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Xafinity: fairly priced for prospects

The pensions consulting business is looking for acquisition opportunities
June 30, 2017

In the past few years, stories like the collapse of retailer BHS have catapulted defined-benefit pension schemes into the public eye for all the wrong reasons. Xafinity (XAF) believes it can benefit from this attention. The administration, consulting and actuarial services provider listed in February this year, following five years under private equity ownership. It was originally part of administration provider Equiniti (EQN), and like its former owner believes it can grow as the regulatory challenges facing clients multiply.

IC TIP: Hold at 164p

There are signs it is working. The group grew adjusted cash profits by 5 per cent in the year, to £17.5m, while winning eight new long-term contracts and beefing up its services for trivial commutation exercises - whereby members of a scheme are able to withdraw small sums of money tax-free - after being appointed by a £11bn scheme. The costs of the IPO weighed heavily on statutory figures. And revenue growth was also muted, in part due to the loss of a contract with the Pension Protection Fund.

Paul Cuff, co-chief executive of the group, said an increase in the number of schemes looking to de-risk their investment portfolios should help drive growth. The group is also looking to grow through acquisitions, he said, which could mean raising further equity.

Analysts at Liberum are forecasting adjusted profit before tax of £16m, giving EPS of 9p in the year to March 2018 (from £10.7m and 8p in FY2017).

 

XAFINITY (XAF)

ORD PRICE:164pMARKET VALUE:£225m
TOUCH:164-165p12-MONTH HIGH:174pLOW: 151p
DIVIDEND YIELD:0.4%PE RATIO:na
NET ASSET VALUE:21p*NET DEBT:97%

 

 

Year to 31 MarTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
2014**51.6-2.0-78.0na
2015**50.01.320.0na
2016**51.83.33.1na
201752.0-13.2-12.50.73
% change+1-498-503-

Ex-div: 31 Aug

Payment: 28 Sep

*Includes intangible assets of £58.6m, or 43p a share **Pre-IPO figures