JTC’s growth gathers pace

A combination of acquisitions and new business wins proved a solid mix for fund and private client services company JTC (JTC), with the company achieving organic revenue growth of 19.9 per cent, well above its medium-term target of 8-10 per cent.

The market has been rapidly consolidating, which means JTC has also been making acquisitions, particularly in the US. This meant a sizeable increase in goodwill on the balance sheet. Cash profits grew by 38.8 per cent to £77.8mn, although margin progression was constrained by continued investment in the business.

The results saw new business wins rise by 25.2 per cent to £30.8mn, with a notable drop in client attrition to 5.1 per cent from 6.4 per cent in 2022. The company said that recent acquisitions had brought long-term client relationships onto the books, which helped offset attrition rates. In divisional terms, acquisitions helped the private client services segment to register high sales growth of 48 per cent, with the integration of the deals for both New York Private Trust Company and the South Dakota Trust Company contributing to the result.

Management ambitions are undimmed with a target to double the size of the company within a four-year period and achieve £500mn of revenue, with a higher proportion of group revenues coming from the high growth US market.

Broker Shore Capital rates the shares at a forward price/earnings ratio of 19.2 for 2024. That looks rich for the sector, which is consolidating but suffering in the UK, but if JTC can keep up the current rate of growth based on its US exposure then investors can directly benefit. Buy.

Last IC View: Buy, 723p, 12 Sep 2023