LIBERUM: CEO Video: Paul Cuff, XPS Pension Group
In these six short videos XPS Pensions Group Co-CEO Paul Cuff discusses the 1H20 results with a particular focus on changes made to the Pension business, the separation from Punter Southall, if the regulatory environment will provide a tailwind in H2, how the recent acquisitions are faring and the outlook for H2.
02 Dec 19
LIBERUM: XPS Pensions Group* - Supportive of the medium-term outlook
Overall, we expect the 1H20 results to be welcomed by investors. In addition, to underpinning our underlying FY20 earnings forecasts, the investment in headcount within the actuarial business bodes well for the medium-term.
28 Nov 19
LIBERUM: XPS Pensions Group* - Trading is supportive of both FY20 and longer-term potential
Given the recent reset to numbers, the robust trading performance seen in 1H20 should be welcomed by investors. In addition to underpinning our FY20 revenue and earnings forecasts, the investment in headcount within the actuarial business bodes well for the medium-term.
24 Oct 19
LIBERUM: Best of the Week: Leisure in depth, Strategy Screen of the Week, ASML Holding, XPS Pensions, Sthree
Liberum's most insightful and high-value research and commentary published this past week.
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26 Jul 19
LIBERUM: XPS Pensions Group* - Investment case remains intact
Although the recent resetting of FY20 estimates was disappointing, we believe that the core investment case remains intact. As the leading independent provider of pension advisory and administration services, XPS is uniquely position within an industry with a growing end market and high barriers to entry.
19 Jul 19
LIBERUM: XPS Pensions Group* - Fundamentals remain robust despite the downgrades
Alongside the FY19 results, the company has provided updated guidance for the short-term outlook for both revenues and costs. Although this results in a 14% downgrade to our FY20 EPS, we believe that the benefits from a stronger central function will place the company in a better position to take advantage of the structural opportunities ahead.
27 Jun 19
LIBERUM: UK Small & Mid Cap Dispatches
Support Services - The 4 S's, DMGT, Galliford Try, CapCo, Spirent, Lookers, Equiniti, SMID Market Highlights
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31 May 19
LIBERUM: Morning Comment
Support Services - The 4 S's, Outdoor Agencies Video, DMGT, Galliford Try, Mining Update, CapCo, Spirent, Lookers, Equiniti, Market Highlights
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31 May 19
LIBERUM: XPS Pensions Group*- Acquisition helps build skillset with smaller schemes
The acquisition of RLCPS provides XPS with a valuable skillset to better enable it to serve a small but increasingly important part of the DB market. In addition, to the strong strategic rationale, the deal looks attractive from a financial perspective and should be accretive to earnings in the first year of ownership.
01 May 19
LIBERUM: XPS Pensions Group* - Mega merger would create significant opportunities for XPS
The potential acquisition of Willis Tower Watson by Aon would in our view be a positive for XPS and support its attempts to grow share. Even if the transaction doesn’t happen we believe that the short term uncertainty created could provide it with the opportunity to make short term gains.
06 Mar 19
LIBERUM: XPS Pensions Group - CMA final report confirms significant opportunity
Last week the CMA published its final report into the investment consultant market's structure, three months ahead of the statutory deadline. In our view it makes good reading for XPS and broadly in line with the remedies suggested in its preliminary report. We expect that the outcome of the review will put significant pressure on the business models of the ‘Big 3’. As the largest independent in the pensions market, we expect this will create significant opportunity for XPS – a view that is supported by its own analysis into the report and its findings. We continue to believe that XPS is uniquely positioned in an industry with a growing end market, regulatory tailwinds and high barriers to entry. With the shares trading on just 14.4x CY19 PE, it would appear that this potential is materially underappreciated by the market. With 57% TSR potential to our TP of 245p, we reiterate our BUY.
17 Dec 18
1H shows impact of PS deal
XPS Pensions Group (“XPS”) interim results to 30 September 2018 are the maiden results for the combined group (Xafinity acquired businesses from Punter Southall Group in January 2018). In summary these results reveal: Revenue rise by 113% to £47.5m, driven by the acquisition of the Punter Southall businesses: pro-form growth was 3.3%; Adj operating profit increased 63% to £11.4m, as the EBIT margin on the Punter Southall Administration businesses is half that of Xafinity’s business; Cash conversion was up marginally to 76% (1H18: 75%); Net debt at period end was £47.5m (March 2018: £45.7m); Adjusted diluted EPS rose 8% to 4.2p; Interim DPS was increased 10% to 2.3p (1H18: 2.1p). The outlook from the joint CEOs refers to “several large
29 Nov 18
LIBERUM: XPS Pensions Group - Well positioned to build on the 1H19 results
Whilst the integration of the Punter Southall acquisition has progressed successfully, it has resulted in a slight slowing of short term organic growth. At 3.3% 1H19 pro-forma revenue growth is below the group’s long term potential, however, the momentum built in the business over the past six months leaves it well placed to deliver on our underlying expectations for FY19. We continue to believe that XPS is uniquely positioned in an industry with a growing end market, regulatory tailwinds and high barriers to entry. With the shares trading on just 14.9x CY19 PE, it would appear that this potential is materially underappreciated by the market. With 53% TSR potential to our TP of 245p, we reiterate our BUY.
