Integrafin ends year on a quiet note

Integrafin (IHP) has generally avoided the churn and earnings attrition that seems to be the norm at the larger retail investment platforms by sticking diligently to offering a specialist service directly to the UK’s network of independent financial advisers (IFAs). That has been generally good for margins over the past couple of years, but even Integrafin has not completely escaped the negative sentiment that has affected the advised platform providers, with the company noting a significant slowdown in the overall market in the second half of the year. Combined with higher personnel costs, this undercut the company’s profitability.

Integrafin’s operational performance can be considered acceptable under the circumstances, and the average number of funds-under-direction going through the “Transact” platform was £52.5bn, compared with an average during the prior year of £47.2bn – this helped to support top-line revenues at key points during the year. Net in-flows for Transact were £4.4bn, compared with the £4.9bn the platform attracted in 2021. There have been cost pressures related to retaining and recruiting key staff, however, and management forecasts that staff costs will rise by 18 per cent this year though both staff and occupancy cost growth should then moderate down to single-digits. The company will also earn materially better interest rates on its substantial balance sheet cash pile of £183mn.

The IFA market has been growing steadily over the past few years as advisers have offloaded portfolio construction and management to outside providers. Broker Numis forecasts long-term annual advised platform market growth of over 8 per cent. Integrafin should remain in a good position to benefit from the trend, which is reflected in a rich-looking forward PE ratio for 2023 of 24 times. Hold.  

Last IC view: Hold, 304p, 26 May 2022