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XPS scaling-up for market share

The pensions consultancy is hoping to take share from the big three global majors
June 28, 2018

High-profile pensions scandals surrounding the collapse of companies such as BHS and, more recently, Carillion have “focused the minds” of management teams on corporate responsibility towards pension schemes, says XPS Pensions (XPS) co-chief executive Paul Cuff. Following last year’s acquisition of Punter Southall, the group – formerly Xafinity – has beefed up its scale in pensions actuarial, investment and administration services, hoping to take advantage of the gathering demand.

IC TIP: Hold at 185p

The group is hoping to take market share from the big three global consultancies – Mercer, Aon Hewitt and Willis Towers Watson – and reckons the Competition and Markets Authority’s review into the investment consultancy market may help free up mandates. Last year, underlying group revenue was up 4.4 per cent, with client wins in the first half feeding through to the bottom line during the latter half. What’s more, a substantial reduction in finance costs – following the repayment of around £19m in bank debt – helped boost pre-tax profits. Encouragingly, defined contribution mastertrust - National Pensions Trust – grew asset under management by 41 per cent, with revenue generated up by around the same amount to £1m.

Analysts at house broker Zeus Capital expect adjusted pre-tax profit of £26.2m for the year to March 2019, giving EPS of 10.2p (from £17.9m and 9.3p in 2018).

XPS PENSIONS (XPS)   
ORD PRICE:185pMARKET VALUE:£377m
TOUCH:181.5-185p12-MONTH HIGH:194pLOW: 152p
DIVIDEND YIELD:3.4%PE RATIO:93
NET ASSET VALUE:75p*NET DEBT:30%
Year to 31 MarTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
201749.5-14.1-13.20.7
201864.04.226.3
% change+29--+763
Ex-div:30 Aug   
Payment:27 Sep   
*Includes intangible assets of £216m, or 106p a share