378m, up 5% relative to June 2016 (€679m in the Q2 17, +2% yoy). Staff costs increased by 9% to €271m (+10% in the Q2 17 to €135m). The contribution of Topdanmark’s net profit amounted to €52m (€19m in H1 16).
Mandatum Life reported a H1 17 pre-tax profit of €116m vs. €103m a year before with a good Q2 (+23% to €62m). The ROE stood at 15.6% vs. 6.5% last year. Premium income decreased in Q2 17 by 22% to €194m, thereby maintaining a negative trend since the beginning of the year with a H1 17 decrease of 14% to €423m. Sampo’s share of Nordea’s H1 17 net profit amounted to €150m in Q2 17, -27% yoy (€322m in H1 17, -12% yoy). Nordea’s ROE stood at 9.9% and its Core Tier 1 ratio strengthened to 19.2%. The group’s Solvency II ratio stood at 163%.
Sampo posted a Q4 16 profit before tax of €528m, up 23.8% yoy and bringing FY 16 profits to €1,871m (-0.9% yoy). ROE stood at 15% vs. 14% a year before.
By business area, P&C posted a pre-tax profit up 9.3% to €223m in Q4 but an annual decrease of 8% to €883m. The combined ratio stood at 84.4% in 2016 vs. 85.4% a year before. Net premiums reached €4,292m in FY 16 down 1.9% yoy, with stable Q4 sales at €883m. FY 16 net income from investments declined by 43% to €173m. Total claims decreased by 7.7% to €2,670m. Staff costs jumped by 38% to €512m. The contribution of Topdanmark’s net profit amounted to €65m (€43m in 2015).
Mandatum Life reported a FY 16 pre-tax profit of €210m vs. €181m a year before with a good Q4 (+10.4% to €53m). ROE stood at 15.9% vs. 12.7% last year. Premium income increased in Q4 by 45.7% to €446m but has kept a negative trend since the beginning of the year with a FY 16 decrease of 2.4% to €1,116m. Sampo’s share of Nordea’s 2016 net profit amounted to €227m in Q4, +31.2% yoy (€773m in FY 16, +2.9% yoy). Nordea’s ROE stood at 11.5% and its Core Tier 1 ratio strengthened to 18.4%.
The group’s Solvency II ratio stood at 154%. The board will propose at the Annual General Meeting a dividend of €2.30/ share.
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A number of REITs have the ability to thrive in current market conditions and thereafter. Not only do they hold assets that will remain in strong demand, but they have focus and transparency. The leases and underlying rents are structured in a manner to provide long visibility, growth and security. Hardman & Co defined an investment universe of REITs that we considered provided security and “safer harbours”. We introduced this universe with our report published in March 2019: “Secure income” REITs – Safe Harbour Available. Here, we take forward the investment case and story. We point to six REITs, in particular, where we believe the risk/reward is the most attractive.
Companies: AGY ARBB ARIX BUR CMH CLIG DNL HAYD NSF PCA PIN PXC PHP RE/ RECI SCE SHED VTA
The Native Antigen Company (“NAC”) has been acquired by LGC for up to £18.0m – with the ongoing COVID pandemic highlighting the value of knowledge and execution in the infectious diseases space. Mercia invested in NAC via both its balance sheet and 3rd party funds. The exit represents a strong return for both sources of capital, validating complete connected capital to optimise value creation. For the balance sheet stake, the £5.2m proceeds represent a £2.5m gain on realisation (c.1.5% of our FY21e NAVps). Final Results will be announced next week, when we will review our forecasts. The shares are currently trading at a 45% discount to NAV (which is 20% cash). Today’s exit demonstrates justification for a much narrower discount, if not a premium, to conservative carrying values.
Companies: Mercia Technologies
With the sale of The Native Antigen Company (NAC) for up to £18m in cash, Mercia expects to realise £5.2m (1.2p per share) for its 29.4% stake. This exit delivers another significant milestone in management’s strategy to achieve an evergreen funding model. Management has confirmed that the group is profitable on a day-to-day basis following the acquisition of the NVM VCT management contracts (NVM) in December 2019. NVM, together with additional allocations from the British Business Bank (BBB), has lifted AUM to c £800m. Management’s three-year strategy targets a sustainable, evergreen balance sheet with AUM of £1bn in FY22, with future investment commitments met through existing cash resources and realisations without the need for further recourse to the markets. Despite real progress, Mercia trades at 0.69x its September 2019 NAV, with the fee-earning funds business as further upside, not captured in an NAV-based calculation. FY20 results are due on 14 July 2020.
Hot on the heels of the Architas acquisition – announced 1st July, Liontrust has issued in line final results (£38.1m adj. PBT vs £38.3m consensus, 24p second interim dividend). An accompanying trading update also confirms that AuM bounced back in Q1 as markets recovered and net inflows were sustained at a record £971m for the quarter. The Architas acquisition – once completed later this year – stands to drive Liontrust through the £25bn AuM mark and bolster the existing multi-asset product offering and wider appeal to the current client base. As joint corporate broker, we have withdrawn forecasts pending the approval of the acquisition at the forthcoming general meeting.
