Sampo posted H1 20 earnings reaching €569m, -42% yoy. The decline came from the investment side, while the insurance business showed high resilience. The group’s solvency ratio stood at 187%. The insurer has also confirmed its intention to acquire 70% of Hastings Group Holdings with the South African RMI through a newly-formed jointly-owned company. The size of the Sampo’s investment should be €1.29bn, of which €1bn funded by newly-issued hybrid Tier 2 capital. Our estimates will be improved.
Companies: Sampo Oyj
The Finnish insurance group Sampo is exploring an entry into the UK market with a potential bid for the Non-Life insurer Hastings Group Holdings. The operation is being prepared with Hastings’s biggest shareholder, Rand Merchant Investment Holdings. Through such an acquisition, Sampo will be able to diversify its earnings, currently coming exclusively from the Nordic countries, and boost its growth. This is also a sign that the impact of the pandemic on its figures is lower than expected.
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.
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%.
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Litigation Capital Management has announced FY20 results with gross profit up 7% to A$21.7m and PBT of A$9.2m, slightly behind expectations albeit the Group had already flagged that delays to 3 cases during the year would result in resolutions in FY21, thereby impacting FY20 results. That said, excellent strategic progress through the year and good news flow as well as increasing scale suggests more value to come. Reiterate buy
Companies: Litigation Capital Management Ltd.
To achieve YoY revenue growth over H1/20A despite the challenges of Covid-19 and its impact on the travel sector is testament to Equals' resilience and increasing focus on B2B and International payments services. While weaker gross profit and EBITDA margins have impacted profitability in H1/20, we see potential for an earnings recovery in H2/20 given cost reduction measures currently being undertaken. This should lead Equals to cash breakeven in Q4/20 and FCF positive by early FY21.
Companies: Equals Group Plc
FY20A results largely reflect a period prior to the Covid-19 lockdown, yet show Duke entering a more challenging FY21E with momentum. Yesterday's trading update demonstrated another notable rise in quarterly cash receipts for Q2/21, as royalty partner trading continues to improve. As some partners' forbearance measures will expire this month, Q3/21 receipts should continue this upwardly momentum. This opens the door to a return to cash dividends at some future point. Today, Duke also confirms it is now seeking new royalty partners, alongside follow-ons.
Companies: Duke Royalty
In June, faced with the task of replacing its longstanding portfolio manager, Alistair Mundy, Temple Bar Investment Trust’s (TMPL’s) board reiterated its commitment to a value style of investing. The board has now opted to hand the management contract to Nick Purves and Ian Lance of RWC Partners, two managers with considerable experience of managing income portfolios using a value-style approach. Value investing, where managers buy stocks that are valued more cheaply than market averages – based on measures such as price/earnings, price/book and yield – is deeply out of favour. The RWC team says that value stocks have never looked more unloved in the 30- odd years that they have been managing money. In their view, this makes it imperative that TMPL investors keep faith with the strategy and it also means this is an attractive entry point for new investors. One important change, however, is a cut to TMPL’s dividend to a level that the RWC team believes will be more sustainable.
Companies: Temple Bar Investment Trust
Sigma Capital (“Sigma”) has partnered with global alternatives manager EQT to deliver and manage a £1bn GDV private-rented sector (“PRS”) housing fund focused on Greater London. EQT will invest £300m equity, complemented by debt (including a Homes England facility), to build 3,000 homes in 5 years. Sigma will generate fee income as development manager, a recurring fee income stream from managing completed assets, as well as participation in returns via a minority co-investment (£16m) and a profit share. We estimate that the fee income alone is worth £45m to Sigma in the first five years: 50% of the current market cap. Crucially, this is a step up in AuM bringing a high quality long-term recurring earnings stream. We will reforecast following interim results (expected tomorrow) to provide full context.
Companies: Sigma Capital Group Plc
Interim results demonstrate YoY growth and a resilient outcome that has exceeded management's expectations from the start of the Covid-19 pandemic. This is testament to the degree of recurring revenue generated across the business. FY21 trading looks to be more challenging, as notably lower new insurance sales post-lockdown will translate into lower premium income. A number of organic opportunities are being worked on to fill the shortfall. Rising UK redundancies and their impact on policyholder retentions creates great uncertainty, hence our forecasts remain withdrawn and recommendation remains Under Review.
Companies: Personal Group Holdings Plc
HSBC’s future should be clarified as soon as the US and China come back to the negotiation table. This will not happen before the US elections are over. In the meantime, HSBC will continue to be instrumentalised and its share price will remain under pressure.
Companies: HSBC Holdings Plc
L&G reported an operating profit from continuing divisions (excluding Mature Savings and General Insurance businesses) of £1,128m, -2.2% yoy. The COVID-19-related cost was £129m. LGR posted a growing operating profit to £721m. Net profit amounted to £290m vs. £874m a year before, being affected by the reduced discount rate used to calculate LGI reserves. The Solvency II ratio stood at 173%. The Board recommended an interim dividend of 4.93p/share, stable relative to H1 19.
