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Sanne's margins dip

The group also reported a decline underlying operating cash-flow conversion
September 11, 2018

Acquisitions remain a core part of Sanne’s (SNN) growth strategy, with the group purchasing Luxembourg Investment Solutions in February and Madrid-based AgenSynd earlier this month. A five-month contribution from the former boosted revenue for the asset management support services specialist during the first half, but associated costs weighed on margins. Coupled with investments in improving operating efficiency, underlying operating margin declined to 30.3 per cent, from 37.1 per cent at the same time last year.

IC TIP: Hold at 604p

While management expects some improvement in margins during the second half, it would rather put any cost savings towards longer-term growth opportunities, says chief financial officer James Ireland. That could include expanding the sales team to enter the German real estate investment advisory market.

New business wins represented an annualised £11.5m in fees, up from £10m last year. However, underlying operating cash-flow conversion declined to 68 per cent from 102 per cent, after pushing back client billing in the Mauritian business and an increase in debtors in certain high-growth jurisdictions, where "cash collection has been less of a focus than on-boarding new client wins". Management expects cash-flow conversion to increase to the mid-to-high 90s in percentage terms by the end of the year.

Analysts at Panmure Gordon expect adjusted pre-tax profits of £44.2m for the year to December 2018, giving EPS of 25.3p (from £38.1m and 23.7p in 2017).

SANNE (SNN)    
ORD PRICE:604pMARKET VALUE:£874m
TOUCH:603-605p12-MONTH HIGH:837pLOW: 579p
DIVIDEND YIELD:2.2%PE RATIO:51
NET ASSET VALUE:124p*NET DEBT:27%
Half-year to 30 JunTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
201756.312.57.74.2
201865.910.96.44.6
% change+17-13-17+10
Ex-div:20 Sep   
Payment:19 Oct   
*Includes intangible assets of £228m, or 157p a share