Close Brothers (CBG) delivered a mixed performance in the year to July, with weakness in securities and asset management offset by a strong performance from the banking division. This helped to nudge adjusted operating profits ahead by 2 per cent to £134.2m. Moreover, following restructuring management believes the loss-making asset management division will be making operating margins of at least 15 per cent by 2015. And with an attractive yield thrown in, we remain buyers.
Demand for loans helped to boost the loan book from £3.4bn to £4.1bn in the banking division, and adjusted operating profits rose by 27 per cent to £135m. This was achieved without compromising credit quality, and the bad debt ratio fell from 2.1 per cent to 1.5 per cent of the loan book. Trading on the securities side, which includes market maker Winterflood, was much tougher. Even though operating expenses were cut by 30 per cent to £57.2m, adjusted operating profits at Winterflood slid 63 per cent to £16m.
On the asset management side, operating expenses rose just 2 per cent to £73.9m, although this still exceeded operating income, which rose 9 per cent to £69.6m.
Broker Numis Securities is forecasting 2013 pre-tax profits of £154.2m and EPS of 78.5p (from £132.3m and 66.7p in 2012).
| CLOSE BROTHERS (CBG) | ||||
|---|---|---|---|---|
| ORD PRICE: | 832p | MARKET VALUE: | £1.22bn | |
| TOUCH: | 832-834p | 12-MONTH HIGH: | 860p | LOW: 586p |
| DIVIDEND YIELD: | 5.0% | PE RATIO: | 12 | |
| NET ASSET VALUE: | 521p | |||
| Year to 31 Jul | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|
| 2008 | 118 | 58.3 | 39.0 |
| 2009 | 88.0 | 43.6 | 39.0 |
| 2010 | 101 | 47.4 | 39.0 |
| 2011 | 78.5 | 29.6 | 40.0 |
| 2012 | 135 | 68.6 | 41.5 |
| % change | +72 | +132 | +4 |
Ex-div: 17 Oct Payment: 27 Nov | |||
