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XPS Pensions

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).

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  • 20 Sep 18
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Safestyle UK

Interim results

Safestyle has announced interim results for the six months ended 30 June. Revenue of £60.5m is down 27% YOY reflecting previously reported significant business disruption experienced in H1 due to the actions of aggressive new market entrant SafeGlaze UK. The Group sought a court injunction to counter these actions with a settlement announced earlier this month (3rd September). Cost pressures have resulted in a 930bps YOY decline in gross margin, delivering a loss before tax of £5.7m in H1 (H1 2017: £8.8m profit). A new management team is now in situ and the swift resolution of the SafeGlaze litigation removes uncertainty from the business and refocuses the group on returning to profitable growth. A slower than expected recovery in installation volumes in Q3 means we reduce our FY18 forecasts but encouraging signs of growth in the order book and anticipation of a return to profitability in Q4 means we leave FY19 forecasts broadly unchanged. At current levels the shares trade on 7.5x FY19 PER which we believe offers substantial turn-around potential should forecast improvements be realised.

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  • 20 Sep 18
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GYG

Delays continue into H2

GYG has released H1 results which, as expected, reflect the challenging trading conditions the company has faced during the period. Operational challenges in key refit locations, and slower than expected growth in the new build division has impacted trading in the first half, as previously flagged. Clearly trading conditions have been challenging in H1 and a number of external factors have held back performance to date. We leave our full year forecasts unchanged for now, albeit any further disruptions to the operations during the period would put these at risk.

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  • 20 Sep 18
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XPS Pensions

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.

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  • 19 Sep 18
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Strix Group

Solid interims underpin FY18

Strix has announced a solid set of interim results providing a high level of confidence in the FY18 profit before tax forecast of £29.1m. Revenue increased 1.5% to £42.9m (HY17: £42.2m) and gross profit increased 3.5% to £16.3m (HY17: £15.7m) on margins increasing 70bps to 37.9%. Adj. Operating margins increased 120bps to 27.9% and on proforma numbers profit before tax increased 10.4% yoy to £11.0m (HY17: £10.0m). The mix within the controls business has better balance. Regulated Markets continue to grow strongly at c. 3%, albeit down from the 5% in FY17, being driven by the growth market of North America. China has returned to growth reporting 6% and Less Regulated grew 8%. We leave PBT forecasts unchanged across the forecasts period but reduce the assumed tax rate from 19% to c.4% based on management guidance. This increases EPS by c. 19% in each year. On new earnings estimates the shares trade on 12.1x and yield 4.2% with the management confirming its commitment to pay 7.0p of dividend in FY18 followed by 7.7p in FY19.

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  • 19 Sep 18
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JTC

Maiden interims & rise in forecasts

This morning, JTC Group (“JTC”) announces its interim results: Revenue rose 25.2% YoY to £35.3m (1H17: £28.2m); Underlying EBITDA rose 56.7% to £10.5m (1H17: £6.7m); Underlying EBITDA margin improved 6.3pp to 29.9% (1H17: 23.6%); Underlying diluted EPS of 7.29p per share uses an average of 91m shares.

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  • 18 Sep 18
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