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Ninety One debuts in the mire

Despite posting a solid first set of results, the Investec spin-off will have hoped for a better backdrop
May 20, 2020

Last year, financial services giant Investec concluded that its business was too complex. Its solution – split out the asset management arm – resulted in March’s spin-off of Ninety One (N91), which reported its first set of full-year results this week.

IC TIP: Hold at 202p

With headline earnings around 10 per cent ahead of market expectations, the FTSE 350 constituent can point to a good start to public life. But many of the subsidiary benefits claimed at the time of Ninety One’s separation from its parent company now look historic. Independence from a bank may be valued, but the crisis brought on by Covid-19 somewhat cancels out the “ideal structure for talent attraction and retention”.

Neither has it done the group’s investment performance much good. Though the long-term track record is robust, sharp asset declines in March hammered the proportion of mandates up on their benchmarks to 39 per cent on a one-year view, and a middling 55 per cent on a three-year horizon. A year previously, out-performance was 54 and 71 per cent, respectively.

And while management expects clients’ risk appetite to increase as volatility fades, little commentary was added to forecasts for “significant revenue pressure in the coming period”.

FactSet-compiled consensus forecasts are for earnings to drop to 12.75p per share in the 12 months to March 2021, recovering to 13.9p in FY2022.

NINETY ONE (N91)   
ORD PRICE:202pMARKET VALUE:£1.26bn
TOUCH:200.4-202p12-MONTH HIGH:208pLOW: 121p
DIVIDEND YIELD:*PE RATIO:12
NET ASSET VALUE:24pNET CASH:£92.9m**
Year to 31 MarRevenue (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
2017^590163-n/a
2018^662178-n/a
2019^69717815.1n/a
202076119916.8*
% change+9+11+11-
Ex-div:n/a   
Payment:n/a   
*Final dividend paid before demerger completed. **Includes lease liabilities of £102m. ^Pre-IPO