IntegraFin enjoys a bumper year

IntegraFin’s (IHP) relatively low profile when it comes to the investment platform market – its emphasis on serving IFAs guarantees this – is proving to be positive asset when it comes to the basic profitability of its business. While the retail-focused investment platforms launch ever more apps to try and attract occasional day traders and investment novices – with varying degrees of success and comparatively little to show for it, so far – IntegraFin's platform, Transact, gets on with serving its specialist adviser market niche, where over 85 per cent of its revenues are based on annual fees that are stable and recurring.

What marks out the company’s performance is the rate that net asset inflows turn into higher profits. For example, funds under management increased by 27 per cent year-on-year to £52bn, with the resulting fees translating into revenue and profits growth that track each other very closely – all this despite a near 14 per cent rise in administrative costs to £58m.

This can be attributed both to the favourable market conditions that always benefits platforms and advisors, but also to what seems to be IntragraFin’s uniquely greater operational gearing while perched atop a relatively stable cost base. In the platform world, that is currently a very rare phenomenon as most are struggling to turn high asset in-flows, into something resembling higher value business, without spending a fortune on marketing.

IntegraFin shares dropped 14 per cent on these numbers, which included a warning of higher costs from the acquisition of Norwich-based Time for Advice and vanilla comments about market uncertainties. A price-to-earnings ratio of 28 on broker Panmure Gordon’s slightly trimmed EPS forecasts suggest the shares had been priced for perfection. The company’s operational competence justifies the premium, but it seems the market now takes this as a given, so expect the rating to stay stable. Hold.

Last IC View: Hold, 522p, 17 Dec 2020