IFG’s Q1 trading update reports the group trading in line with expectations with both James Hay and Saunderson House continuing to attract new clients and assets, and maintain strong levels of retention. Revenues and profits are ahead of the same period in 2015 with a continued emphasis on margin and costs discipline. The refocused IFG is well positioned for further progress, supported by a strong and liquid balance sheet, in markets that offer good long-term growth potential and consolidation opportunities.
The Q1 trading update reports the group trading in line with management’s full year expectations, with both James Hay (JHP) and Saunderson House (SH) continuing to attract new clients and assets, and maintain strong levels of retention. Our estimates and fair value were increased following strong 2015 results and we make no changes at this stage. The trading statement confirms our outlook for continued organic growth at JHP including benefits from the 2015 partnership agreements with Towry and Capita. 2016 will also see a full-year benefit from the 2015 repricing of certain JHP products and a maturing of business written in 2015. We see less room for operational gearing at SH but anticipate continued steady growth in client numbers. Investment across the group has been heavy in the past couple of years, preparing the way for further growth; we expect this to be an ongoing feature of the business but look for it to level out to the benefit of margins.
IFG’s strategic progress has until now been somewhat masked by significant investment and the loss of earnings and accounting noise generated by non-core business disposals. While we expect there to be an ongoing need for investment, it appears to be levelling out and allowing the benefits of continued revenue growth to fall to the bottom line. With a strong balance sheet IFG has the resources to seize additional consolidation opportunities amongst SIPP providers, about which management is hopeful.
Our fair valuation for the group remains unchanged at €2.39/share, derived from our sum-of-the parts ‘relative’ valuation (€2.45) and our DCF ‘absolute’ valuation (€2.33).