JTC locks in higher growth rates

Shares in professional services provider JTC (JTC) were heavily marked up on results day as the figures exceeded almost all the expectations that the market had placed on the company. The combination of bedded down acquisitions and organic demand from a rapidly reconfiguring asset management sector, meant the company enjoyed underlying revenue growth rates of 21 per cent, with demand from institutional clients notably high.

JTC provides “white label” services to banks and other trust companies, as well as to private clients and family offices, and organic revenue growth in both its institutional and retail divisions were closely aligned at 22.4 per cent and 18 per cent, respectively. Management said that the process of outsourcing costs by financial services companies had accelerated over the past couple of years, and it expects that trend to continue.

Chief executive Nigel Le Quesne noted that consolidated didn’t really affect its client retention rates, but that JCT preferred to operate across both institutional and private client segments as a way of hedging its overall market exposure. The impact of JTC's acquisitions was interesting; the company’s return-on-equity of 12 per cent is currently artificially suppressed by its takeovers as capital is deployed, though the company expects that return will rise significantly once this process is completed.  

Broker Numis said that higher recurring revenues in the second half will result in better revenue growth for the full-year. The broker raised its EPS targets by 4 per cent and now expects EPS of 37 for 2023, giving a forward price/earnings ratio of 18, falling to 15.7 in 2024. We think that looks achievable. Speculative buy.

Last IC view: Hold, 716p, 11 Apr 2023