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Tatton Asset Management

Interims show strong growth

What’s new: Tatton Asset Management’s results for the six months to 30 September revealed strong growth in divisional revenue and profits: ▪ 15% rise in Group Revenue to £9.73m (1H18: £8.45m) - AuM based revenues rose 19% to £7.10m (1H18: £5.99m), with Tatton Investment revenue rising 35% and wrap income declining; - Paradigm revenues rose 7% to £2.60m (1H18: £2.43m); ▪ 23% rise in Group adjusted operating profit to £4.13m (1H18: £3.35m) - 23% rise in AuM based profit to £4.27m (1H18: £3.48m) which is 42% rise in Tatton Investment profits (as previously reported); - 11% rise in Paradigm profits to £0.91m (1H18: £0.82m) and - 11% rise in central costs to £1.1m (1H18: £0.96m) ▪ Adj FD EPS rose 18% to 5.4p (1H18: 4.6p); ▪ Interim DPS was increased 14% to 3.2p (1H18: 2.8p); ▪ Net cash was £9.17m after paying £3.1m final dividend and £2.0m for Sinfonia, with operating cash conversion at over 100%. The Group trading update on 17 October had already announced: ▪ 14.8% rise in Group AuM to £7.0 billion (30/9/18: £5.7 billion: 23% rise YoY; 31/3/19: £6.1 billion: 14.8% rise in the 6 months period): - 1H organic net inflows of £441m increased AuM by 7.2%; - the Sinfonia acquisition added £135m, increasing Group AuM by 2.2%. Outlook: Paul Hogarth, Founder and CEO, notes: “monthly net flows continuing to perform well from both existing and new IFAs despite an uncertain and volatile market” and the reorganisation of the group’s “IFA support services businesses under the existing Paradigm brand but with one simplified operational and management structure …[should enable] improved efficiencies and opportunities”.

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  • 11 Nov 19
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Inchcape

Revising 2020E and 2021E

We update our forecasts following Inchcape’s Q3 IMS on 7th November, and focus our attention on 2020E and 2021E estimates after the Group confirmed it was well placed to hit 2019E last week. In 2020E and 2021E we expect a more challenging market in Asia, and currency headwinds in regions such as Australia to persist and adjust our forecast accordingly. We now expect adj. PBT in 2020E of £270.0m (vs £307.1m previously) and £268.5m in 2021E (vs £320.9m previously), which triggers a c12% EPS downgrade in each year. We remain comfortable with our long-term thesis set out in December 2018 and continue to see Inchcape as a unique investment opportunity. The business continues to invest in the higher margin distribution business, and growth of this segment should act as a key factor in the re-rating in our view.

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  • 11 Nov 19
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Inchcape

Q3 IMS

Inchcape have released a Q3 trading update confirming trading in the three months to September 2019 have been in line with expectations and have reiterated full year profit guidance, excluding the AUD/JPY headwind. The group have also announced this morning the acquisition of A Daimler Bistribution business in Uruguay and Ecuador for £47m (implied EV/EBIT of c.8.5x). Given the timing of this acquisition there is no impact to 2019E forecasts. We remain comfortable with our long-term thesis set out in December 2018 and continue to see Inchcape as a unique investment opportunity. The business continues to invest in the higher margin distribution business, and growth of this segment should act as a key factor in the re-rating in our view.

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  • 07 Nov 19
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Purplebricks Group

Trading update: flat YoY

Purplebricks’ trading update for the 6 months to 31 October 2019 reveals: “At a Group level, pro forma revenue is expected to be broadly flat relative to the same period last year ... and the Group enjoyed profitable trading in the First Half.”

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  • 07 Nov 19
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Lookers

Finding the floor

We update our forecasts following Lookers announcement on the 1st November that trading has continued to deteriorate and the now expects adj. PBT in 2019E of £16m (vs ZC forecast of £39.0m previously) equating to a c.60% EPS downgrade, and a c.50% downgrade in 2021E. The group has experienced continued headwinds across new and used cars highlighted by recent SMMT data for October. The balance sheet remains robust with significant facilities available, 2019E net tangible asset value per share of 34p backed with freehold and long leasehold of 80p per share net debt/EBITDA at the end of 2019E of 1.2x, based on our new forecasts. There is clear longterm earnings recovery potential based on previous peak EPS of 15.8p in 2016A, albeit increased regulatory costs across the sector make reaching this peak unlikely in the near term.

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  • 06 Nov 19
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Flowtech Fluidpower

Q3 trading update

Coming just a month after the release of the interim results (24th September) today’s Q3 trading statement does not contain any surprises. Organic revenue growth has slowed since June but remains positive at 1.8%. Contribution from the Balu acquisition means Group revenue year to date is up 4.3%. The services division continues to bear the brunt of the more difficult trading conditions with revenue down YTD whilst the Components division is up 5.8%. Net debt is marginally up on the £18.8m reported at the HY stage, at £19.1m, due to dividend payments, earn-out consideration as well as other payments made during the quarter. ZC reduced net debt expectations for FY19 at the time of the interims and expect this to be achieved due to improved cash generation and an improved working capital position during Q4. The current valuation reflects the more difficult trading backdrop leaving the shares trading on 7.7x FY19 year earnings, reducing to 7.1x in FY20. The yield is 5.9% with the dividend having increased 5% annually since the business floated in 2014.

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  • 22 Oct 19
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