AJ Bell priced for growth

Surging profits papered over the fact that chasing new customers is getting harder. Excluding defined benefit and bulk migrations, net inflows to AJ Bell’s advised and direct-to-customer platform came to £3.2bn this year, down from £3.3bn in the group’s IPO year. Distribution costs rose a fifth to £9.2m, leading founder and chief executive Andrew Bell to conclude that it is “definitely harder to market” to two user groups the company describes as “hungry for help” and “nervous newcomers”.

Another constituent – well-funded “security seekers” looking for cash returns – are also in the crosshairs. Although no formal plans are in place to pull in deposit-like funds, the growing scale of rival Hargreaves Lansdown’s (HL.) Active Savings model has been noted.

Separately, the group has launched an initiative to award £10m-worth of shares to its charitable trust, should earnings per share double over three years, and rise by at least 150 per cent in five. Those increases should not be seen as soft targets, according to Mr Bell, who stressed “an element of daylight” between the three-year figure and analyst forecasts.

Numis expects EPS of 8.8p for the year to September 2020, rising to 10.3p in FY2021.