Warnings of increasing competition and deteriorating credit quality within the motor and commercial finance markets overshadowed a solid set of full-year trading figures for Close Brothers (CBG). At a group level adjusted operating profit was up 13 per cent to £265m, beating company-compiled consensus of £261m.
Lending at its banking business increased 7 per cent to £6.9bn, despite a mixed performance from its products. Property finance grew operating profit almost a quarter, helped by provision releases for some legacy properties as well as a 12 per cent increase in lending. Premium inflation and new broker wins meant premium finance business accounted for the lion’s share of the 8 per cent growth in retail finance loans. However, increased margin pressure in motor finance caused the group to pull back on new lending. Adjusted retail finance operating profit was flat at £78m.
Competition within the asset finance market also led management to try to protect margins within its commercial finance business. However, an increase in invoice finance of a fifth and the acquisition of Novitas Loans meant adjusted operating profit for this division still grew 4 per cent to £73m. Elsewhere, securities business Winterflood benefited from volatility within UK markets post-referendum. Bargains per day were up more than a quarter to 65,000, boosting operating profit by almost half to £28m.
Analysts at Shore Capital expect adjusted net tangible assets of 780p at July 2018, up from 701p in FY2017.
CLOSE BROTHERS (CBG) | ||||
ORD PRICE: | 1,443p | MARKET VALUE: | £2.19bn | |
TOUCH: | 1,443-1,444p | 12-MONTH HIGH: | 1,715p | LOW: 1,222p |
DIVIDEND YIELD: | 4.2% | PE RATIO: | 11 | |
NET ASSET VALUE: | 815p | LEVERAGE RATIO: | 8.7 |
Year to 31 Jul | Total operating income (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
2013 | 583 | 164 | 82 | 44.5 |
2014 | 628 | 189 | 98 | 49 |
2015 | 673 | 220 | 118 | 53.5 |
2016 | 687 | 229 | 126 | 57 |
2017 | 766 | 259 | 128 | 60 |
% change | +11 | +13 | +2 | +5 |
Ex-div: | 12 Oct | |||
Payment: | 21 Nov |