29 Nov 18
LIBERUM: XPS Pensions Group - Regulatory tailwinds strengthens our conviction
Last week saw two regulatory-related announcements, both of which only strengthen our conviction in the group’s model. As the leading independent provider of pension advisory and administration services, XPS is in a unique position in an industry with a growing end market, regulatory tailwinds and high barriers to entry. As a result, we see it as extremely wellplaced to deliver a combination of growth, attractive margins, and attractive shareholder returns. With the shares trading on a CY19 PE of just 14.4x, it appears that this potential, and the recurring nature of its revenues, are underappreciated by the market. With 58% TSR potential to our TP of 245p, we reiterate our BUY.
29 Oct 18
Review of investment case
Review of investment case Using reported results for XPS Pensions Group (“XPS”) published in June, we have calculated proforma revenues, profit and adj EPS assuming Punter Southall had been included for the full year to March 2018. Key points are: Total proforma revenue for the year of £106.0m includes a £51.5m contribution from Xafinity (excluding HR Trustees which was sold) and £54.5m contribution from Punter Southall (post acquisition actual reported: £12.8m); Proforma EBIT margin of 24.2% reflects a full year of Pension Admin which has lower margin and includes the positive impact of the TSA agreement, with 28.5% EBIT margin from Xafinity and 20.0% EBIT margin from the Punter Southall businesses. Proforma adj diluted EPS of 9.3p based on proforma PAT of £19.2m and 206m shares (N.B. reported adj EPS using only post acquisition profits and the average shares in issue is co-incidentally also 9.3p a share).
20 Sep 18
LIBERUM: XPS Pensions Group - Defensive growth at an attractive valuation
XPS’s position as the leading independent provider of pension advisory and administration services puts it in a unique position in an industry with a growing end market and high barriers to entry. As a result, we see it as extremely well-placed to deliver a combination of growth, attractive margins, and shareholder returns. With the shares trading on a CY19 PE of just 15.1x, it appears that this potential, and the recurring nature of its revenues are underappreciated by the market. With 50% TSR potential to our TP of 245p, we reiterate our BUY.
20 Sep 18
2 contingent deals
On Tuesday 18 September 2018, XPS Pensions Group (”XPS”) announced two contingent deals: The proposed acquisition of Kier Pensions Unit (“KPU”) from Kier Group for total max consideration of £3.5m in cash conditional, inter alia, on a threshold percentage of KPU’s existing clients agreeing to transfer their contract to XPS. The acquisition is expected to add approximately 4% to XPS’s revenues. The proposed disposal of Healthcare Consulting Business (“HCB”) to Punter Southall Group Ltd (“PSGL”) for total consideration of £1.25m in cash conditional upon the amount of revenue generated by HCB in the twelve months after the disposal.
19 Sep 18
Merger adds to momentum
XPS’s full year results which include the acquisition of Punter Southall in January, are in line with our expectations. The merger of Xafinity and the pensions administration business of Punter Southall, has created the largest “pure-play” pensions consultancy in UK based on proforma revenues. These results set out the platform on which XPS are building.
28 Jun 18
New business activity in H2 has resulted in “good momentum”; The integration of Punter Southall's actuarial consulting, pensions administration and investment consulting businesses has “advanced well” and the response from both clients and employees has been “positive”; Full year results to be “in line with its expectations”; “Xafinity is well positioned for further growth”
30 Apr 18
LIBERUM: Xafinity - A transformative and accretive deal
Xafinity’s acquisition of Punter Southall cements its position as the leading independent provider of pension advisory and administration services. With this deal adding to the significant optionality already built into the business, we believe that it is extremely well-placed to gain material market share in the coming years. This upside is underpinned by an exposure to an end market which provides Xafinity with an attractive combination of noncyclical and highly visible stream of revenues. With 38% upside to our new TP of 245p (from 210p) we reiterate our BUY rating.
06 Feb 18
Supportive of referral to CMA
Yesterday the Company and Markets Authority, “CMA”, launched a market investigation into investment consultancy and fiduciary management services. Yesterday, Xafinity’s Head of Pension Investment commented: “[Xafinity] fully support[s] the announcement from the FCA today to refer investment consultants to the CMA.”
15 Sep 17
On the radar
Xafinity, which was listed on the LSE on 16 February 2017, has reported its results for the year to 31 March 2017. Highlights include: Revenue of £52.0m (Zeus forecast of £52.2m); Adjusted EBIT of £16.5m (Zeus forecast: £16.2m); EBIT margin of 31.6% (Zeus forecast 30.9%); Cash conversion of 91% (Zeus forecast 90%); Stub DPS of 0.73p per share (Zeus forecast: 0.70p per share); Development of proprietary Radar software
28 Jun 17
Xafinity - The Most Exciting of Actuaries
Xafinity provides a range of services to pension trustees and sponsors, including derisking, valuation, and administration services. In recent years the company has delivered steady EBITDA margins of above 30%, with a 90% cash conversion ratio, and more than 80% of revenues coming from recurring streams. All characteristics one would hope to see in a pension advisory business. But where’s the excitement? In this report we examine two of the growth opportunities which we believe will allow Xafinity to sustain 6% revenue growth in the coming years, in addition to maintaining a 65% dividend pay-out ratio.
08 May 17