The defined-benefit (DB) pensions market might be in structural decline, but the Bank of England estimates that it's worth in the region of £1.5 trillion, and the nature of the industry ensures that the underlying funds have “long-term investment horizons”. Consultancies such as XPS Pensions (XPS) will be offering their advisory services for decades to come.
The co-chief executive of the firm, Paul Cuff, said the nature of the industry also gives rise to a certain level of “stickability”, and therefore high customer retention rates, although the business mix can have a marked impact on profitability. This factor, along with an increase in central costs, meant that adjusted cash profits were flat on the 2018 half-year, with profitability constrained by increased IT expenditure and costs linked to the Kier and Royal London pensions acquisitions.
A pronounced fall in net operating cash-flow, down two-thirds to £2.58m, was attributable to a steep increase in receivables, with debt collection slowing due to the exit from the IT transitional services agreement, along with alterations to the payment schedule of staff pension contributions.
Consensus forecasts give cash profit of £28.1m for the March 2020 year-end, rising to £29.6m in FY2021.
| XPS PENSIONS (XPS) | ||||
| ORD PRICE: | 129p | MARKET VALUE: | £ 263m | |
| TOUCH: | 128-130p | 12-MONTH HIGH: | 168p | LOW: 95p |
| DIVIDEND YIELD: | 5.1% | PE RATIO: | 18 | |
| NET ASSET VALUE: | 74p* | NET DEBT**: | 36% | |
| Half-year to 30 Sep | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2018 | 52.2 | -1.10 | 0.2 | 2.3 |
| 2019 | 56.3 | 4.38 | 1.6 | 2.3 |
| % change | +8 | - | +700 | - |
| Ex-div: | 09 Jan | |||
| Payment: | 06 Feb | |||
| *Includes intangible assets of £210m, or 103p a share. **Does not include lease liabilities of £11.1m | ||||