Companies: Liontrust Asset Management
HgCapital Trust’s (HGT) 12-month NAV TR to end-March 2020 was a solid 13.8% despite the COVID-19 market downturn in March 2020 (ytd NAV performance since end-December 2019 was a 6.2% decline). The coverage ratio reached a historically low level (13% vs three-year average of 53%) after HGT notably increased its investment activity and commitments in Q120. However, a significant part of these new commitments will not be drawn in the near term. The board continues to review its future funding arrangements and may also opt out of a new investment without penalty across all funds. HGT’s portfolio focus is on the resilient software and technology sector and the manager expects a limited direct earnings impact on its portfolio from the COVID-19 pandemic.
Companies: Hgcapital Trust
Key takeaways from NSF’s results and presentation were: i) solid underlying 2019 with normalised operating profits up 20% and lower impairments to revenue; ii) £60m cash now ‒ April and May cash-generative; and iii) current collections 86% of pre-lockdown levels. NSF is a going concern and is considering an equity raise to help fund additional growth. Downside includes: i) statutory loss with further goodwill impairments; ii) material uncertainty arising from COVID-19 effects and so possibly its going-concern status; and iii) operating performance improvement needed for further securitisation-line drawings (waiver extended on 29 June).
Companies: Non-Standard Finance
Beijing’s forced implementation of the Hong Kong security law threatens the region’s financial hub status. This is a potential game-changer for HSBC but it does not seem to come as a surprise for the group as confirmed by the acceleration of its investments in China or its efforts to secure a leading position on the RMB.
FY20 earnings remain in line with estimates upgraded in June as the result of decisive action. Client assets are stable, acquisitions integrating well (with approval for Hurley Partners imminent) whilst net cash remains plentiful at £26m. CFO Nathan Imlach is to be succeeded by group FD Ravi Tara at the AGM, with the board bolstered elsewhere. We do not change our forecasts, pending a review at the Finals, but note the steady market trajectory (since our June revisions) could provide upside.
Companies: Mattioli Woods
PetroTal (PTAL LN/TAL CN)C; Target price £0.45: 1Q20 results/Bretaña expected to restart in July – 1Q20 financials are in line with expectations and 1Q20 production had been reported previously. At the end of 1Q20, current trade and other payables had been reduced to ~US$45 mm compared to ~US$55 mm at YE19. Most importantly. PetroTal continues to expect the Bretaña field to be re-opened this month. The contingent liability with Petroperu is estimated at US$25 mm at the current oil price and the company has entered into a financial swap for 0.46 mmbbl of oil with an ICE Brent reference price of US $40.58/bbl to cover the upcoming sale by Petroperu at the Bayovar port. This is a recovery story that we continue to like. It offers a combination of value, production and cash flow growth and reserves upside. We anticipate that the imminent reopening of the field with be an important catalyst to the share price.
i3 Energy (I3E LN): Reveals takeover target in Canada | Maha Energy (MAHA-A SS): Production update | Aker BB (AKERBP NO): 2Q20 update in Norway | Energy (RRE LN): Recommended offer by Viaro Energy | Spirit Energy: Dry hole in Norway | Enwell Energy (ENW LN): Ukraine update | JKX Oil & Gas (JKX LN): 2Q20 update in Ukraine and Russia | Pharos Energy (PHAR LN): Operating update in Egypt and Vietnam | Sound Energy (SOU LN)C: Terms of Moroccan licence renegotiated | Tethys Oil (TETY SS): June production in Oman | Victoria Oil & Gas (VOG LN): Gas sales contract with ENEO in Cameroon terminated
EVENTS TO WATCH NEXT WEEK
14/07/2020: Aker BP (AKERBP NO) – 2Q20 results
15/07/2020: Premier Oil (PMO LN) – 1H20 update
13-17/07/2020: GeoPark (GPRK US) – 2Q20 update
Companies: I3E MAHAA JKX PHAR EQNR AKERBP ENI HUR PTAL REP RRE SOU TPL VOG OMV
Accelerating activity in to FY21
Companies: Manolete Partners
With a new CEO, Amanda Blanc, Aviva’s shareholders could dream of a possible change in the group’s strategy, with a more focused insurance business. The new Chief has an opportunity to take painful decisions in a year where no one will require a high operating performance.
Companies: Aviva Plc
With care home COVID-19 infection rates continuing to decline, and continuing full rent collection, Impact has reaffirmed its intention to pay its Q220 DPS in line with expectations. Across the sector, the pandemic has created operational challenges for care home operators, including Impact’s tenants, but it has also highlighted the essential service that the sector provides. This may have the positive effect of permanently improving resident funding and support investment to meet the increasing care needs of a growing elderly population.
Companies: Impact Healthcare Reit
Much has been written about the effects of the virus on the world and on the stock market. Here is one analyst’s take on some of the likely impacts on the way we should look at companies. This article was originally produced as a blog, “10 Changes Post Virus”, which was published a few weeks ago.
Companies: AGY ARBB ARIX DNL GDR NSF PCA PIN PHNX PHP RE/ RECI STX SCE SIXH TRX SHED VTA
Gfinity plc* (GFIN.L, 1.625p/£14.0m) | Blackbird plc* (BIRD.L, 16.5p/£55.4m) | Tern plc* (TERN.L, 11.5p/£31.1m) | The Panoply Holdings (TPX.L, 72.5p/£39.9m)
Companies: GFIN BIRD TERN TPX
Trading Well in Tough Market
Companies: Palace Capital