Integrafin profits fall on flat revenues

A 1 per cent fall in the daily average for funds under direction (FUD) for Integrafin’s (IHP) Transact platform, lower inflows and higher staff costs added up to a subdued half for the platform provider, which generates business through its close relationships with IFAs, who use the company’s range of made-to-measure portfolios. Essentially, flat sales for the half offer some clues as to how the market has changed. In essence, interest rate rises are encouraging investors to revert to cash. Integrafin’s own much higher interest rate earnings of £2.2mn on its cash holdings is evidence of the impact of higher rates.

The mood change and adverse market conditions was partly reflected in lower net inflows of £1.6bn (2022:£2.7bn) in FUD. Given that most of the company’s sales are based on recurring revenues, any changes to FUD would have an impact. In these results, total recurring revenue was essentially flat at £57.1mn, while sales of new tax wrappers edged up slightly to £6.1mn. The company added 9,000 new clients to its Transact platform, taking the total to 228,000.

However, the biggest single line item was the increase in staff costs, which increased by £2.8mn, knocking roughly the same amount from pre-tax profits. A combination of increased headcount and higher cost-of-living-inspired pay awards added downward pressure to the already static income statement. Numis analysts noted that, unlike other platforms, Integrafin does not take a cut on the interest earned on customers’ unused balances

Integrafin currently trades at a price/earnings ratio of 20 times Numis’s forecasts for 2024. Currently, that looks fully priced while the market adjusts structurally to higher interest rates. Hold.  

Last IC view: Hold, 312p, 15 Dec 2022