Companies: Legal & General Group Plc
In line interim results to 30 June 2020 show the strength of this business amid a difficult environment. This is the first step in what should be an exciting growth trajectory toward a larger, scaled up business with high recurring revenues and ownership of the full supply chain in the personal injury and clinical negligence market for clients requiring long-term, risk-adjusted returns. We reiterate our TP of 50p, noting further upside potential as acquisitions are completed.
Companies: Frenkel Topping Group Plc
Today's news & views, plus announcements from VOD, POLY, SMDS, BLND, BYG, WEIR, DC, SNR, SHI, INTU, IHR, CNC, ARE, INCE
Companies: INTU SHI INCE
The impressive full year 2019 results included some eye-catching numbers, including a record PBT of £40.1m (nearly 3x FY18 @ £14.3m), £620m of reserves acquired over 16 legacy deals, and $842m of (estimated) Contracted Premium in the Program business – on track to breach $1bn in FY20 as previously guided and $1.5bn-$2bn in 2022-2023.
Companies: Randall & Quilter Investment Holdings Ltd.
Mercia’s FY20 results reflect continued progress, delivering on management’s three-year strategy. AUM climbed 58% to £0.8bn, while FUM rose 73% to £658m. Following the acquisition of the NVM VCT fund management business, the company is operationally profitable on a monthly basis, with annual revenues exceeding operating costs for the first time in FY20. Net assets rose 12% to £141.5m, with the direct investment portfolio stalled at £87.5m reflecting the impact of COVID-19 fair value adjustments and a £15.7m net investment. The group remains well-placed for a downturn with £30m of unrestricted balance sheet cash and £320m of group cash. Post period end the group exited The Native Antigen Company, with £5.2m in cash (8.4x return, 65% IRR) expected. Despite the group’s progress, Mercia’s shares continue to trade at a material discount to NAV (0.60x), even before considering the embedded value of the third-party fund management business (> 4.5p at 3% of AUM).
Companies: Mercia Asset Management Plc
Activity was limited by housebuilding shutdown in H1 as a result of COVID. Sigma remained profitable and, with a strong balance sheet, has weathered the storm. With yesterday’s launch of the £1bn EQT London fund, a material step change is expected for the coming financial year. We reinstate forecasts; updating for EQT and revised expectations post-COVID. We revisit our valuation: a “sum of the parts” approach, assuming no additional AuM, implies an intrinsic value of 200p/share.
Trident Royalties Plc (AIM: TRR) has, this morning, announced the acquisition of a 1.5% Net Smelter Royalty (NSR) over the resourcestage Lake Rebecca Gold Project located in the highly prospective Eastern Goldfields province in Western Australia. The royalty package is being acquired from a private seller for a total consideration of A$8.0 million (c. US$5.63 million), comprising of A$7.0 million in cash and A$1.0 million in new ordinary shares in Trident. The acquisition is Trident’s fifth overall and its third gold deal. As per strategic guidance the company is moving fast assembling a diversified portfolio with a paying cashflow stream from iron ore and copper production and several strategic gold royalties with the potential for near term revenues. The market is paying attention with TRR shares up 49.8% since its IPO on AIM in June this year. There is clearly more to come with c. US$7.5 million of uncommitted cash as well as the potential for debt funding and the ability to use equity as acquisition consideration. The Lake Rebecca Gold Project operated and wholly owned by Apollo Consolidated (ASX: AOP), is located 150km ENE of Kalgoorlie in the Eastern Goldfields Province of the Yilgarn Craton. The Project, envisaged as a simple open pit operation, is close to existing gold infrastructure namely Saracen Mineral Holdings Limited’s (ASX: SAR) Carosue Dam Operation whose processing plant is in the process of being upgraded to increase throughput to 3.2 Mtpa.
Companies: Trident Royalties Plc
Hunters delivered a resilient performance in H1 and is now experiencing a very positive rebound in H2. After a strong start to the year, CV19 lockdown led to a reduction in H1 revenues of -18% to £5.4m largely due to a fall in residential sales income, with lettings and franchise income holding up well. Restructuring of the cost base and utilisation of government support resulted in EBITDA increasing +30% to £1.4m. As lockdown restrictions have eased since the period end, activity has rebounded with instructions in August up +38% y/y. Hunters benefits from a favourable geographic spread of branches and is well placed to benefit from the strong property market as, prompted by CV19, people reconsider where they wish to live. As with many industries, CV19 has accelerated technological change and Hunters expects to release its SKIPA CRM platform shortly, which should deliver material productivity benefits. We resume forecasts with PBT/EPS of £2.2m/6.2p for FY20 and introduce estimates of £2.4m/6.6p for 2021. The shares trade on 7x 2020 earnings which we view as an unwarranted discount to peers Belvoir (10.4x) and The Property Franchise Group (12.1x). Further, the anticipated reinstatement of a dividend for FY20 will see the shares yield over 6%.
Companies: Hunters Property Plc